REG-Ashmore Group Plc Interim results - Part 1

Released : 24/02/2009

http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20090224:RnsX7618N
                                                                                                                       .
RNS Number : 7618N  
  
Ashmore Group PLC  
  
24 February 2009  
  
PRESS RELEASE  
  
24th February 2009 07.00    
  
Ashmore Group plc   
  
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2008  
  
Ashmore Group plc ("Ashmore", the "Group"), a leading specialist emerging 
markets investment manager today announces its interim results for the six 
months to 31 December 2008.  
  
Financial Highlights  
  
 
 * Net management fees up 19% to £101.9 million (2007: £85.9million), down 1% on 
a US$ basis   
  
 
 * Performance fees up 52% to £48.9 million (2007: £32.2 million)  
  
 
 * Foreign exchange loss of £49.8 million (2007: £0.4 million gain), principally 
from hedging of management fee income, including timing differences 
of£41.4mrelatedto future fee income  
  
 
 * Total net revenue of £104.5 million (2007: £123.5 million)  
  
 
 * Profit before tax of £80.3 million (2007: £100.9 million)  
  
 
 * Operating margin of 70% (H1 2008: 75%)  
  
 
 * Basic EPS of 8.48p (2007: 10.47p) and diluted EPSof 7.90p (2007: 9.9p)  
  
 
 * An interim dividend of 3.66p per share will be paid on 24 April 2009 
(2007:3.66p)  
  
Operational Highlights  
  
 
 * Assets under management ("AuM") of US$24.6 billion at 31 December 2008, down 
US$12.9 billion (34%) from 30 June 2008  
  
 
 * Offices established in India, Turkey, and New York during the period  
  
Commenting on the results Mark Coombs Chief Executive Officer of Ashmore Group 
plc said;  
  
"The results for the six months to 31 December 2008 represent a period where 
Ashmore Group plc has delivered satisfactory financial performance despite 
challenging operating conditions, in a period of significant global market 
turmoil.  
  
Over the last twenty years, the investment team at Ashmore has had significant 
experience operating and outperforming during a number of economic crises 
affecting the emerging markets.  With this experience and our strong balance 
sheet, we see significant opportunities to outperform going forward, 
particularly as the number of participants operating within emerging markets 
reduces. Ashmore is in an excellent position to continue to deliver on our 
strategy."  
  
Contacts  
  
Penrose Financial Gay Collins/Jesper Lofgren +44 20 7786 4882/4873 mobile 07798 
626282   
  
Ashmore@penrose.co.uk  
  
Ashmore Group plc  Graeme Dell, Group Finance Director       +44 20 7557 4100  
  
  Chief Executive Officer's Statement  
  
Financial performance  
  
The results for the six months to 31 December 2008 represent a period where 
Ashmore Group plc ("Ashmore", the "Group") has delivered satisfactory financial 
performance despite challenging operating conditions, in a period of significant 
global market turmoil. The Group's net revenue comprised management fee income 
net of distribution costs of £101.9 million (2007: £85.9 million), performance 
fees of £48.9 million (2007: £32.2 million), other revenue of £3.5 million 
(2007: £5.0 million), and foreign exchange losses of £49.8 million (2007: £0.4 
million gain). Within foreign exchange losses, £12.7 million relates to 
management fees earned in the first half, and £41.4 million relates to the 
hedging of management fee income to be earned in future periods, partially 
offset by other FX gains. The Group profit before tax for the six months to 31 
December 2008 was £80.3 million (2007: £100.9 million) resulting in basic 
earnings per share of 8.48 pence (2007: 10.47 pence). The Group declared an 
interim dividend of 3.66 pence per share (2007: 3.66 pence).  
  
