TIDMASHM
RNS Number : 6159K
Ashmore Group PLC
03 September 2021
Ashmore Group plc
3 September 2021
RESULTS FOR YEARING 30 JUNE 2021
Ashmore Group plc (Ashmore, the Group), the specialist Emerging
Markets asset manager, today announces its audited results for the
year ending 30 June 2021.
- Assets under management (AuM) increased 13% to US$94.4
billion
- Investment performance of US$9.6 billion and net inflows of US$1.2 billion
- Strong outperformance through active management
- 96% of AuM outperforming benchmarks over one year, 57% over three years and 79% over five years
- Efficient business model delivering diversified profit growth
and strong cash flow
- Investment performance delivered performance fees of GBP11.9
million and seed capital gains of GBP92.5 million
- Adjusted net revenue of GBP296.6 million, 9% lower YoY
reflecting stage in the recovery cycle and impact of mix effects on
net management fee margin
- Strict cost management reduced non-VC operating costs by 6%
and delivered adjusted EBITDA margin of 66%
- Adjusted EBITDA declined by 12% to GBP195.7 million
- Profit before tax increased 28% to GBP282.5 million
- Operating cash flow of GBP213.1 million and well-capitalised, liquid balance sheet maintained
- Diluted EPS increased 33% to 34.2 pence and adjusted diluted EPS fell by 11% to 23.3 pence
- Proposed final dividend per share of 12.1 pence to give total
dividends of 16.9 pence for the year
- Growth and diversification from strategic initiatives
- Equities AuM increased by 61% YoY to US$7.4 billion,
reflecting strong investment performance and net inflows
- Local platforms delivered AuM growth of 44% YoY to more than US$7 billion
- Significant progress made with consistent and comprehensive
approach to sustainability
- ESG factors integrated across all asset classes
- Launched dedicated ESG strategies in external debt and corporate debt
- Joined the Net Zero Asset Managers and Climate Action 100+ industry initiatives
- Positive outlook for Emerging Markets reflects superior
growth, stronger economic fundamentals and attractive
valuations
Commenting on the Group's results, Mark Coombs, Chief Executive
Officer, Ashmore Group said:
"Ashmore has made significant progress against its strategic
objectives over the past year, generated outperformance for
clients, and the Group's robust business model has delivered a
financial performance that reflects the early stages of a cyclical
recovery.
"As vaccination rates increase across the world and governments
ease social restrictions, economic activity is picking up and
reinforcing the Emerging Markets growth premium, and hawkish
central banks in many emerging countries are acting to contain
inflation. This environment provides attractive opportunities for
investors to increase allocations with heavily discounted equity
valuations in Emerging Markets and high real yields compared with
the negative rates in Developed Markets.
"Against this positive backdrop, Ashmore's investment
performance track record positions the firm well to capitalise on
the significant opportunities available across the diversified
Emerging Markets."
Analysts briefing
There will be an online presentation for analysts at 9.30am on 3
September 2021. A copy of the presentation will be made available
on the Group's website at www.ashmoregroup.com.
Contacts
For further information please contact:
Ashmore Group plc
Tom Shippey, Group Finance
Director +44 (0)20 3077 6191
Paul Measday, Investor Relations +44 (0)20 3077 6278
FTI Consulting
Neil Doyle +44 (0)20 3727 1141
Kit Dunford +44 (0)20 3727 1143
CHIEF EXECUTIVE'S REVIEW
The Group's established business model has operated as expected
over the past 12 months and delivered strong investment
performance, higher performance fees and a return to net inflows in
the second half of the year. While there was strong growth in
statutory profits, lower adjusted profits reflect the stage of the
recovery cycle.
Strong investment performance
Ashmore's active management of client portfolios has delivered
exceptionally strong performance across all investment themes over
the past 12 months, resulting in 96% of AuM outperforming
benchmarks over one year. The longer-term track records are also
robust with 57% of AuM outperforming over three years and 79% over
five years.
As anticipated, this represents a significant improvement from a
year ago, when the initial impact of the COVID-19 pandemic led to
severe risk aversion and market dislocations and consequently some
underperformance (30 June 2020: 9% AuM outperforming benchmarks
over one year; 17% over three years; and 74% over five years).
Notwithstanding that this cycle has its own distinctive features,
Ashmore's experienced investment teams ensured that the investment
processes followed a consistent approach in identifying oversold
assets, subsequently adding risk to portfolios, and maintaining a
diligent focus on liquidity.
The pace and scale of the market recovery has to some extent
mirrored the sharp market drawdown in early 2020, but, as described
in the Market review, the combination of a positive macro-economic
outlook and attractive valuations across both fixed income and
equity markets means that investors should expect further
outperformance by Emerging Markets assets. While the trajectory of
the recovery is unlikely to be linear and there will inevitably be
periods of price volatility, Ashmore will continue to exploit these
market opportunities to add value to portfolios and underpin its
successful long-term investment track records.
Robust business model
With the notable exception of a period of remote working,
discussed further below, Ashmore's business model has remained
unchanged through this cycle and has continued to deliver
significant benefits for its stakeholders, including clients,
employees and shareholders.
The conservative financial model, with an emphasis on balance
sheet strength and operating cost flexibility, has ensured
stability in the operating platform, with uninterrupted operating
processes, high levels of employee retention, strong profit growth,
and continued investment in the business to support the achievement
of strategic objectives.
- Well-capitalised, liquid balance sheet with over GBP750
million of financial resources and a Pillar II capital requirement
of GBP156 million
- Adjusted operating costs reduced by 2%
- Operating profitability maintained, with an adjusted EBITDA
margin of 66%
- Unplanned employee turnover of less than 7%
- Profit before tax increased by 28% and diluted EPS increased
by 33% to 34.2 pence per share
- On an adjusted basis, diluted EPS fell by 11% to 23.3 pence
per share
The strength of Ashmore's team-based culture has served it well
over the past 18 months, a period during which remote working has
been the norm for most of the Group's employees, but the culture is
ultimately reinforced by employees working together in close-knit
teams in an office environment. Therefore, as governments around
the world review and ease social restrictions over the coming
months, Ashmore hopes to re-open its office network and steadily
return to previously established operating practices. Undoubtedly,
some of the working practices developed during the remote working
period will persist, particularly the intelligent use of
communications technology that may allow for greater efficiency.
