Ashmore Group plc · LSE:ASHM
Ashmore — FY2014 Earnings Presentation
33 slides from Ashmore's earnings presentation, Sep 11, 2014
Slide 1: Preliminary results for 12 months to 30 June 2014
Ashmore Group plc Preliminary results for 12 months to 30 June 2014 11 September 2014 www.ashmoregroup.com
Slide 2: Overview
Overview • Resilient AuM given market environment: -3% to US$75.0 billion at 30 June 2014 • Long-term investment performance remains strong: 81% AuM outperforming benchmarks over three years • PBT reduced by 34% to £170.3 million (FY2012/13: £257.6 million), 16% at constant currency largely explai
Slide 3: Assets under management
Assets under management AuM development (US$bn) 16.8 (24.3) • Strong gross subscriptions US$16.8 billion, 22% of opening AuM Diversified by mandate size, investment theme, client type and domicile 5.6 (0.5) 77.4 75.0 • Gross redemptions US$24.3 billion, 32% of average AuM (FY2012/13: 19%) AuM at J
Slide 4: Diversified long-term growth
Assets under management AuM by investment theme (US$bn) 90 • AuM increasingly diversified 80 • Phase 2 progress 70 Short duration, private debt products 60 Awarded first RQFII licence outside of Greater China Expanding SICAV and 40-Act ranges 50 40 • Phase 3 progress 30 Saudi Arabia licence
Slide 5: Building a balanced and diversified global client base
Distribution Client base AuM by client type • Significant investment over past five years Global distribution team: 48 people in 10 countries Central banks 11%2% 19% Sovereign wealth funds Selective headcount increases for next phase of 2% Governments growth 15% 8% Pension plans Corporate / Fin
Slide 6: Delivering growth from scalable intermediary platforms
Distribution Intermediary platforms Good, diversified growth in mutual funds (US$m) SICAV • Good growth from scalable mutual fund platforms 12,000 +24% Net inflows from US and Europe intermediary clients 10,000 8,000 SICAV funds 6,000 • Comprehensive, widely accessible fund range 4,000 • 32 funds
Slide 7: Negative FX and lower performance fees
Financial results Revenues Year ended Year ended 30 June 2014 30 June 2013 Variance £m £m £m % Management fees 283.1 316.0 (32.9) (10) Distribution costs (4.6) (4.8) 0.2 4 Net management fees 278.5 311.2 (32.7) (10) Performance fees 3.1 33.4 (30.3) (91) Other revenue 7.9 6.2 1.7 27 Foreign exchange
Slide 8: Management fee margins
Financial results Management fee margins Average net management fee margins (bps) 300 258 • Margin was broadly stable through the 250 year FY13 FY14 202 H1: 61bps 200 H2: 60bps 150 118 123 93 100 68 60 65 60 70 73 76 60 • Y-o-Y margin decline due to factors 49 55 56 50 evident in H1 17 19 Larg
Slide 9: Flexibility of cost base demonstrated
Financial results Expenses Year ended Year ended 30 June 2014 30 June 2013 Variance £m £m £m % Personnel expenses 24.6 25.1 (0.5) (2) Variable compensation 41.5 57.2 (15.7) (27) Other operating expenses 26.8 24.7 2.1 9 92.9 107.0 (14.1) (13) Depreciation 1.2 2.4 (1.2) - Amortisation 3.8 17.8 (14.0)
Slide 10: Adjusted EBITDA margin remains high at 65%
Financial results Adjusted profits Statutory Adjusted Adjusted FY2013/14 Adjustments FY2013/14 FY2012/13 £m £m £m £m % Net revenue 262.9 - 262.9 355.5 (26) EBITDA 174.7 (3.7) 171.0 249.2 (31) EBITDA margin 66% 65% 70% Net finance income 2.5 (1.6) 0.9 1.6 Seed capital-related items - 4.8 17.2 Acquisi
Slide 11: Management fees delivering high-quality profits
