Ashmore Group plc · LSE:ASHM
Ashmore — H1 2017/18 Earnings Presentation
30 slides from Ashmore's earnings presentation, Feb 8, 2018
Slide 1: Results for six months ending 31 December 2017
Ashmore Group plc Results for six months ending 31 December 2017 8 February 2018 www.ashmoregroup.com
Slide 2: Overview
Overview • Accelerating growth and outperformance across Emerging Markets GDP growth driven by exports, continued inflows to stimulate domestic growth Highly-diversified asset classes continue to provide value opportunities • Active management delivering strong investment performance 82% AuM o
Slide 3: Financial performance overview
Financial performance overview Six months ended Six months ended • AuM +18% over the six months 31 December 2017 31 December 2016 £m £m YoY % Net flows +US$7.9 billion, investment performance +US$3.2 billion AuM (US$bn) 69.5 52.2 33 Operating revenues 136.7 135.7 1 • Operating revenues +1% to £136
Slide 4: Strong growth through net flows
Assets under management • Gross subscriptions of US$15.0 billion, 26% of AuM development (US$bn) opening AuM (H1 2016/17: US$5.5 billion, 10%) (7.1) 15.0 Strong demand across investment themes 3.2 (0.3) • Gross redemptions of US$7.1 billion, 12% of opening AuM (H1 2016/17: US$6.2 billion, 12%) S
Slide 5: Net flows were positive for all regions and all client types
Client flows and products • Broad-based distribution capabilities maintaining Net flows (US$bn) diverse client mix 25 20 15 10 • Sales biased towards top-ups from existing clients, with 5 good level of new client mandates 0 -5 -10 -15 • Strong growth in retail AuM, +20% over the six months -20 H1'07
Slide 6: AuM growth driving revenues
Financial results Revenues • Net management fees +5%, driven by AuM growth Higher net management fee income 25.7 13.7 • Average GBP:USD rate 4% higher headwind for fees, some positive contribution from FX hedges 4.4 2.0 120.5 • Net management fee margin 50bps, stable versus H2 114.9 2016/17 4 bp
Slide 7: Continued cost discipline
Financial results Operating costs • Continued focus on controlling expenses Non-VC adjusted operating costs reduced 27.1 0.6 0.6 • Non-VC adjusted operating costs reduced by 4% 25.9 • 3% lower average headcount • Variable compensation accrued at 20% of EBVCIT H1 2016/17 Fixed staff costs Other costs
Slide 8: Revenue quality and adjusted EBITDA
Financial results Revenue quality and adjusted EBITDA • Revenues are driven by recurring management fee High-quality revenues and increase in profitability income, representing 90-95% of total fees 100% Fees as % total fees / Adj EBITDA margin 90% • Operating revenues +1%, non-VC costs reduced 4% 80
Slide 9: Financial effects of seed capital
Financial results Financial effects of seed capital • Total seed capital gains of £10.5 million 6m ended 6m ended 31 Dec 2017 31 Dec 2016 £m £m • Consolidated funds: Gains/(losses) on investment securities 9.4 6.7 Line-by-line consolidation in financial Change in third-party interests in consolida
Slide 10: Seed capital programme supports future AuM growth
Financial results Seed capital Seed capital movement (£m) • Market value £226.3 million (30 June 2017: £210.2 million) 27.7 18.7 7.1 226.3 210.2 Majority is in funds with at least monthly dealing frequency • Profit contribution of £10.5 million Market performance delivered gain of £13.5 million
Slide 11: Dividend maintained
Financial results Statutory earnings 6m ended 6m ended 31 Dec 2017 31 Dec 2016 YoY £m £m % Finance income 9.1 26.1 (65) Profit before tax 99.0 121.5 (19) Tax (17.8) (22.7) 22 Profit after tax 81.2 98.8 (18) Profit attributable to non-controlling interests (1.0) (0.4) nm Profit attributable to equity
Slide 12: Consistent generation and uses of cash
Financial results Cash flow • Operations generated cash flow of Cash flow (£m) (1) £73.5 million (1) 81% of adjusted EBITDA (H1 2016/17: 109%) 73.5 20.3 86.5 420.1 10.3 • Significant cash uses in H1, relating 9.3 2.3 12.0 357.5 to the prior year: Distribution of prior year final ordinary dividen
Slide 13: Well-capitalised, liquid balance sheet with no debt
Financial results Balance sheet • Excess regulatory capital of £485.1 million Conservative balance sheet maintained across market cycles Capital resources of £596.2 million (2) 700 600 Pillar 2 regulatory capital requirement of 500 £111.1 million 400 Excess capital equivalent to 69p/share 300
Slide 14: Continued strong performance over one, three and five years
Investment performance AuM outperforming versus benchmark, AuM outperforming versus benchmark, AuM outperforming versus benchmark, gross one year annualised gross three years annualised gross five years annualised 100% 100% 100% 93% 80% 80% 87% 80% 82% 60% 60% 60% 40% 40% 40% 20% 20% 20% 0% 0% 0% Bl