However, the Ashmore investment processes, distribution model and
other functions will still place a heavy emphasis on establishing
and developing long-term relationships and knowledge that is best
achieved through physical meetings.
Continued growth in equities
The equities business has good momentum, with AuM growth of +61%
or US$2.8 billion over the past 12 months. Excellent investment
performance has been delivered across all strategies over the past
12 months with absolute returns of 41% to 66%, and nearly 1,700
basis points of outperformance in the All Cap strategy. This track
record is delivering decent client flows, with net inflows of
US$0.9 billion over the past 12 months and eight consecutive
quarters of net inflows to the Group's equity strategies.
Ashmore's equity investment committee and the teams it oversees
operate independently of the fixed income investment process,
providing diversification benefits, but there is collaboration and
sharing of investment research and insights between the two asset
classes. For example, the equity teams have the ability to draw
upon long-standing, specialist expertise in Emerging Markets
macro-economic and political analysis if required.
Continued growth in equity assets under management is a
strategic priority for Ashmore, consistent with its objective to
diversify its business in order to provide multiple independent
sources of fee income. With just under 10% of Group AuM invested in
equity strategies, and no capacity constraints in terms of
investment capabilities, operational processes, or market size,
there is significant growth opportunity in this business and over
the medium term it should represent two to three times the current
proportion of AuM.
Strategic opportunity in intermediary retail
Similar to the strategic opportunity in equities, the Group
intends to increase the proportion of assets managed for
intermediary retail clients, to provide diversification alongside
its institutional client base. While there is no single type of
intermediary client, in the same way that institutional investors
all vary in their objectives and behaviour, it is observable that
intermediary retail clients tend to be more sensitive to short-term
market conditions and investment performance, and therefore usually
have shorter holding periods than the typical institutional
investor. Nonetheless, over time intermediary retail capital could
represent 20% to 30% of Ashmore's assets under management, a
significant increase from the current level of 8%. In addition to
diversification of the client base, growth in intermediary retail
assets also benefits the Group's net management fee margin.
Over the past year, it is notable that Ashmore's intermediary
retail clients have been relatively slow to return to Emerging
Markets. While there is a positive trend in terms of reducing net
outflows over the period, cumulatively intermediary retail flows
reduced AuM by US$2.9 billion over the 12 months and investment
performance added US$1.3 billion.
Therefore, while the 8% of AuM from intermediary retail clients
is broadly similar to a year ago, it is lower than the 15% reached
before the impact of the COVID-19 pandemic. In contrast, the
institutional business delivered net inflows of US$4.1 billion over
the year, largely as a consequence of typically direct
relationships with the investors, and the fact that, on average,
Ashmore's institutional assets have been managed by the firm for
more than eight years and therefore the investors have more
experience of market cycles and the opportunities that they can
present.
Increasing importance of investment grade credit
The ongoing development of emerging countries means that an
increasing number of countries and companies have achieved
investment grade (IG) status. For example, IG bonds now represent
more than half of the external debt and corporate debt benchmark
indices (53% and 57%, respectively). While there will inevitably be
cyclical influences on issuers' ratings, the growth in IG issuance
is expected to continue and is a trend that is echoed in the demand
by investors as they recognise the attractive characteristics of
the IG asset class such as lower volatility during periods of risk
aversion, stronger macro-economic fundamentals, higher yields than
developed world bonds, increasing diversification, no defaults and
therefore good risk-adjusted returns.
Ashmore provides access to investment grade strategies across
the four fixed income investment themes of external debt, local
currency, corporate debt and blended debt, and manages portfolios
in both mutual fund and segregated account structures. Investment
performance is strong, for example the corporate debt IG strategy
has a gross annualised return of +9.3% over three years and has
significantly outperformed its benchmark index return of +7.1%.
Over the 12 months, Ashmore has continued to experience good
demand for investment grade strategies from both existing and new
institutional clients, and its strong investment performance
underpins the potential for further capital raising.
Local offices performing well
The third phase of Ashmore's strategy focuses on mobilising
Emerging Markets capital, including managing assets locally for
domestic institutional and intermediary retail clients in certain
emerging countries. Ashmore currently has local asset management
operations in Colombia, India, Indonesia, Peru, Saudi Arabia and
the United Arab Emirates, and has a financial investment in an
onshore mutual fund business in China.
Collectively, these businesses represent more than US$7 billion
of assets and delivered AuM growth of +44% over the past 12 months.
The platforms are performing well and each has a highly scalable
operating model, replicating the Group's disciplined approach to
managing operating costs and a simple, common operating
infrastructure. This means that as AuM grows, the profitability of
these businesses is trending towards the Group's level.
During the period there was particularly strong asset growth in
India and Indonesia, significant new institutional client wins in
Saudi Arabia, and in Colombia the Group is marketing its third
private equity fund and a regional real estate fund. Following its
IPO in January 2020, and consistent with its strategy to use
technology to access new distribution channels and improve access
to financial services, Ashmore Indonesia invested in BIB, a local
online distribution platform, in December 2020.
Significantly, although the offices are designed primarily to
raise and manage domestic capital, most of them also manage assets
for the Group's larger institutional clients, where the investor
wishes to take single country or regional risk, have it managed by
the local investment team, and within the Ashmore Group governance
and risk management framework.
The local businesses should continue to contribute to Ashmore's
growth and profitability over the longer term as each of the local
management teams delivers on its strategic objectives and
participates in the development of an independent asset management
industry in its country. These platforms also help to diversify the
Group's revenues and profits through independent investment
processes, uncorrelated investment returns and different product
structures and client bases. Ashmore will consider opportunities to
expand the local office network, through scaling up and
diversifying the existing businesses, and by considering new
markets with attractive growth characteristics.
An integrated approach to sustainability
Sustainability, including the consideration of environmental,
societal and governance (ESG) factors, has always been an important
topic for companies and for investment managers, but issues such as
the impact of climate change, employee diversity and remuneration
incentives are under increasing scrutiny from investors,
regulators, politicians and other stakeholders.