Market background  
  
The first half has been a time of extreme turbulence in the world's markets, 
culminating in the sale, reorganisation, nationalisation or bankruptcy of a 
number of major financial institutions in the developed world and structural 
changes within those organisations that remain. The principal impact of these 
structural changes has been a severe reduction in the amount of leverage 
employed in the markets with an extreme fall in asset values as liquidity has 
been withdrawn. The crisis did not originate in the emerging markets and the 
economic fundamentals for many of these markets remain significantly more 
positive than for a number of the developed ones. Nevertheless, whilst not 
historically over-levered, the emerging markets have seen liquidity withdrawn - 
partly reflecting US dollar and other hard currency repatriation - as investors 
have moved away from markets traditionally viewed as riskier than the developed 
world, regardless of current relative risk measures.   
  
Assets under Management ("AuM") and theme review  
  
Assets under management at 31 December 2008 were US $24.6 billion, a decrease of 
US$12.9 billion (-34%) in the period resulting from net redemptions of US$5.8 
billion, and negative investment performance of US$7.1 billion.    
  
Gross subscriptions in the first half were US$2.2 billion, down 58% from US$5.2 
billion in the same period last year, reflecting the difficult market conditions 
and the absence of any new fund launches.   
  
Gross redemptions have increased substantially to US$8.0 billion (2007: US$2.6 
billion), largely reflecting the liquidity needs of clients in the extreme 
market conditions, rather than any adverse allocation away from emerging market 
assets.  Included within redemptions is US$0.3 billion in respect of the first 
Global Special Situations Fund which matured at the end of its 5 year term in 
July 2008 with gross annualised performance of 39%.  A number of redemptions 
have been at lower fee rates, which has contributed to average management fee 
margins increasing to 114 basis points ("bps"), (FY08: 103bps; 1H08 103bps).  
  
The adverse investment performance of US$7.1 billion in the period reflects the 
extreme market conditions, where there were significant month-on-month declines 
in all relevant emerging market indices up to the end of November and all 
relevant indices ended the half down, some significantly.  Prior to the period 
end markets have stabilised somewhat, with December 2008 providing the first 
overall positive performance month across all themes since May 2008.  
  
External debt  
  
In line with terminology widely used within the emerging markets the dollar debt 
theme has been renamed "external debt". The external debt investment theme 
comprises US dollar and other G7 currency denominated instruments, which may 
include derivatives, investing principally in sovereign bonds.   
  
AuM at 31 December 2008 were US$14.7 billion, a decrease of US$8.0 billion (35%) 
from 30 June 2008, with net redemptions accounting for US$3.9 billion. During 
the period the theme contributed £45.9 million in management fees at an average 
margin of 88bps, and £17.4 million of performance fees (2007: £44.6 million; 
83bps; and £13.2 million).   
  
Local currency   
  
The local currency investment theme comprises local currency and local currency 
denominated debt instruments, principally sovereign in nature, and it may 
include derivatives.   
  
AuM at 31 December 2008 were US$5.4 billion; a decrease of US$3.1 billion (36%) 
from 30 June 2008, with net redemptions of US$1.2 billion. There has however 
been continued demand for the Group's local currency products with reasonable 
gross subscriptions of US$1.2 billion (2007: US$1.6 billion). During the period 
the theme contributed £26.6 million in management fees at an average margin of 
125 bps, and £14.9 million of performance fees (2007: £16.6 million; 117 bps; 
and £14.4 million).   
  
Special situations   
  
The special situations theme comprises investments in debt, equity, and other 
instruments in specialist corporate investments or projects.  Situations include 
distressed assets or distressed sellers of assets, where our approach often 
incorporates restructuring, reorganisations, or other private equity techniques. 
  
  
AuM at 31 December 2008 were US$4.4 billion, a decrease of US$1.1 billion (20%). 
Net redemptions of US$0.3 billion overall included US$0.3 billion as a result of 
the first Global Special Situations Fund maturing at the end of its 5 year term 
which, as previously announced, crystallised a £15.6m performance fee.  During 
the period the theme contributed £28.1 million in management fees at an average 
margin of 191bps, and £16.5 million of performance fees (2007: £18.9 million; 
191bps; and £2.1 million).   
  
