Ashmore Group plc · LSE:ASHM
Ashmore — H1 2013/14 Earnings Presentation
33 slides from Ashmore's earnings presentation, Feb 25, 2014
Slide 1: Ashmore Group plc Interim results
Ashmore Group plc Interim results 25 February 2014 Six months to 31 December 2013
Slide 2: Financial performance reflects FX translation and weaker markets
Overview •Assets under management US$75.3 billion at 31 December 2013 - Investment performance added US$0.8 billion (H1 2012/13: US$5.7 billion) - Net outflow US$2.9 billion (H1 2012/13: US$1.6 billion inflow) •Net revenue £134.6 million (H1 2012/13: £163.7 million) - Net management fees increased 1
Slide 3: Set against uncertain market backdrop, AuM reduced by 2.7%
Assets under management Overview • AuM declined by US$2.1bn (2.7%) from 30 Assets under management (US$bn) June 2013 • Investment performance added US$0.8bn • Net outflow of US$2.9bn 77.4 75.3 - subscriptions of US$7.3bn (H1 2012/13: US$8.8bn) 65.8 63.7 - redemptions of US$10.2bn (H1 2012/13: US$7.2
Slide 4: Positive investment performance, but net flows reflect small number of large redemptions
Assets under management Subscriptions, redemptions and performance • On-going broad-based client demand AuM development (US$bn) - focus on local currency, corporate debt 7.3 (10.2) and blended debt - equities subscriptions continue • Redemptions 13% of average AuM (H1 2012/13: 11%) 1.6 (0.8) - small
Slide 5: Strategy delivering a diversified and balanced client mix
Assets under management Distribution • Appropriately scaled distribution team of 47 people AuM by client type - organised by functional discipline and covering broad Central banks geographic area 10% 2% 18% Sovereign wealth funds 2% • Segregated mandates account for 65% of AuM 13% Governments 9% Pen
Slide 6: Established processes take on risk to deliver long-term outperformance
Assets under management Investment performance Funds outperforming versus Funds outperforming versus Funds outperforming versus benchmark – Gross 1 Year benchmark – Gross 3 Years benchmark – Gross 5 Years 100% 100% 100% 80% 80% 80% 60% 60% 60% 40% 40% 40% 20% 20% 20% 0% 0% 0% External Local Corporat
Slide 7: Revenue decline driven by reduction in performance fees and FX translation
Financial results Net revenue Six months ended Six months ended 31 December 2013 31 December 2012 Variance £m £m £m % Management fees 152.0 150.2 1.8 1 Less: distribution costs (2.2) (2.0) (0.2) - Net management fees 149.8 148.2 1.6 1 Performance fees 0.7 15.3 (14.6) - Other revenue 2.6 2.3 0.3 - Fo
Slide 8: Management fee margins
Financial results Management fee margins • Majority of the y-o-y decline attributable to: Average net management fee margins (bps) - large mandate wins in H2 2012/13 300 - change in charging basis for alternatives funds 260 • Limited theme mix impact 250 H1'13 H2'13 H1'14 • Investment theme margin t
Slide 9: Alternatives
Financial results Alternatives • Funds historically charged on ‘invested cost’ basis Special situations funds: investment performance - from 1 Oct 2013, two funds changed to lower of NAV 30 Net annualised IRR since inception (%) and invested cost 25 20 - reduces annualised revenues by US$25m Add cha
Slide 10: Revenue quality and profitability
Financial results Revenue quality and profitability • Diversified management fees from eight 300 investment themes and 26 sub-themes 80% 250 70% • High-quality profits and an industry- leading margin 60% 200 Net fees (US$m) 50% • EBITDA margin ‘in the 60s’ after reduction 150 in performance fees and
Slide 11: Highly variable cost structure provides for significant flexibility
Financial results Expenses Six months ended Six months ended 31 December 2013 31 December 2012 Variance £m £m £m % Personnel expenses 12.5 12.2 (0.3) 2 Variable compensation 21.3 25.8 4.5 (17) Other operating expenses 13.6 12.0 (1.6) 13 Depreciation 0.5 1.1 0.6 - Amortisation 2.0 10.0 8.0 - Total op
Slide 12: Seed capital result affected by FX translation