Ashmore has developed a comprehensive and consistent approach to
sustainability across its operations and investment management
activities. The Board is ultimately responsible for ESG matters and
has delegated the day-to-day oversight and management to a
specialised ESG Committee. This committee meets frequently and
regularly, and has representatives from across the firm, including
the local offices, ensuring that relevant ESG matters are brought
to the attention of all concerned and that the approach to
sustainability is consistent across the Group.
The consideration of ESG factors is integrated into all of
Ashmore's investment processes, covering fixed income, equity and
alternatives strategies, and the Group has launched a range of
dedicated ESG funds in the external debt, corporate debt, blended
debt and equity themes. It has been a signatory to the UNPRI since
2013 and, to support the achievement of the UN Sustainable
Development Goals, it is a signatory to the UN Global Compact.
Environment
From an operational perspective, the asset management business
model does not have a significant direct impact on the environment.
For example, there are no long, complex supply chains with material
environmental considerations, the 'product' is investment
performance, and the firm's assets are predominantly people and
financial instruments including cash. However, travel and office
occupancy is inherent in Ashmore's business model, both of which
result in modest levels of greenhouse gas emissions. Ashmore has an
objective to achieve net zero emissions from its operations, and
while the ability to reduce materially the gross emissions is
limited, through The Ashmore Foundation the Group seeks to offset
its gross emissions each year by supporting environmentally and
socially beneficial projects in developing countries.
From an investment perspective, Ashmore joined two important
industry initiatives during the period: the Net Zero Asset Managers
Initiative and the Climate Action 100+ industry group.
Respectively, these will help the Group define and manage a net
zero plan, with an interim target to be set over the next 12
months, and will enable Ashmore to collaborate with other investors
to achieve environment-related outcomes with certain investee
companies.
Society
Ashmore wishes to be recognised as a responsible company that
has a positive impact on society. The definition of society is
broad, but includes the Group's clients, employees, shareholders
and other stakeholders. Of particular importance to Ashmore's
approach is The Ashmore Foundation, which provides grants to
projects that seek to make a positive and sustainable difference to
disadvantaged communities in the developing countries in which
Ashmore operates and invests.
To enhance the impact and sustainability of the Foundation's
projects and to increase the overall scale of the Group's
philanthropic activities, the Board approved an annual charitable
contribution equivalent to 0.5% of the Group's profit before tax
excluding unrealised seed capital gains. This means that in respect
of FY2020/21, the Group made a payment of GBP1.0 million to The
Ashmore Foundation and other charitable activities.
Governance
Ashmore is a UK company with a premium listing on the London
Stock Exchange and at all times seeks to comply with, and to
respect the spirit of, relevant laws and regulations, with the
objective of upholding robust standards of corporate governance.
This means that for its local offices, Ashmore will impose the
higher of local or global standards in order to ensure that
governance is appropriate.
Employees and culture
For many Ashmore employees, the past year has been challenging
with all of the Group's offices remaining closed, or experiencing
intermittent re-openings, in line with local government guidance
and laws. On behalf of the Board, I would like to thank everyone
for their hard work and unwavering commitment to delivering strong
performance for our clients, for upholding high standards of
professionalism and conduct while working remotely, and for helping
to maintain Ashmore's distinctive, team-based culture even in the
absence of face-to-face contact.
As vaccination programmes deliver tangible results, governments
around the world can start to ease the social and economic
restrictions that have characterised the past 18 months. This will
enable Ashmore to return to the office-based operating model that
has served the firm well for the vast majority of its life, and to
reinforce the social connectivity that inevitably has become looser
after a protracted period of remote working. While the remote
working environment has been challenging, it has also highlighted
how the innovative use of technology can play a meaningful role in
the industry, and so Ashmore will keep its operating model under
review in order to ensure that it optimises the culture of the
firm, its effectiveness for clients, and overall productivity.
Outlook
The recovery in economic performance is well-established across
the Emerging Markets, with superior GDP growth to the developed
world and a widening of the growth premium expected over the next
few years. Importantly, after an initial lag, vaccination rates in
the developing world have accelerated and are expected to match the
levels achieved in developed countries by the end of 2021. This
underpins the growth outlook as governments can ease restrictions
and allow economies to reopen, leading to higher levels of domestic
activity and international trade.
In aggregate, developing countries are emerging from the
COVID-19 pandemic in a stronger position than Developed Markets.
Economic growth is higher, debt levels are manageable even after
the recent fiscal stimulus, inflation is under control and hawkish
central banks should ensure that remains the case, and valuations
remain attractive and should support continued capital flows.
The main risk to a positive outlook for Emerging Markets is a
period of widespread investor risk aversion, which history suggests
would typically follow an unexpected event in the developed world
rather than an isolated development in one of the more than 70
different emerging nations. While current US inflation suggests
that there is a possibility of significantly higher interest rates,
this is mitigated by the very high US government indebtedness and
the potential for inflation to drift lower over the next 12 to 24
months as base effects roll off and deflationary pressures
increase. Furthermore, as explained in the Market review, the
impact on Emerging Markets is likely to be less severe than in the
2013 to 2016 cycle given the significant improvement in economic
conditions and the low absolute level of nominal and real US
interest rates today. Indeed, a world in which there is decent
growth, some inflation, and steadily rising US rates from current
levels is a good environment for the performance of emerging
countries and their capital markets.
Therefore, the outlook for the economic and market performance
of emerging countries is positive and arguably more favourable than
it appeared a year ago. Valuations in Emerging Markets do not fully
reflect this outlook, and there is a clear opportunity for
investors to continue to increase allocations from underweight
levels and to capture substantial absolute and relative value
across the fixed income and equity asset classes.
Against this market backdrop, Ashmore's investment performance
track records position the firm well for asset growth and the
business model has successfully managed another market down cycle
and is demonstrating the benefits of its consistent and
conservative approach as conditions normalise. The past 18 months
have had the specific challenges of remote working, but there is
now the real prospect of a return to more normal working patterns
over the course of the coming months. Therefore the firm looks to
the current financial year and beyond with confidence.
Mark Coombs
Chief Executive Officer
2 September 2021
MARKET REVIEW
Strong market performance over the year
Emerging Markets have performed strongly over the past fiscal
year, delivering positive absolute returns and mostly outperforming
developed world counterparts. This is typical for the early
transition phase of a cycle, as asset prices move from oversold
levels, in this case immediately after the onset of the COVID-19
pandemic in early 2020, and start to reflect more positive
longer-term fundamentals including the ongoing tailwinds of
superior economic growth and more attractive valuations in Emerging
Markets compared with Developed Markets.