Equity, Corporate High Yield, Multi Strategy and other assets  
  
The equity investment theme comprises public equity and equity-related 
securities. The instruments invested in by the funds can include equities, 
convertibles, warrants and equity derivatives. AuM at 31 December 2008 was 
US$0.1 billion, a decrease of US$0.7 billion (88%) from 30 June 2008, reflecting 
negative market sentiment towards equities, especially during the first four 
months of the financial year.  
  
The corporate high yield theme comprises investments in corporate debt within 
emerging markets. This asset class offers investors a risk-return profile 
distinct from other segments of emerging market fixed income. AuM at 31 December 
2008 had increased by 20% to US$1.3 billion, across our funds, reflecting our 
assessment of the value within this theme at this point in the economic cycle.   
  
In both the multi-strategy funds and Ashmore Global Opportunities Limited, the 
LSE listed permanent capital vehicle, Ashmore makes the asset allocations based 
on analysis across the investment themes. At the end of the period the total AuM 
within the five themes arising from the multi strategy funds was US$1.6 billion, 
a decrease of 43% from 30 June 2008.   
  
The liquidity fund, with its Standard & Poors "AAAm" rating, is principally used 
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. The level of funds at the period end was US$1.3 billion drawn 
from across the investment themes and funds, a US$1.1 billion (46%) decrease 
from 30 June 2008.  
  
Development of the Ashmore platform  
  
In line with the Group's strategy of developing asset management operations in a 
number of the key emerging markets, the period has seen developments in two 
markets. Firstly, following receipt of regulatory approval from the Capital 
Markets Board in Turkey, the Group established an asset management operation 
with equity and fixed income capabilities, which manages listed onshore 
investment companies and offshore open ended funds focussed on Turkey. Secondly, 
during the period the Group increased its presence in India by adding locally 
based special situations resources co-located with the mid market private equity 
venture it established there two years ago. Finally, in line with the Group's 
strategy to increase the number of global emerging markets themes the Group 
acquired a majority interest in New York based Dolomite Capital in November, 
which provides a platform and expertise as a specialist emerging markets fund of 
funds manager and independent advisor on emerging market investments.   
  
Operating costs and margins  
  
The Group's cost structure is maintained with a low proportion of tightly 
controlled recurring costs and a large proportion of variable performance 
related costs. The majority of the Group's costs are personnel expenses, where 
recurring costs have increased during the period in line with the planned 
increase in headcount to 138 at 31 December 2008 from 93 at 30 June 2008. These 
increases include the recruitment of investment professionals and infrastructure 
staff within the global operating business together with those joining the Group 
in the subsidiary operations described above. Variable compensation, including 
performance related bonuses, share based payments and associated social security 
costs is calculated as a percentage of profit before tax, interest and variable 
compensation which has been accrued at a rate of 20% (six months to 31 December 
2007: 20%; year ended 30 June 2008: 18.2%). Other operating costs are in line 
with the levels outlined at the time of the Group's full year results but ahead 
of the equivalent period last year reflecting the increases in rental expense in 
the Group's London office and the amortisation of deferred acquisition costs.  
  
As a result of the reduction in net income, particularly the foreign exchange 
loss relating to future management fee income, and the increases to costs 
outlined above, including the early stage of some of the new business ventures 
established in the period, the overall operating margin has reduced to 70% from 
75% in the equivalent period last year. This continues to place Ashmore amongst 
the leading asset managers in terms of operational efficiency, a position we 
strive to maintain in our global business and to develop within our subsidiary 
asset management operations.  
  
Balance sheet, cash flow and foreign exchange  
  
The Group maintains a strong balance sheet in order to support its regulatory 
capital, commercial and business developmental requirements, including seeding 
new funds. Cash has increased during the six months to 31 December 2008 to 
£301.8 million (31 December 2007: £221.0 million; 30 June 2008: £279.2 million). 
 The Group's operating activities are highly cash-generative, as demonstrated by 
net operating cash inflows during the period of £79.9 million, after payments in 
respect of taxation liabilities of £28.2 million. Material non-operating cash 
outflows during the period were in respect of business acquisitions (£3.7 
million), share purchases held in Treasury (£6.5 million), and the payment in 
December of the final dividend in respect of the year ended 30 June 2008 (£57.0 
million).    
  
