Ashmore Group plc · LSE:ASHM
Ashmore — FY2018 Earnings Presentation
33 slides from Ashmore's earnings presentation, Sep 7, 2018
Slide 1: Results for year ending 30 June 2018
Ashmore Group plc Results for year ending 30 June 2018 7 September 2018 www.ashmoregroup.com
Slide 2: Overview
Overview • Strong operating and financial performance ˗ Active investment continues to produce outperformance (94% of AuM outperforming over three years) ˗ AuM growth (+26% YoY to US$73.9 billion) driven by record gross and net flows Broad-based client demand and strategic initiatives generating s
Slide 3: Financial performance overview
Financial performance overview • AuM +26% over the year FY2017/18 FY2016/17 £m £m YoY % Record net flows +US$16.9 billion, investment performance -US$1.4 billion AuM (US$bn) 73.9 58.7 26 Operating revenues 278.3 249.8 11 • Operating revenues +11% to £278.3 million Net management fees +13% to £25
Slide 4: Record flows deliver strong AuM growth
Assets under management • Gross subscriptions of US$30.0 billion, 51% of AuM development (US$bn) opening AuM (FY2016/17: US$14.8 billion, 28%) 30.0 (13.1) Record demand, subscriptions doubled YoY Broadly spread across investment themes (1.4) (0.3) • Gross redemptions of US$13.1 billion, 22% of o
Slide 5: Client flows and products: increasingly broad client demand
Client flows and products Increasingly broad client demand • Strong investment performance and consistent Increasing institutional allocations to Emerging Markets (%) (1) highlighting of value available across Emerging 7.5 Markets 6.4 5.4 4.2 • Greater understanding and adoption of Emerging 3.6 3.8
Slide 6: Strategic initiatives delivering growth
Client flows and products • Global distribution team delivering flows diversified by Net flows (US$bn) investment theme, client type and client geography 17.0 Foundations Overlay/liquidity Middle East & Africa Fund/sub-advisers 15.0 Equities Central banks • Strategic initiatives delivering strong Au
Slide 7: Strong revenue growth
Financial results Revenues • Net management fees +13%, driven by AuM growth Higher net management fee income 6% headwind from higher average GBP:USD rate 60.3 17.7 3.0 3.0 13.7 250.5 • Net management fee margin 49bps 3 bps lower YoY attributable to growth in large 221.6 segregated accounts Ret
Slide 8: Continued focus on cost control
Financial results Operating costs • Consistent operating model Non-VC operating costs reduced by 4% ˗ Ongoing focus on fixed operating costs 52.8 0.6 1.5 50.7 ˗ Variable compensation provides strong alignment of client/shareholder/employee interests through the cycle • Stable Group headcount ˗ Local
Slide 9: Positive operating leverage
Financial results Business model delivers through market cycles • Net management fees contribute >90% of fee income High-quality revenues, increase in adjusted EBITDA margin 100% 70% 90% • +14% growth in adjusted EBITDA 80% 65% Fees as % total fees ˗ Fee income growth generated +11% increase in 70%
Slide 10: Seed capital programme supports future AuM growth
Financial results Seed capital Seed capital movement (£m) • Market value £228.3 million (30 June 2017: £210.2 million) 65.0 55.8 Undrawn commitments of £32.5 million 8.9 228.3 210.2 • Profit contribution of £10.1 million, of which £5.0 million realised Investment return of £14.0 million Mark-t
Slide 11: Active seed capital programme creating value
Financial results Active seed capital programme creating value Active management of seed capital investments • Active seeding supports Ashmore’s strategy through: ˗ Creating a marketable investment track record £640m ˗ Establishing new distribution conduits ˗ Providing additional scale to an existin
Slide 12: Lower mark-to-market gains on seed capital
Financial results Finance income FY2017/18 FY2016/17 YoY £m £m % Finance income 15.2 38.6 (61) Comprising: Interest income 4.6 2.6 77 Seed capital 10.6 36.0 (71) Seed capital (see Appendix 1b): - Interest & dividend income (consolidated funds) 5.1 7.8 (35) - Market return (unconsolidated funds) 9.4
Slide 13: Dividend maintained
Financial results Statutory earnings FY2017/18 FY2016/17 YoY £m £m % Profit before tax 191.3 206.2 (7) Tax (37.8) (36.7) (3) Profit after tax 153.5 169.5 (9) Profit attributable to non-controlling interests (2.1) (1.9) (11) Profit attributable to equity holders of the parent 151.4 167.6 (10) Earning
Slide 14: High conversion of earnings to cash flow
Financial results Cash flow • Operations generated cash flow of Cash flow (£m) (1) £210.1 million (1) 114% of adjusted EBITDA 210.1 47.3 (FY2016/17: 109%) 119.9 • Consistent uses of cash through 18.0 cycles 8.9 4.7 14.0 420.1 426.8 Ordinary dividend EBT share purchases to mitigate dilution fro
Slide 15: Conservative balance sheet maintained through cycles
Financial results Balance sheet • Excess regulatory capital of £479.7 million Consistent balance sheet structure Financial resources of £599.2 million (2) 700 600 Pillar 2 regulatory capital requirement of 500 £119.5 million 400 Excess capital equivalent to 68p/share 300 200 100 • Balance shee