Broadly, markets have recovered to pre-pandemic levels although
valuations are typically cheaper, for example, the sovereign
external debt index trades at 340 basis points over US Treasuries
compared with below 300 basis points at the end of 2019.
Equity markets, as represented by the MSCI EM index, rose by
+41% over the 12 months, marginally outperforming the S&P 500
index (+39%), and delivered positive returns in every quarter of
the year. Fixed income indices also performed well, with positive
returns in three of the four quarters and declines in the third
quarter to March 2021 as global fixed income markets repriced for
higher inflation expectations, particularly in the US. For the year
overall, the main Emerging Markets fixed income indices increased
by +7% to +9% over the 12 months, compared with a negative return
of -4% from the 10-year US Treasury bond and a -5% decline in the
US dollar trade-weighted index.
Economies, and therefore markets, around the world are today in
a transition period, between the severe growth and societal shock
experienced in early 2020, and the return to normal conditions that
is predicted as vaccination programmes take effect and allow
restrictions to ease. This transition period is experienced in
every market cycle, and results in elevated market volatility as a
consequence of the inherent uncertainty being faced: the 'bad'
conditions of last year are known, and the 'better' future
conditions are hoped for but are not certain. In this specific
cycle, the recovery path of the pandemic is overlaid with the
uncertainty associated with the impact of monetary and fiscal
stimulus on inflation, growth, bond yields and policy rates, both
in the short term and the longer term.
Near-term macro opportunities and risks
The progress of vaccination programmes is critical to both
developing and developed countries, because this will determine the
pace of economic and social recovery. The developed world has so
far led vaccination rates, but as these approach critical levels
then these countries can make more vaccines available to other
countries. Consequently, vaccination rates in large emerging
countries have accelerated in recent months.
Importantly, Emerging Markets' well-established GDP growth
premium has been maintained throughout the pandemic period: in
aggregate, emerging nations experienced a shallower recession than
the developed world in 2020, and are forecast to deliver a faster
economic recovery in 2021 and 2022.
Many countries responded to the economic shock by delivering
fiscal expansion and monetary stimulus through cuts to policy rates
and, in developed economies, even greater use of unconventional
methods such as quantitative easing. A critical difference is that
emerging countries typically have lower and more manageable
debt/GDP ratios than developed countries, and were able to cut
policy rates from a position of high real rates rather than low, or
even negative, real rates that prevail in the developed world.
Indeed, even though US rates are likely to increase at some point
over the next year or two, the pace of tightening is expected to be
gradual and rates are likely to remain negative in real terms for
the foreseeable future. Therefore financial conditions, and risk
appetite, will continue to be supportive for Emerging Markets.
Another consequence of the recent stimulus is higher inflation,
and in the early part of calendar 2021 there was a repricing of
inflation expectations in global rates markets. While inflation is
likely to remain high in some countries, like the United States,
over the short term because of base effects and the recent rise in
commodity prices, the principal uncertainty is to what extent, and
for how long, the current levels of inflation will persist. It is
possible that the rolling over of base effects, some deflationary
impact from higher unemployment as government support schemes end,
and central bank rate rises mean that inflation will start to abate
over the next 12-18 months.
Significantly, some central banks in emerging countries have
already acted sensibly to anchor inflation expectations, and the
impact of a more hawkish policy mix has supported currencies given
the wider interest rate differentials. Therefore, while inflation
is a common theme and of potential concern to investors across both
developed and developing countries, the prevalence of
inflation-targeting policy regimes and independent central banks
across Emerging Markets, together with the returns offered by high
real interest rates, add to the attractions of the Emerging Markets
asset classes.
Notwithstanding the market's focus on inflation and the Fed's
assessment of and reaction to the data, there is unlikely to be a
material impact on Emerging Markets from expectations of higher US
interest rates such as was experienced in the 2013 to 2016 period.
The following significant differences in macro conditions between
2013 and now underpin this view:
- In 2013, the rise in nominal US Treasury yields was driven by
the Fed's indication that it would taper its quantitative easing
programme, and the market swiftly priced in rate increases even
though they did not occur for another 2 1/2 years. In the absence
of higher inflation expectations, real yields also increased and so
the tighter financial conditions had an adverse impact on Emerging
Markets.
- In 2021, the rise in nominal yields has been driven by higher
inflation expectations and so real yields have risen only modestly,
and remain negative across the US Treasury curve. Therefore
financial conditions are still supportive and are likely to remain
so even as the Fed increases its policy rate.
- Emerging countries have robust external accounts with, in
aggregate, a current account surplus of more than 1% of GDP,
compared with a 2% deficit in 2013.
- The valuations of Emerging Markets currencies are close to
historical lows in both real and nominal terms, whereas they were
closer to fair value in 2013.
- The recent rally in commodity prices has benefited the terms
of trade and supports the creditworthiness of exporters, whereas
prices were falling in 2013. If commodity prices remain around
current levels then capital and current accounts should continue to
benefit, which in turn will support Emerging Markets
currencies.
As ever, the outlook for the US dollar is important when
considering the performance of Emerging Markets, from a fundamental
perspective but also because most investors measure returns in US
dollar terms. While the fundamental picture is complex, and will
vary by country, the performance of the US dollar has implications
for investor risk appetite generally and there is a strong
long-term correlation between the US dollar and the relative
performance of Emerging Markets local asset prices. While there
will inevitably be periods of intermittent strength, the
combination of high US current account and fiscal deficits, high
foreign investment in US assets, a less productive US economy as
the government has increased its share of debt, and the prospect of
higher taxes to address inequality suggests that the currency will
weaken over the medium term. This would be positive for Emerging
Markets, in terms of capital flows broadly and specifically for
investment returns in local currency bonds, currencies, and
equities.
Finally, from a technical perspective there is the prospect of a
decent tailwind for Emerging Markets. The limited investment grade
issuance and negative yields in the US market should encourage
crossover investors to seek duration, yield and issuance volumes in
Emerging Markets.