Slide 15: Expect Emerging Markets to continue outperforming in 2018
Expect Emerging Markets to continue outperforming in 2018 Fixed income Equities • Attractive nominal and real yields, especially versus DM assets • Performance has good correlation with GDP growth • Currencies offer exceptional value • 2017 returns (MSCI EM +38%) justified by profit growth, PER is l
Slide 16: Years of successful investing in Emerging Markets
25 years of successful investing in Emerging Markets • EMLIP launched in October 1992 Superior long-term performance Annualised net return +14.4% 3,100 Substantial outperformance versus benchmark (EMBI +10.6% annualised) and 2,600 S&P (+9.8% annualised) 2,100 • EMLIP’s long-term track record del
Slide 17: Summary
Summary • Accelerating growth and outperformance across Emerging Markets • Active management delivering continued strong investment performance • Increasing flow momentum, existing clients adding to allocations • Business model delivering positive operating leverage in favourable environment • Expec
Slide 18: Appendices
Ashmore Appendices eee
Slide 19: Adjusted profits reconciliation
Appendix 1 Adjusted profits reconciliation Adjusted Adjusted H1 2017/18 H1 2016/17 £m £m YoY % Net revenue 134.4 144.1 (7) FX translation 2.3 (8.4) nm Operating revenues 136.7 135.7 1 Operating costs ex consolidated funds (45.0) (47.7) (6) VC on FX translation (0.5) 1.7 nm Adjusted operating costs (
Slide 20: Net management and performance fees by theme
Appendix 2a Net management and performance fees by theme H1 2017/18 H1 2016/17 H1 2017/18 H1 2016/17 £m £m US$m US$m External debt 24.4 23.6 32.3 30.0 Local currency 21.4 22.7 28.6 28.9 Corporate debt 16.3 12.7 21.6 16.2 Blended debt 34.1 30.8 45.7 39.2 Equities 10.8 11.4 14.3 14.5 Alternatives 6.6
Slide 21: Management fee margins
Appendix 2b Management fee margins H1 2016/17 H2 2016/17 H1 2017/18 141 137 123 96 84 82 79 78 76 61 63 61 54 51 49 53 53 50 50 50 45 43 43 39 16 14 17 Equities Multi-asset Group Alternatives Local currency Overlay/liquidity External debt Blended debt Corporate debt Fixed income: 49bps (H1 2016/17:
Slide 22: Assets under management
Appendix 3a Assets under management AuM by theme (US$bn) AuM as invested (US$bn) External debt 1.2 6.5 6.3 Local currency External debt 1.6 15.0 1.8 3.9 Corporate debt 4.5 Local currency 26.5 Blended debt Corporate debt Equities 9.4 Equities 18.8 14.9 Alternatives Alternatives Multi-asset Overlay/li
Slide 23: Investment themes
Appendix 3b Investment themes Overlay/ External Debt Local Currency Corporate Debt Equities Alternatives Liquidity (US$15.0bn) (US$14.9bn) (US$7.8bn) (US$3.9bn) (US$1.6bn) (US$6.3bn) Global Emerging • Broad • Bonds • Broad • Global EM Value • Private Equity • Overlay Markets • Sovereign • Bonds (Bro
Slide 24: Quarterly net flows
Appendix 3c Quarterly net flows +8.0 +6.0 +4.0 +2.0 US$ billion +0.0 -2.0 -4.0 -6.0 -8.0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 24
Slide 25: AuM movements by theme and fund classification
Appendix 4 AuM movements by theme and fund classification AuM Gross Gross Reclassification AuM US$bn 30 June 2017 Performance subscriptions redemptions Net flows & other 31 December 2017 External debt 13.3 0.6 2.4 (1.1) 1.3 (0.2) 15.0 Local currency 13.7 0.8 4.1 (1.7) 2.4 (2.0) 14.9 Corporate debt 6
Slide 26: Foreign exchange
Appendix 5 Foreign exchange • Sterling strengthened against the US dollar over the six month Currency exposure of cash(1) period 31 December 2017 % 30 June 2017 % Period-end rate moved from 1.2946 to 1.3513 £m £m US dollar 285.3 80 241.6 57 Average rate 1.3259 vs 1.2809 in H1 2016/17 Sterling 51
Slide 27: Cash flows and consolidated funds H1 2017/18
Appendix 6 Cash flows and consolidated funds H1 2017/18 £m As reported Consolidated funds Group ex funds Cash from operations 72.7 (0.8) 73.5 Taxation (20.3) - (20.3) Interest received 5.0 2.7 2.3 Seeding activities (11.9) (2.6) (9.3) Dividends paid (86.5) - (86.5) Treasury/own shares (10.3) - (10.3
Slide 28: Investment performance
Appendix 7 Investment performance 1yr 3yr 5yr 31 December 2017 Ashmore Benchmark Ashmore Benchmark Ashmore Benchmark External debt Broad 11.3% 10.3% 10.9% 7.1% 5.6% 4.6% Sovereign 10.1% 10.3% 9.3% 7.1% 5.1% 4.6% Sovereign IG 10.9% 9.2% 5.8% 4.9% 3.2% 3.2% Local currency Bonds 17.4% 15.2% 4.2% 2.5% -
Slide 29: Disclosures
Appendix 8 Disclosures Page 14: - Gross performance is shown, weighted by fund AuM, to provide a representative view to analysts and shareholders of Ashmore’s investment performance over relevant time periods - Only funds at 31 December 2017 and with a performance benchmark are included, which speci
Slide 30: 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