Financial results EBITDA margin Revenue quality and EBITDA margin • EBITDA margin moved into the ‘60s’ 100% 75% Adjusted EBITDA margin 65% (FY2012/13: 70%) 90% 80% 70% • Factors supporting a leading EBITDA margin 70% Highly flexible cost base, focus on efficiency Mix of fee income 60% Addition
Slide 12: Strong cash generation supports progressive dividend policy
Financial results Earnings Year ended Year ended 30 June 2014 30 June 2013 Variance £m £m £m % Profit before tax 170.3 257.6 (87.3) (34) Tax (36.9) (56.0) 19.1 Profit after tax 133.4 201.6 (68.2) (34) Profit attributable to non-controlling interests (2.6) 0.6 (3.2) - Profit attributable to equity ho
Slide 13: Foreign exchange
Financial results Foreign exchange PBT bridge (£m) • Three elements reduced PBT by £46m 257.6 46.0 Translation effect on non-Sterling balance sheet items 211.6 30.1 (-£45m) 26.4 27.6 12.4 170.3 Average rate effect on P&L translation (-£4.5m) Gains on FX hedges (+£3.5m) • P&L hedging policy: up
Slide 14: Continued strong cash generation
Financial results Cash flow Cash flow (£m) (1) • Good conversion of profits to cash Operating profit of £166.0 million 209.6 48.3 generated cash flow of £209.6 million (1) 119.1 • Cash generation supports: 29.8 10.4 Progressive dividend policy 393.9 0.8 32.4 364.3 Seeding activity Purchase o
Slide 15: Over US$4bn AuM in seeded funds
Financial results Seed capital • Active management delivering scale Diversified across themes and platforms Over past four years, ~£370 million (US$590 million) Theme Investment % total Principal funds invested in funds (£m) investment Approximately half recycled to cash External debt 5.7 3% 40-
Slide 16: Strong, liquid balance sheet
Financial results Balance sheet Excess capital invested in liquid assets • Tangible shareholders’ equity £543.6 Total available capital: £539m (2) million (30 June 2013: £543.8 million) • Regulatory capital requirement £72.9 million (30 June 2013: £87.0 million) Cash and cash 364 equivalents Excess
Slide 17: Strong long-term investment track record
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 Corporate Blended Equities Total Ex
Slide 18: Investment processes identified opportunities during volatile markets
Investment performance LC monthly relative performance, rolling 6m average 0.50% • QE taper debate caused exit of non-dedicated investors Jul 2011 from May’13 to Jan’14 0.40% Apr 2013 • Resultant market volatility created short term 0.30% underperformance… 0.20% • …but also opportunities to invest t
Slide 19: Emerging markets today
Emerging Markets today • Solid growth outlook (5% EM vs 2% DM) GDP growth (%) 10 Emerging Markets • Emerging Markets elections: so far, so good as reformers take 8 Developed Markets lead 6 4 2 • Geo-political risks create uncertainty, but confined to small 0 number of countries -2 -4 • China: rapid
Slide 20: Emerging Markets diversity requires specialist, active fund management skills
Drivers of asset class demand and returns • Investment grade asset class External debt • New issuers and credit diversification • ~300bps spread vs US Treasuries (170bps historical low) • Large, diversified, growing market: US$6.7trn, 89% off benchmark Local currency • Dominated by local institution
Slide 21: Summary
Summary • Tough market conditions during the period Volatility creates investment opportunities for specialist, active manager • Strong long-term investment track record • Financial performance influenced by FX translation and lower performance fees, but sound operational results Stable manageme