Powerful structural growth drivers
When looking beyond the short-term factors described above,
there are strong and varied drivers of growth and investment
opportunities across the Emerging Markets. None of these has been
impaired by the most recent pandemic-related cycle, and indeed in
the case of valuations there are even more attractive opportunities
to access these growth themes today.
1. Large investment universe, dominated by local currency
assets
The total Emerging Markets investment universe is approximately
US$71 trillion, comprising US$34 trillion in fixed income issuance
and US$37 trillion of equity market capitalisation. Importantly,
the majority of securities are denominated in local currencies,
with only US$5 trillion of the total representing hard currency
sovereign and corporate bonds.
2. Low index representation
Despite the size, growth and vast opportunity set of the
Emerging Markets investment universe, it remains significantly
under-represented in benchmark indices. For example, only 17% of
bonds and 22% of equities are included in the main indices,
although the representation is higher in the more established, but
smaller, hard currency asset classes.
As index representation increases over time, for example as
countries lower or remove capital controls to allow foreign
investors to access their local bond markets, then this will
provide a tailwind to investor allocations. An important
development in the past year was the inclusion of China's local
currency government bonds in the JP Morgan benchmark index, which
means that the country is now 10% of the index and represents
around US$200 billion of securities.
In the meantime, the low level of indexation provides a
substantial barrier to entry for passive substitutes and means
there is a sizeable opportunity for active managers such as Ashmore
to deliver alpha from investing in both benchmark and non-benchmark
securities. To provide some context, JP Morgan estimates that
approximately 18% of the US$0.5 trillion of Emerging Markets fixed
income mutual fund assets are in exchange-traded funds, which can
act as a loose proxy for passive AuM. The figure is higher for
Emerging Markets equities at 35% of the US$1.5 trillion mutual fund
sample, and both figures have increased over the past year (from
15% and 31%, respectively). However, this illustrates that for
mutual fund investors, there continues to be a strong preference
for active management to access the diversified risks and returns
available across the Emerging Markets investment universes.
3. Local currency funding
Arguably the single most important structural capital markets
development in Emerging Markets over the past few decades is the
establishment of and growth in local currency bond markets, which
today represent more than 85% of all sovereign and corporate bonds
outstanding. The move from external funding to domestic local
currency funding is a natural one for a country to take as it
establishes domestic yield curves and supports the development of
long-term institutional investors such as pension funds. It has
important positive implications for the country's ability to
withstand exogenous shocks, although to be successful it has to be
accompanied by high-quality policy making.
The impact of these different funding regimes has been seen over
the past 18 months, with external debt-funded countries facing
greater constraints on their ability to use fiscal and monetary
stimulus, and an increased reliance on creditors. In contrast, the
local currency-funded nations have allowed currencies to fluctuate,
have been able to undertake fiscal expansion with manageable
debt/GDP ratios, and central banks were able to cut policy
rates.
The local currency bond markets will continue to grow, as
existing issuers' economies and capital markets develop further,
and the pool of countries expands as hitherto hard currency-funded
nations wean themselves off external creditors and develop their
domestic markets. Furthermore, of the approximately 155 developing
countries in the world, only about half have issued debt in public
markets and so there remains a long list of potential future
issuers of both external and then local currency bonds.
4. Inefficient markets
The combination of low index representation, underappreciation
of the diversity and fundamental strengths of emerging economies
and capital markets, and typically low foreign investor
participation in local markets can lead to significant
inefficiencies in the Emerging Markets asset classes. Ashmore's
specialist, active management of client portfolios can exploit
these inefficiencies to deliver long-term outperformance.
5. Significance of Emerging Markets to the world's economy
Although there are significant differences between the
developing countries, taken as a whole they represent a large and
often increasing proportion of the world's economy and capital
markets.
- 84% of the world's population lives in an emerging country,
and the demographics are typically more favourable than in
developed countries.
- Emerging Markets generate 58% of the world's GDP, and future
growth potential is underpinned by relatively low GDP per capita
levels; in aggregate, the GDP per capita of Emerging Markets is
US$12,000, less than a quarter of the level in developed nations
(US$55,000).
- Emerging countries control foreign exchange reserves of more
than US$9 trillion, and representing 75% of the total world foreign
exchange reserves.
- Bond issuance and equity market capitalisation in Emerging
Markets represent 25% and 33%, respectively, of the world totals,
providing for significant growth.
- Emerging Markets represent between 13% (equity) and 28% (fixed
income) of global benchmark indices and these weights are rising
over time.
While some factors, such as the share of the world's population,
are unlikely to change materially in the near future, the case for
superior GDP growth and rising GDP per capita is well established,
and capital markets should continue to broaden, deepen and become
more accessible. Overall, the influence of Emerging Markets on the
world should therefore continue to increase over the coming years
and decades, and this will result in Emerging Markets representing
ever higher proportions of global benchmark indices.
6. Underweight allocations
In the context of the Emerging Markets characteristics described
above, and the persistent upward pressure on index weights,
developed world institutional and retail investors continue to have
significantly underweight allocations to the asset classes. For
example, analysis shows that the typical institutional investor has
a target Emerging Markets allocation of less than 10%, compared
with the 13% to 28% weight in global benchmark indices.
Given the superior growth and attractive valuations, this
suggests that the investor will underperform compared with one that
has at least a neutral weighting to Emerging Markets through the
cycle.
INVESTMENT THEMES
External debt
The external debt market was the first investable fixed income
asset class for foreign investors in Emerging Markets and, while it
is now smaller in size than the local currency government bond
market, it remains a sizeable asset class with US$1.5 trillion of
bonds outstanding. Reflecting its established status, the benchmark
index includes 89% of those securities, issued by 74 countries and
with 53% of the bonds rated investment grade.
Over the past 12 months, the index performed strongly and
returned +7.5% as spreads continued to tighten from the oversold
levels of early 2020. High yield bonds outperformed with a return
of +13.1% compared with +3.0% for investment grade assets.
Notwithstanding this strong performance over the year, valuations
remain attractive with the index spread of approximately 340bps
being significantly wider than before the pandemic (below 300bps)
and offering a decent protective cushion should US Treasury bond
yields come under pressure. Furthermore, the nominal index yield of
5% should be seen in the context of US$13 trillion of sovereign
bonds issued in Developed Markets that trade with a negative
nominal yield, and this figure increases to US$41 trillion, or 93%
of sovereign debt in issue, when considering real yields.