Slide 16: Delivering outperformance 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% 94% 89% 80% 80% 80% 73% 60% 60% 60% 40% 40% 40% 20% 20% 20% 0% 0% 0% Bl
Slide 17: Emerging Markets fundamentals are positive
Emerging Markets development continues Fundamentals are positive… • Emerging nations had the ability and willingness to respond to the Emerging Markets fundamentals continue to improve market environment of 2013-2015 2018 2013 ˗ significant macro adjustments GDP growth +5.1% +5.1% ˗ very few default
Slide 18: Emerging Markets outlook: recent price moves create opportunities
Emerging Markets outlook …so recent price moves creates opportunities • Profit-taking after strong Emerging Markets returns in 2016 & 2017 Attractive local currency real yields e.g. local currency bonds +26%, equities +53% 6.00 Local currency bonds real yield (%) 5.00 • Markets affected by Developed
Slide 19: Summary
Summary • Strong operating and financial performance ˗ Active investment continues to produce outperformance ˗ AuM growth driven by record gross and net flows Broad-based client demand and strategic initiatives generating strong AuM growth Maintained focus on cost control, delivering growth in a
Slide 20: Appendices
Ashmore Appendices eee
Slide 21: Adjusted profits reconciliation
Appendix 1a Adjusted profits reconciliation Adjusted Adjusted FY2017/18 FY2016/17 £m £m YoY % Net revenue 276.3 257.6 7 FX translation 2.0 (7.8) nm Operating revenues 278.3 249.8 11 Operating costs ex consolidated funds (94.3) (90.3) (4) VC on FX translation (0.4) 1.6 nm Adjusted operating costs (94
Slide 22: Financial effects of seed capital
Appendix 1b Financial effects of seed capital • Total seed capital gains of £10.1 million FY2017/18 FY2016/17 £m £m Gains/(losses) on investment securities 3.0 22.4 • Consolidated funds: Change in third-party interests in consolidated funds (2.4) (12.5) Line-by-line consolidation in financial stat
Slide 23: Net management and performance fees by theme
Appendix 2a Net management and performance fees by theme FY2017/18 FY2016/17 FY2017/18 FY2016/17 £m £m US$m US$m External debt 50.7 48.9 67.8 61.4 Local currency 46.6 42.8 62.7 54.7 Corporate debt 35.8 25.9 47.6 33.0 Blended debt 68.2 57.8 92.7 74.0 Equities 23.3 21.5 31.4 27.4 Alternatives 12.3 12.
Slide 24: Management fee margins
Appendix 2b Management fee margins 132 131 FY2016/17 FY2017/18 90 81 80 74 62 59 52 53 49 50 49 46 41 42 15 17 Group External debt Local Corporate Blended debt Equities Alternatives Multi-asset Overlay currency debt Fixed income: 48bps (FY2016/17: 50bps) 24
Slide 25: Assets under management
Appendix 3a Assets under management AuM by theme (US$bn) AuM as invested (US$bn) 1.0 External debt 1.5 6.2 14.5 6.5 Local currency 1.6 External debt 4.2 4.7 Corporate debt Local currency 28.4 Blended debt Corporate debt Equities 11.0 Equities 19.7 17.0 Alternatives Alternatives Multi-asset Overlay/l
Slide 26: Investment themes
Appendix 3b Investment themes Overlay/ External Debt Local Currency Corporate Debt Equities Alternatives Liquidity (US$14.5bn) (US$17.0bn) (US$9.8bn) (US$4.2bn) (US$1.5bn) (US$6.2bn) Global Emerging • Broad • Bonds • Broad • Global EM Equity • Private Equity • Overlay Markets • Sovereign • Bonds (Br
Slide 27: Quarterly net flows
Appendix 3c Quarterly net flows +8.0 +6.0 +4.0 +2.0 US$ billion +0.0 -2.0 -4.0 -6.0 -8.0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 27
Slide 28: 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 30 June 2018 External debt 13.3 (0.2) 3.4 (2.0) 1.4 - 14.5 Local currency 13.7 (0.6) 8.4 (2.5) 5.9 (2.0) 17.0 Corporate debt 6.3 -
Slide 29: Foreign exchange
Appendix 5 Foreign exchange • Sterling was stronger against the US dollar over the 12-month Currency exposure of cash(1) period and compared to the prior financial year 30 June 2018 % 30 June 2017 % Period-end rate moved from 1.2946 to 1.3200 £m £m US dollar 317.0 74 241.6 57 Average rate 1.3464
Slide 30: Cash flows and consolidated funds FY2017/18
Appendix 6 Cash flows and consolidated funds FY2017/18 £m As reported Consolidated funds Group ex funds Cash from operations 206.6 (3.5) 210.1 Taxation (47.3) - (47.3) Interest received 9.8 5.1 4.7 Seeding activities (16.6) (7.7) (8.9) Dividends paid (119.9) - (119.9) Treasury/own shares (18.0) - (1
Slide 31: Investment performance
Appendix 7 Investment performance 1yr 3yr 5yr 30 June 2018 Ashmore Benchmark Ashmore Benchmark Ashmore Benchmark External debt Broad -2.3% -1.6% 7.1% 4.6% 5.8% 5.2% Sovereign -2.0% -1.6% 6.2% 4.6% 5.8% 5.2% Sovereign IG 0.6% -0.5% 4.1% 3.4% 4.5% 4.4% Local currency Bonds -1.6% -2.3% 3.3% 2.0% -0.6%
Slide 32: Disclosures
Appendix 8 Disclosures Page 16: - 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 30 June 2018 and with a performance benchmark are included, which specifica
Slide 33: 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