The Group's foreign exchange hedging activities have had a material impact in 
the period following the sharp fall in sterling between September and December 
2008 to levels not anticipated and not experienced in many years. In line with 
the Group's hedging policy a significant proportion of its management fee 
income, which is almost entirely denominated in US dollars, is hedged using 
forward foreign exchange contracts providing certainty over the exchange rates 
that will be achieved. Following the reduction in AuM, the Group's FY08/09 
effective management fee income reported in GBP will not benefit from the 
current strength of the US Dollar, being fully hedged at current AuM levels at a 
rate of GBP1:1.95USD as a result of these forward foreign exchange contracts.  
Hedge contracts of US$100m are also in place to partially hedge FY09/10 
management fees at a rate of GBP1:1.79USD.  Included within the overall foreign 
exchange loss of £49.8 million recognised as at 31 December 2008, is £41.4 
million, in respect of the unrealised marked-to-market loss on open forward 
foreign exchange contracts.  These are valued at the year end rate of 
GBP1:1.46USD and will be offset by either gains on management fees as they 
crystallise, or hedge contracts as they mature, during the second half of this 
financial year and the next financial year.    
  
Dividend  
  
The Board has determined that an interim dividend of 3.66 pence per share (3.66 
pence) will be paid on 24 April 2009 to all shareholders who are on the register 
on 27 March 2009.  
  
Purchase of own shares  
  
In line with authorities granted at the AGM in October 2008, the Company 
purchased 4,966,587 shares for an aggregate consideration of £6.5 million which 
are held in treasury.   
  
Strategy and outlook  
  
The current global economic environment has resulted in markets where the 
dominant characteristic is the severe reduction in liquidity which exacerbates 
the traditionally lower levels of liquidity seen in the emerging markets, 
accompanied by asset repatriation to the US Dollar and a lesser extent the Euro. 
  
  
The investment team at Ashmore has significant experience operating and 
outperforming during a number of economic crises affecting the emerging markets 
over the last twenty years, which share many characteristics with the current 
conditions. We continue to believe that global and regional macroeconomic, 
demographic and political factors underpin the long term growth prospects of the 
emerging market asset classes and these trends will see the long term allocation 
to the emerging markets increase, particularly as their relative growth 
prospects become ever clearer over the next two years.   
  
  We see significant investment opportunities for our funds, where asset 
valuations have been driven lower by uncertainty surrounding the economic 
backdrop and reduced market liquidity - basically we are a buyer from here. 
However the environment for asset raising remains difficult, as it always does 
at the right time to invest, with investors still digesting the impact of recent 
events and their large losses in developed markets.   
  
The Group, with its strong balance sheet and significant cash reserves, is in an 
excellent position to deliver on its strategy, as the number of participants 
operating within emerging markets reduces, and a large number of global 
financial institutions retreat to their home markets. This provides both 
increased visibility of Ashmore's commitment to these markets as well as the 
potential opportunities to establish or acquire interesting asset management 
capabilities.   
  
Consolidated income statement   
  
 
                                                                                               
                                        Unaudited           Unaudited           Audited        
                                        6 months to         6 months to         12 months to   
                                        31 December 2008    31 December 2007    30 June        
                                                                                2008           
                                 Note   £m                  £m                  £m             
                                                                                               
  Management fees                       104.6               88.7                186.7          
  Performance fees                      48.9                32.2                44.7           
  Other revenue                         3.5                 5.0                 10.1           
  Total revenue                         157.0               125.9               241.5          
  Less: Distribution costs              (2.7)               (2.8)               (4.7)          
  Less: Foreign exchange         2      (49.8)              0.4                 3.2            
  Net revenue                           104.5               123.5               240.0          
                                                                                               
  Personnel expenses                    (23.2)              (26.6)              (47.7)         
  Other expenses                        (8.1)               (4.0)               (11.1)         
  Operating profit                      73.2                92.9                181.2          
                                                                                               