Slide 22: Appendices
Ashmore Appendices eee
Slide 23: Net management and performance fees by theme
Appendix 1a Net management and performance fees by theme FY2013/14 FY2013/12 FY2013/14 FY2013/12 £m £m US$m US$m External debt 51.4 65.6 83.9 100.8 Local currency 51.2 53.8 83.6 85.0 Corporate debt 29.4 21.4 48.1 34.7 Blended debt 65.8 55.1 107.6 87.2 Equities 25.9 27.8 42.4 43.9 Alternatives 24.3 3
Slide 24: Average net management fee margins
Appendix 1b Average net management fee margins 250 229 217 200 H2'13 H1'14 H2'14 175 150 124122 116 100 85 74 75 75 77 67 63 61 60 66 61 60 56 58 56 56 50 49 50 17 18 19 0 Local Equities Alternatives Overlay/ External Corporate Group Blended Multi-strategy liquidity Alternatives AuM stated after exc
Slide 25: Assets under management
Appendix 2a Assets under management AuM by theme (US$bn) AuM as invested (US$bn) External 2.73.6 Local 3.2 3.6 External 2.5 14.0 Corporate 7.1 Local 6.1 22.8 Blended Corporate Equities 14.4 Equities 17.3 20.6 Alternatives Alternatives 8.2 Multi-strategy 23.9 Overlay / liquidity Overlay / liquidity A
Slide 26: Investment themes
Appendix 2b Investment themes Overlay/ External Debt Local Currency Corporate Debt Equities Alternatives Liquidity (USD 14.0bn) (USD 17.3bn) (USD 8.2bn) (USD 6.1bn) (USD 2.5bn) (USD 3.6bn) Global • Broad • Bonds • Broad • Special Situations • Overlay • Broad Global Emerging • Sovereign • Bonds (Broa
Slide 27: Quarterly net flows
Appendix 2c Quarterly net flows +8.0 +6.0 +4.0 +2.0 US$ billion +0.0 -2.0 -4.0 -6.0 -8.0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Net flow Cumulative average per quarter 27
Slide 28: AuM movements by theme and fund classification
Appendix 3a AuM movements by theme and fund classification AuM Gross Gross AuM US$bn 30 June 2013 Performance subscriptions redemptions Net flows Reclassification 30 June 2014 External debt 14.5 1.5 2.1 (3.0) (0.9) (1.1) 14.0 Local currency 17.6 0.7 3.6 (4.6) (1.0) - 17.3 Corporate debt 6.1 0.6 3.2
Slide 29: AuM movements by theme (half on half)
Appendix 3b AuM movements by theme (half on half) AuM AuM 31 December AuM US$bn 30 June 2013 Performance Net flows Reclass. 2013 Performance Net flows 30 June 2014 External debt 14.5 0.5 (0.5) (1.1) 13.4 1.0 (0.4) 14.0 Local currency 17.6 (0.3) (0.4) - 16.9 1.0 (0.6) 17.3 Corporate debt 6.1 0.3 0.6
Slide 30: Statutory to adjusted profits reconciliation
Appendix 4 Statutory to adjusted profits reconciliation £ millions FY2013/14 Statutory Seed capital-related Acquisition- FY 2013/14 FY2012/13 items related items Adjusted Adjusted Net revenue 262.9 262.9 355.5 Inv. secs. & third-party interests in funds 4.7 (4.7) - - Personnel expenses (66.1) (66.1)
Slide 31: Cash flows and consolidated funds
Appendix 6 Cash flows and consolidated funds £millions As reported Consolidated funds Group ex funds Cash from operations 210.4 0.8 209.6 Taxation (48.3) - (48.3) Interest & dividends 0.8 - 0.8 Seeding (6.4) 4.0 (10.4) Dividends paid (119.1) - (119.1) Treasury/own shares (29.8) - (29.8) FX and other
Slide 32: Investment performance
Appendix 7 Investment performance Performance (1) Ann. 3 Year Source: Ashmore (un-audited), JP Morgan, Morgan Stanley, Bank Standard of America-Merrill Lynch. Data as at 30th June 2014. Returns Launch AuM Since gross of fees, dividends reinvested. Theme Fund/Strategy Date USDm Launch 1 Year 3 Year 5
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