Ashmore's broad external debt composite has outperformed its
benchmark by more than 600bps over the past year with a return of
+13.8%. Over the past three years, the composite has delivered
annualised gross returns of +5.9% compared with +6.7% for the
benchmark.
Local currency
Government bonds issued in domestic currencies represent a
large, growing and highly attractive asset class with US$14.5
trillion of securities in issue. Although the benchmark index
currently fails to adequately reflect the breadth and scale of the
investment opportunity, with only 11% of those bonds included in
the index, it is steadily catching up with the structural
developments in the asset class. For example, during the year,
China was included in the GBI-EM GD index at the maximum 10%
weighting, meaning that the index now has $200 billion of
investable Chinese government bonds and includes 20 countries.
The index returned +6.6% over the past 12 months, with positive
contributions from both bonds and currency strength against the US
dollar. The ability to issue bonds in its own currency provides a
country with many advantages and means that there have been no
defaults in the asset class, but it also means that other risks,
notably inflation, have to be managed. In this respect, an
important development towards the end of the period was a number of
central banks, including those in Turkey, Brazil, Russia, Mexico,
Czech Republic and Hungary, raised interest rates as inflation
returned to long-run trend levels. This reinforced the credibility
of policymaking in those countries, and provided support to
currencies.
The local currency index yield of 5% is notable, but the highly
attractive relative value available in the asset class is
illustrated by the real yield of approximately 1%, compared with
-3% for equivalent five-year duration US Treasury bonds. As the
structural challenges facing Developed Markets such as the US are
expected to undermine the value of their currencies over the medium
term, the total returns available from Emerging Markets bonds can
include both attractive carry and meaningful foreign exchange gains
against the US dollar.
Over the past year, Ashmore's local currency bonds composite has
outperformed the benchmark by nearly 300bps with a return of +9.3%,
and over three years it has generated annualised gross returns of
+4.4%, outperforming the benchmark return of +4.1%.
Corporate debt
The Emerging Markets corporate debt universe comprises both hard
currency, typically US dollar denominated, bonds and local currency
securities, with outstanding issuance of US$3.2 trillion and US$4.9
trillion respectively. The diversification and quality of the asset
class is illustrated by comparing the benchmark CEMBI BD index with
the US high yield market:
- the CEMBI default rate over past 12 months is 3.6%,
significantly lower than the US HY default rate of 6.2%. The
long-run average default rate for Emerging Markets corporate debt
is also lower at 4.1%, compared with 4.4% for the US market;
- the index comprises 59 countries and 806 issuers;
- more than 56% of bonds are investment grade rated; and
- the HY part of the index yields nearly 6%, and there is a
meaningful pick-up in spread over US HY bonds for equivalent-rated
credits.
As well as the attractive fundamental characteristics described
above, relatively short duration, high yielding corporate bonds
offer some protection against rising US rates. This has been
demonstrated over the past year with very strong index returns of
+8.7% and +13.5% for the HY component. Towards the end of the
period, the commodity-exposed parts of the asset class benefited
from the rally in most major commodity prices. The demand for
investment grade debt is also increasing, given the
diversification, yield and issuance trends that are all favourable
compared with the US market.
Over the past year, Ashmore's broad corporate debt composite has
performed well and, with a return of +15.2%, has outperformed the
benchmark by 650bps. Over the past three years, the composite has
delivered a gross annualised return of +7.8%, compared with +7.5%
for the benchmark index.
Blended debt
Blended debt strategies provide broad access to the broad
Emerging Markets fixed income universe, with active management able
to exploit the significant variances in the annual returns of the
constituent external debt, local currency and corporate debt asset
classes. For example, over the past nearly two decades, the average
difference in annual returns between the best and worst performing
fixed income asset classes has been more than 1,000bps and the
minimum difference has been 450bps. An active management approach
to blended debt provides investors with the fullest range of
potential fixed income investment opportunities, with approximately
US$34 trillion of bonds issued by sovereigns and corporates, in
both hard currencies (typically US dollars) and local currencies,
and across more than 70 different emerging countries.
An allocation to blended debt can meet the requirements of the
first-time investor in Emerging Markets, enabling a deeper
understanding of the underlying asset classes to be developed over
time. It also suits the more experienced investor that is able to
define bespoke investment objectives and a blended benchmark
against which investment performance can be measured.
Reflecting the strong performance of the underlying asset
classes, over the past 12 months, the standard blended debt
benchmark index, comprising 50% external debt (EMBI GD), 25% local
currency bonds (GBI-EM GD) and 25% EMFX (ELMI+), returned
+7.1%.
Ashmore's broad blended debt composite returned +13.0% over the
past 12 months and has outperformed the standard benchmark index by
nearly 600bps. Over the past three years, it has generated a gross
annualised return of +5.0%, in line with the performance of the
standard benchmark index.
Equities
The emerging equity markets are highly diversified and, like
their fixed income counterparts, have inefficiencies that can be
exploited by active management. The prospects for investment
returns are underpinned by Emerging Markets' superior economic
growth, ongoing reforms and attractive absolute and relative
valuations.
Emerging Markets
The MSCI EM index delivered an impressive return of +40.9% over
the past year, with Asia outperforming Eastern Europe and Latin
America as social and economic recovery from COVID-19 followed a
broadly similar geographic pattern to the onset of the
pandemic.
Ashmore's All Cap equity strategy has delivered excellent
performance over the past year with a return of +57.6%, and over
three years it has produced gross annualised returns of +20.4%,
significantly outperforming the MSCI EM index return of +11.3%. The
Active equity strategy performed broadly in line with the MSCI EM
index over the past 12 months (+41.2%) and has outperformed over
three years with gross annualised returns of +12.3%.
Small cap
Strong performance is also reflected in the small cap part of
the Emerging Markets equity universe, with a very strong index
return of +63.8% over the past year and Ashmore's Global small cap
strategy outperformed with a return of +65.9%. Over three years,
the strategy has returned +16.8% on a gross annualised basis,
outperforming the benchmark return of +12.3%.