  Interest income                       7.1                 8.0                 15.0           
  Profit before tax                     80.3                100.9               196.2          
                                                                                               
  Tax expense                           (23.3)              (30.8)              (55.2)         
  Profit for the period                 57.0                70.1                141.0          
                                                                                               
  Attributable to:                                                                             
                                                                                               
  Equity holders of the parent          56.9                70.0                140.8          
  Minority interest                     0.1                 0.1                 0.2            
  Profit for the period                 57.0                70.1                141.0          
                                                                                               
  Earnings per share:                                                                          
                                                                                               
  Basic                          3      8.48p               10.47p              21.03p         
  Diluted                        3      7.90p               9.90p               19.89p         
                                                                                               
  
  
consolidated balance sheet   
  
 
                                                                     Unaudited           Unaudited           Audited    
                                                                     As at               As at               As at      
                                                                     31 December 2008    31 December 2007    30 June    
                                                                                                             2008       
                                                              Note   £m                  £m                  £m         
                                                                                                                        
  Assets                                                                                                                
  Property, plant and equipment                                      4.0                 0.5                 3.3        
  Intangible assets                                           5      6.7                 4.1                 4.1        
  Deferred acquisition costs                                  6      12.4                14.5                13.4       
  Other receivables                                                  1.0                 -                   -          
  Deferred tax assets                                                8.0                 14.8                13.8       
                                                                                                                        
  Total non-current assets                                           32.1                33.9                34.6       
                                                                                                                        
  Trade and other receivables                                        32.9                57.0                34.7       
  Derivative financial instruments                                   -                   -                   1.2        
  Cash and cash equivalents                                          301.8               221.0               279.2      
  Total current assets                                               334.7               278.0               315.1      
                                                                                                                        
  Non-current assets held for sale                                   16.6                -                   16.4       
                                                                                                                        
  Total assets                                                       383.4               311.9               366.1      
                                                                                                                        
  Equity                                                                                                                
  Issued capital                                                     -                   -                   -          
  Share premium                                                      0.3                 0.3                 0.3        
  Retained earnings                                                  262.0               223.8               271.5      
                                                                                                                        
                                                                                                                        
  Total equity attributable to equity holders of the parent          262.3               224.1               271.8      
                                                                                                                        
  Minority interest                                                  2.4                 0.6                 1.5        
                                                                                                                        
  Total equity                                                       264.7               224.7               273.3      
                                                                                                                        
  Liabilities                                                                                                           
  Deferred tax liabilities                                           2.1                 4.1                 3.8        
  Total non-current liabilities                                      2.1                 4.1                 3.8        
                                                                                                                        
  Current tax                                                        20.3                24.4                24.5       
  Derivative financial instruments                                   41.4                1.2                 0.7        
  Trade and other payables                                           54.9                57.5                63.7       
  Total current liabilities                                          116.6               83.1                88.9       
                                                                                                                        
  Non-current liabilities held for sale                              -                   -                   0.1        
                                                                                                                        
  Total liabilities                                                  118.7               87.2                92.8       
  Total equity and liabilities                                       383.4               311.9               366.1      
                                                                                                                        
  
  
consolidated statement of changes in equity  
  
  
 
                                                                                                                      Total equity attributable to equity holders of the parent                                       
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
                                                              Issued capital    Share premium    Retained earnings                                                                Minority interest    Total equity   
                                                              £m                £m               £m                   £m                                                          £m                   £m             
                                                                                                                                                                                                                      
  Audited balance at 1 July 2007                              -                 0.3              195.6                195.9                                                       0.1                  196.0          
                                                                                                                                                                                                                      
  Profit for the period                                       -                 -                70.0                 70.0                                                        0.1                  70.1           
  Issue of share capital                                      -                 -                -                    -                                                           0.4                  0.4            
  Share based payments                                        -                 -                2.7                  2.7                                                         -                    2.7            
  Current tax related to share based payments                 -                 -                0.7                  0.7                                                         -                    0.7            
  Dividends                                                   -                 -                (45.2)               (45.2)                                                      -                    (45.2)         
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
  Unaudited balance at 31 December 2007                       -                 0.3              223.8                224.1                                                       0.6                  224.7          
                                                                                                                                                                                                                      