Financial results Adjusted EBITDA £ millions H1 2013/14 Seed capital- Acquisition- H1 2013/14 H1 2012/13 Variance Statutory related items related items Adjusted Adjusted % Net revenue 134.6 134.6 163.7 (18) Inv. secs. & third-party interests in funds 5.0 (5.0) - - - Personnel expenses (33.8) (33.8)
Slide 13: Dividend increased given balance sheet strength and confidence in outlook
Financial results Earnings Six months ended Six months ended 31 December 2013 31 December 2012 Variance £m £m £m % Profit before tax 79.5 120.2 (40.7) (34) Tax (15.4) (26.3) 10.9 41 Profit after tax 64.1 93.9 (29.8) (32) Profit attributable to non-controlling interests (1.3) 0.4 (1.7) - Profit attri
Slide 14: Cash reduced by expected seasonal effects
Financial results Cash flow • Continued good conversion of profits to Cash flow (£m) (1) cash 87.5 29.0 - operating profit £89.7m leads to cash 84.2 flow of £87.5m (98%, H1 2012/13: 393.9 1.9 1.2 0.3 23.2 116%) 344.6 • Seasonal peak demand for cash in H1 - final dividend - taxation - prior year remu
Slide 15: Strong and liquid balance sheet
Financial results Balance sheet • Tangible shareholders’ equity £522.6m Excess capital invested in liquid assets (31 December 2013: £477.7m; 30 June 2013: £543.8m) Total available capital: £516m (2) • Excess over regulatory capital of c.£430m • Cash and cash equivalents (1) £344.6m (30 June 2013: £3
Slide 16: Seed capital delivers scale in third-party AuM
Financial results Seed capital • P&L loss of £5.7m includes positive Diversified across themes and platforms investment gains but more than offset by Theme Investment % total Principal funds FX translation effect of -£13.7m (H1 (£m) investment 2012/13: -£0.2m) External debt 3.1 2% US 40-Act Local cu
Slide 17: Consistent hedging policy
Financial results Foreign exchange hedging and translation Cash and cash equivalents by currency • Policy is to hedge up to two-thirds of US$ management £m Total GBP USD Other fees - collars used to provide protection outside of 31 Dec 2013 346.8 78.2 254.3 14.3 reasonable range 30 Jun 2013 395.5 16
Slide 18: Diversity of Emerging Markets
Diversity of Emerging Markets • 160 countries of which more than 65 are readily investable Differentiation of returns: local currency bonds, Q4 2013 - different stages of economic growth, political and capital 6.0% markets development provides scope for diversification 4.0% 2.0% 0.0% • 5% GDP growth
Slide 19: Increasing diversification improves earnings quality
Focus on diversification Balanced net management fee income • Diverse AuM and management fee mix 3% 9% - eight investment themes and 26 sub-themes 28% 10% 9% - two largest themes only 41% of management fees vs 73% 1% five years ago 26% 23% - lower representation from assets priced off US Treasuries
Slide 20: Selective approach to a diverse asset class
Investment opportunities • Vulnerable/poorly managed countries influence EM sentiment Local currency bonds yield more than 7% - price volatility is arguably a poor measure of risk, especially 12 in fixed income 10 GBI EM GD UST 10yr • Heavy election schedule in 2014 8 Yield (%) - more than 40% of th
Slide 21: Summary
Summary •Financial results reflect uncertain markets and FX translation •Balance sheet strength supports future growth and shareholder returns •Recent investment in distribution and operational infrastructure is bearing fruit •Strong investment track record across a diverse range of Emerging Markets
Slide 22: Appendices
Ashmore Appendices
Slide 23: Net management and performance fees by theme
Appendix 1a Net management and performance fees by theme H1 2012/13 H1 2013/14 H1 2012/13 H1 2013/14 £m £m US$m US$m External debt 34.4 26.9 54.5 42.6 Local currency 24.0 27.3 38.5 43.5 Corporate debt 8.4 15.2 13.4 24.2 Blended debt 23.9 34.3 38.8 53.9 Equities 13.7 13.1 22.0 20.9 Alternatives 19.8
Slide 24: AuM by theme and fund account / classification
Appendix 2a AuM by theme and fund account / classification US$ billions 31 December 2012 30 June 2013 31 December 2013 External debt 15.3 14.5 13.4 Local currency 13.2 17.6 16.9 Corporate debt 3.1 6.1 7.0 Blended debt 16.6 17.6 19.1 Equities 6.0 5.5 5.3 Alternatives 2.3 2.7 2.5 Multi-strategy 5.1 3.