Frontier Markets
The MSCI FM index performed strongly over the year and returned
+31.3%. Ashmore's Frontier Markets strategy outperformed this
benchmark with a return of +43.5%, and has also outperformed over
three years with gross annualised returns of +6.8% compared with
+6.1% for the benchmark index.
While active managers can find alpha opportunities outside of
the main benchmark indices, it is a positive development that the
equity benchmarks continue to evolve and become more representative
of the Emerging Markets opportunity. For example, in recent years
MSCI has enhanced the representation of its main Emerging Markets
equity index by including Saudi Arabia and China.
The vaccination rate across emerging nations has accelerated in
recent months as developed countries reach critical vaccination
levels and there are more doses available for the rest of the
world. The broadening of this growth impulse, combined with some
inflation and still very loose monetary conditions, means that
there is a positive outlook for the Emerging Markets equity asset
classes, and even more so given the still substantial
price/earnings discounts that prevail relative to Developed
Markets.
Outlook
Following a strong year for Emerging Markets, the outlook is
favourable and the potential investment returns available are
highly attractive, whether considered in absolute terms or relative
to Developed Markets. The second half of 2021 is expected to see a
catch-up in COVID-19 vaccination rates across Emerging Markets,
which underpins expectations of faster economic growth, and in
excess of that forecast for developed countries.
Uncertainty over US inflation will remain a source of market
volatility, but the fundamental strength of emerging economies and
prevailing valuations should ensure that expectations of higher US
interest rates do not lead to another 'taper tantrum'. When the Fed
does raise rates, it will be from such a low level that real rates
are likely to remain extremely supportive for some time to come.
Inflation in Emerging Markets has increased, but this is largely
due to base effects and it has returned to its long-run trend rate.
Central banks have already turned hawkish and started increasing
rates, and the higher differential in real yields is positive for
those countries' currencies versus the US dollar.
After the strong returns delivered over the past year, the
combination of high carry, better growth momentum than developed
countries and attractive valuations presents a very supportive
backdrop for continued performance by Emerging Markets assets.
BUSINESS REVIEW
Ashmore delivered strong earnings growth with profit before tax
and diluted EPS 28% and 33% higher, respectively, than in the prior
year, as a result of mark-to-market gains on the Group's seed
capital investments. While average AuM was flat and operating costs
were reduced, a lower management fee margin driven by mix effects
meant that, on an adjusted basis, EBITDA fell by 12% and diluted
EPS declined by 11%. The Group's balance sheet remains
well-capitalised and highly liquid.
Summary non-GAAP financial performance
The table below reclassifies items relating to seed capital and
the translation of non-Sterling balance sheet positions to aid
comprehension of the Group's operating performance. Excluding these
items also provides a more meaningful comparison with the prior
year. For the purposes of presenting 'Adjusted' profits, personnel
expenses have been adjusted for the variable compensation on
foreign exchange translation gains and losses.
Reclassification
of
---------------------------
Seed capital- Foreign
FY2020/21 related exchange FY2020/21 FY2019/20
GBPm Reported items translation Adjusted Adjusted
------------------------------------------ --------- ------------- ------------ --------- ---------
Management fees net of distribution costs 270.9 - - 270.9 315.5
Performance fees 11.9 - - 11.9 3.9
Other revenue 4.6 - - 4.6 4.1
Foreign exchange 4.3 - 4.9 9.2 1.5
------------------------------------------ --------- ------------- ------------ --------- ---------
Net revenue 291.7 - 4.9 296.6 325.0
Investment securities 123.5 (123.5) - - -
Third-party interests (52.6) 52.6 - - -
Personnel expenses (80.3) - (1.1) (81.4) (81.5)
Other expenses excluding depreciation &
amortisation (21.2) 1.7 - (19.5) (21.0)
------------------------------------------ --------- ------------- ------------ --------- ---------
EBITDA 261.1 (69.2) 3.8 195.7 222.5
EBITDA margin 91% - - 66% 68%
Depreciation & amortisation (2.8) - - (2.8) (3.4)
------------------------------------------ --------- ------------- ------------ --------- ---------
Operating profit 258.3 (69.2) 3.8 192.9 219.1
Net finance income/expense 23.9 (23.3) - 0.6 5.8
Associates & joint ventures 0.3 - - 0.3 (0.2)
------------------------------------------ --------- ------------- ------------ --------- ---------
Profit before tax 282.5 (92.5) 3.8 193.8 224.7
------------------------------------------ --------- ------------- ------------ --------- ---------
Diluted EPS (p) 34.2 (11.4) 0.5 23.3 26.1
------------------------------------------ --------- ------------- ------------ --------- ---------
Assets under management
AuM increased by 13% over the year to US$94.4 billion through
investment performance of US$9.6 billion and net inflows of US$1.2
billion. Reflecting the lower opening AuM level following the
initial market reaction to the COVID-19 pandemic, average assets
under management were broadly unchanged at US$90.0 billion
(FY2019/20: US$89.6 billion).
Gross subscriptions of US$17.6 billion were lower than in the
prior year and represented 21% of opening AuM (FY2019/20: US$24.3
billion, 26%). The lower activity levels reflect a period when
investors were considering the impact of the COVID-19 pandemic on
economies and markets across the world, meaning that they typically
resisted making significant changes to portfolio allocations, and
contrasts with the strong subscriptions experienced for most of the
prior year.
There was broad-based demand across asset classes in the period,
including new client mandates in external debt, blended debt,
equities and overlay / liquidity. Approximately 80% of gross
institutional flows came from existing clients, including
significant flows in local currency, corporate debt, including
investment grade strategies, blended debt and overlay /
liquidity.
Gross redemptions were also lower at US$16.4 billion, or 20% of
opening AuM (FY2019/20: US$24.4 billion, 27%), a level more
consistent with the longer-term pattern following heightened client
redemptions at the end of the prior financial year. The redemptions
reflect the typical range of client allocation decisions including
profit taking after strong market performance and shifts in asset
allocation and model portfolios.
Overall, institutional clients delivered a net inflow of US$4.1
billion, and there was a net outflow of US$2.9 billion from
intermediary retail clients, to give a total net inflow of US$1.2
billion compared with a small net outflow of US$0.1 billion in the
prior year.