  Profit for the period                                       -                 -                70.8                 70.8                                                        0.1                  70.9           
  Issue of share capital                                      -                 -                -                    -                                                           0.8                  0.8            
  Share based payments                                        -                 -                6.1                  6.1                                                         -                    6.1            
  Current tax related to share based payments                 -                 -                (2.0)                (2.0)                                                       -                    (2.0)          
  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                                                   -                 -                (24.9)               (24.9)                                                      -                    (24.9)         
                                                                                                                                                                                                                      
  Audited balance at 30 June 2008                             -                 0.3              271.5                271.8                                                       1.5                  273.3          
                                                                                                                                                                                                                      
  Profit for the period                                       -                 -                56.9                 56.9                                                        0.1                  57.0           
  Issue of share capital                                      -                 -                -                    -                                                           0.8                  0.8            
  Share based payments                                        -                 -                0.9                  0.9                                                         -                    0.9            
  Current tax related to share based payments                 -                 -                0.2                  0.2                                                         -                    0.2            
  Deferred tax related to share based payments                -                 -                (5.3)                (5.3)                                                       -                    (5.3)          
  Net gains on available-for-sale financial assets            -                 -                0.6                  0.6                                                         -                    0.6            
  Treasury shares                                             -                 -                (6.5)                (6.5)                                                       -                    (6.5)          
  Dividends                                                   -                 -                (57.0)               (57.0)                                                      -                    (57.0)         
  Exchange adjustments on translation of foreign operations   -                 -                0.7                  0.7                                                         -                    0.7            
                                                                                                                                                                                                                      
  Unaudited balance at 31 December 2008                       -                 0.3              262.0                262.3                                                       2.4                  264.7          
  
  
consolidated cash flow statement   
  
 
                                                                        Unaudited           Unaudited           Audited        
                                                                        6 months to         6 months to         12 months to   
                                                                        31 December 2008    31 December 2007    30 June        
                                                                                                                2008           
                                                                 Note   £m                  £m                  £m             
                                                                                                                               
  Operating activities                                                                                                         
                                                                                                                               
  Cash receipts from customers                                          159.2               105.9               242.8          
  Cash paid to suppliers and employees                                  (51.1)              (38.8)              (47.3)         
                                                                                                                               
  Cash generated from operations                                        108.1               67.1                195.5          
                                                                                                                               
  Taxes paid                                                            (28.2)              (17.9)              (46.5)         
                                                                                                                               
  Net cash from operating activities                                    79.9                49.2                149.0          
                                                                                                                               
  Investing activities                                                                                                         
  Interest received                                                     6.6                 8.0                 15.4           
  Acquisition of subsidiary                                             (3.7)               -                   -              
  Purchase of non-current assets held for sale                          -                   -                   (15.1)         
  Purchase of deferred acquisition costs                                -                   (10.3)              (14.6)         
  Purchase of property, plant and equipment                             (1.1)               (0.3)               (3.5)          
                                                                                                                               
  Net cash from/(used in)investing activities                           1.8                 (2.6)               (17.8)         
                                                                                                                               
  Financing activities                                                                                                         
                                                                                                                               
  Dividends paid                                                 4      (57.0)              (45.2)              (70.1)         
  Purchase of treasury shares                                    9      (6.5)               -                   -              
                                                                                                                               
  Net cash used infinancing activities                                  (63.5)              (45.2)              (70.1)         
                                                                                                                               
  Effect of exchange rate changes on cash and cash equivalents          4.4                 1.6                 0.1            
                                                                                                                               
  Net increase in cash and cash equivalents                             22.6                3.0                 61.2           
                                                                                                                               
  Cash and cash equivalents at beginning of period                      279.2               218.0               218.0          
                                                                                                                               