Slide 25: AuM / product information
Appendix 2b AuM / product information AuM by theme (US$bn) AuM as invested (US$bn) External 8.3 8.3 13.4 External 2.8 Local 3.1 20.3 2.5 Corporate Local 6.1 5.3 Blended Corporate Equities Equities 16.9 Alternatives 14.7 Alternatives 19.1 Multi-strategy Overlay/liquidity 7.0 22.9 Overlay/liquidity Au
Slide 26: AuM movements by investment theme
Appendix 2c AuM movements by investment theme AuM Gross Gross AuM US$ billions 30 June 2013 Performance subscriptions redemptions Net flows Reclassification 31 December 2013 External debt 14.5 0.5 1.0 (1.5) (0.5) (1.1) 13.4 Local currency 17.6 (0.3) 1.5 (1.9) (0.4) - 16.9 Corporate debt 6.1 0.3 1.4
Slide 27: Statutory to Adjusted profits reconciliation H1 2012/13
Appendix 3a Statutory to Adjusted profits reconciliation H1 2012/13 H1 2012/13 Acquisition- H1 2012/13 £ millions Statutory Seed capital-related items related items Adjusted Consolidated Other seed capital funds items Net revenue 163.7 163.7 Inv. secs. & third-party interests in funds 7.1 (7.1) - Pe
Slide 28: Seed capital and acquisition-related items
Appendix 3b Seed capital and acquisition-related items £ millions H1 2012/13 H1 2013/14 Operating expenses (0.4) (0.5) Gains/(losses) on investment securities 9.3 3.8 Change in third-party interests (2.2) 1.2 Finance income 1.1 0.5 Other gains on seed capital investments 0.9 (10.7) Total seed capita
Slide 29: Cash flows and consolidated funds
Appendix 3c Cash flows and consolidated funds £millions Six months ended 31 December 2013 Six months ended 31 December 2012 As Consolidated Group ex Consolidated Group ex reported funds funds As reported funds funds Cash from operations 87.0 (0.5) 87.5 127.1 (0.4) 127.5 Taxation (29.0) - (29.0) (29.
Slide 30: Investment performance
Appendix 4 Investment performance Annualised Source: Ashmore (un-audited), JP Morgan, Performance (1) 3 Year Morgan Stanley. Data as at 31 Launch AuM Since Standard December 2013. Returns gross of fees, Theme Fund Date US$M Launch 1 Year 3 Year 5 Year 10 Year Deviation dividends reinvested. EM Exter
Slide 31: Statutory income statement
Appendix 5 Statutory income statement £ millions H1 2012/13 H2 2012/13 H1 2013/14 Net revenue 163.7 191.8 134.6 Inv. Secs & third-party interests in funds 7.1 (3.4) 5.0 Operating expenses (61.1) (66.1) (49.9) Operating profit 109.7 122.3 89.7 Net finance income 10.5 15.2 (9.5) Associates & joint ven
Slide 32: Disclaimer
Disclaimer IMPORTANT INFORMATION This document does not constitute an offer to sell or an invitation to buy shares in Ashmore Group plc or any other invitation or inducement to engage in investment activities. Certain statements, beliefs and opinions in this document are forward-looking, which refle
Slide 33: Ashmore
Ashmore