  Cash and cash equivalents at end of period                            301.8               221.0               279.2          
                                                                                                                               
                                                                                                                               
  Cash and cash equivalents comprise:                                                                                          
  Cash at bank and in hand as shown in balance sheet                    301.8               221.0               279.2          
                                                                        301.8               221.0               279.2          
  
  
NOTES TO THE FINANCIAL STATEMENTS  
  
1. Basis of preparation and significant accounting policies  
  
The interim report is unaudited and does not constitute statutory accounts 
within the meaning of Section 240 of the Companies Act 1985. The financial 
statements have been prepared in accordance with IAS 34 'Interim Financial 
Reporting' and the Listing Rules of the Financial Services Authority ("FSA").  
  
The accounting policies applied in these interim financial statements are 
consistent with those applied in the Group's annual report and accounts for the 
year ended 30 June 2008. The annual report and accounts is available on the 
Group's website. Certain comparative amounts relating to foreign exchange have 
been reclassified to conform to the current period presentation. None of the 
changes are significant in nature.  
  
In addition to the accounting policies applied in the Group's annual report, the 
following accounting policies were adopted:  
  
Basis of consolidation  
  
The results of subsidiaries acquired during the year are included in the 
consolidated income statement from the effective date of acquisition.  
  
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 as at    Closing rate as at    Closing rate as at    Average rate         Average rate         Average rate   
              31 December 2008      31 December 2007      30 June               six months ended     six months ended     year           
                                                          2008                  31 December 2008     31 December 2007     ended          
                                                                                                                          30 June        
                                                                                                                          2008           
  US dollar   1.4593                1.9850                1.9923                1.6984               2.0368               2.0119         
  
  
Net foreign exchange losses in the six months to 31 December 2008 comprise £54.2 
million (six months to 31 December 2007: £0.6 million net gains) of realised and 
unrealised hedging losses relating to the management of the Group's US dollar 
denominated revenue. This was partially offset by a £4.4 million gain (six 
months to 31 December 2007: £0.2 million loss) from foreign exchange movements 
on the Group's non-sterling denominated net assets.   
  
Included within the overall foreign exchange loss of £49.8 million recognised at 
31 December 2008 is £41.4 million in respect of the unrealised marked-to-market 
loss on open forward foreign exchange contracts. These are valued at the year 
end rate of GBP1:1.46USD and will be offset by either gains on management fees 
as they crystallise, or hedge contracts as they mature, during the second half 
of this financial year and the next financial year.    
  
 
                                                 Maturity date                          
                                                                                        
                                                 Second half 08/09    Full year 09/10   
                                                                                        
  Hedge contracts maturing (US$m)                165.0                100.0             
                                                                                        
                                                                                        
  Average contract rate (GBP:USD)                1.95                 1.79              
                                                                                        
  Exchange rate at 31 December 2008 (GBP:USD)    1.46                 1.46              
                                                                                        
  Hedge loss recognised at 31/12/08 (£m)         (28.7)               (12.7)            
  
  
3. 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 £56.9 million (six months 
to 31 December 2007:£70.0 million) 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 an 
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 financial year attributable to equity holders of the 
parent used in the basic and diluted earnings per share calculations.  
  
A reconciliation of the figures used in calculating basic and diluted earnings 
per share is shown below:  
  
 
                                                                   6months to          6months to          12 months to   
                                                                   31 December 2008    31 December 2007    30 June        
                                                                                                           2008           
                                                                                                                          
  Weighted average number of ordinary shares used in calculation   670,469,341         668,501,230         669,671,683    
  of basic earnings per share                                                                                             
  Effect of dilutive potential ordinary shares - share options     49,804,829          38,428,080          38,322,426     
  Weighted average number of ordinary shares used in calculation   720,274,170         706,929,310         707,994,109    
  of diluted earnings per share                                                                                           
  
  
4. Dividends  
  
An analysis of dividends is as follows:  
  
 
                                            6 months to         6 months to         12 months to    
  
  
More to follow, for following part double-click [nRn2X7618N]