Investor profile
Ashmore's client base is well diversified by client type and
domicile. Over the period there was an increase in the proportion
of AuM from government-related institutions and small reductions in
the proportions of AuM sourced from pension funds and intermediary
retail clients. In total, 26% of the Group's AuM has been sourced
from clients domiciled in Emerging Markets (30 June 2020: 26%).
Segregated accounts including white-labelled funds represent 79%
of AuM (30 June 2020: 75%). The slight increase reflects good
levels of institutional activity from both new and existing
clients, and net redemptions from the Group's mutual funds.
Ashmore's main mutual fund platforms are in Europe and the US.
The European SICAV range comprises 29 funds with AuM of US$10.1
billion (30 June 2020: 30 funds, US$12.1 billion) and the US 40-Act
platform manages US$2.3 billion in 12 funds (30 June 2020: 10
funds, US$2.4 billion). There was strong investment performance
across all strategies, and the decline in AuM over the period is
primarily due to net redemptions from local currency, short
duration and blended debt strategies.
AuM by investor type
2021 2020
% %
---------------------------------- ---- ----
Central banks 11 11
Sovereign wealth funds 21 7
Governments 7 16
Pension plans 26 29
Corporates/financial institutions 22 22
Funds/sub-advisers 4 3
Intermediary retail 8 11
Foundations/endowments 1 1
---------------------------------- ---- ----
AuM by investor geography
2021 2020
% %
----------------------- ---- ----
Americas 20 23
Europe ex UK 28 28
UK 7 9
Middle East and Africa 17 17
Asia Pacific 28 23
----------------------- ---- ----
AuM movements by investment theme
The AuM by theme as classified by mandate is shown in the table
below.
AuM AuM
30 June Gross Gross 30 June
2020 Performance Subscriptions redemptions Net flows 2021
Theme US$bn US$bn US$bn US$bn US$bn US$bn
------------------ -------- ----------- -------------- ------------ --------- --------
External debt 17.1 1.6 1.9 (2.4) (0.5) 18.2
Local currency 18.7 1.9 2.4 (3.4) (1.0) 19.6
Corporate debt 10.6 1.6 2.1 (3.0) (0.9) 11.3
Blended debt 23.3 2.7 2.4 (5.0) (2.6) 23.4
Equities 4.6 1.9 2.6 (1.7) 0.9 7.4
Alternatives 1.4 - 0.2 (0.2) - 1.4
Multi-asset 0.3 - - - - 0.3
Overlay/liquidity 7.6 (0.1) 6.0 (0.7) 5.3 12.8
------------------ -------- ----------- -------------- ------------ --------- --------
Total 83.6 9.6 17.6 (16.4) 1.2 94.4
------------------ -------- ----------- -------------- ------------ --------- --------
AuM as invested
The table below shows AuM 'as invested' by underlying investment
theme, which adjusts from the 'by mandate' presentation to take
account of the allocation into the underlying asset classes of the
multi-asset and blended debt themes, and of crossover investment
from within certain external debt funds.
The Group's AuM by geography of investment remains diversified
with 37% invested in Latin America, 25% in Asia Pacific, 19% in the
Middle East and Africa, and 19% in Eastern Europe.
AuM as invested
2021 2020
% %
------------------ ---- ----
External debt 32 38
Local currency 26 28
Corporate debt 19 17
Equities 8 6
Alternatives 1 2
Overlay/liquidity 14 9
------------------ ---- ----
Revenues
Net revenue fell by 12% to GBP291.7 million as a result of lower
net management fee income partially offset by higher performance
fees. On an adjusted basis, excluding foreign exchange translation
effects, net revenue declined by 9% to GBP296.6 million.
Net revenue
FY2020/21 FY2019/20
GBPm GBPm
------------------------------ --------- ---------
Net management fees 270.9 315.5
Performance fees 11.9 3.9
Other revenue 4.6 4.1
FX: hedges 9.2 1.5
------------------------------ --------- ---------
Adjusted net revenue 296.6 325.0
FX: balance sheet translation (4.9) 5.5
------------------------------ --------- ---------
Net revenue 291.7 330.5
------------------------------ --------- ---------
Management fee income, net of distribution costs, declined by
14% to GBP270.9 million, reflecting flat average AuM of US$90.0
billion, a stronger average GBP:USD rate of 1.3472 (FY2019/20:
1.2637) and a 4bps decline in the average net management fee margin
to 41bps. At constant FY2019/20 average exchange rates, net
management fees fell by 8%.
Approximately half of the decline in the net management fee
margin compared with the prior year is explained by theme and
client mix effects. The overall impact of investment theme mix
changes, for example the increase in overlay / liquidity AuM and
lower average AuM in blended debt together with a positive
contribution from the growth in equities and locally-managed AuM,
reduced the margin by one basis point. Net outflows from
intermediary retail clients and other mutual fund net redemptions
had a 1.5 basis points effect.
Flows into new and existing large institutional mandates reduced
the margin by less than 0.5 basis point and the remaining movement
of approximately one basis point is attributable to competition and
other factors.
Fee income and net management fee margin by investment theme
The table below summarises net management fee income after
distribution costs, performance fee income, and average net
management fee margin by investment theme.
Net management Net management Performance Performance Net management Net management
fees fees fees fees fee margin fee margin
FY2020/21 FY2019/20 FY2020/21 FY2019/20 FY2020/21 FY2019/20
Theme GBPm GBPm GBPm GBPm bps bps
------------------ -------------- -------------- ----------- ----------- -------------- --------------
External debt 51.9 59.4 1.8 2.5 39 41
Local currency 50.7 60.2 1.8 - 35 38
Corporate debt 34.6 51.3 4.2 0.4 41 50
Blended debt 82.7 94.6 2.6 0.9 47 49
Equities 26.5 23.0 - - 60 66
Alternatives 12.3 15.4 0.7 0.1 132 139
Multi-asset 2.3 3.0 0.8 - 114 100
Overlay/liquidity 9.9 8.6 - - 15 15
------------------ -------------- -------------- ----------- ----------- -------------- --------------
Total 270.9 315.5 11.9 3.9 41 45
------------------ -------------- -------------- ----------- ----------- -------------- --------------
Strong relative performance in several large institutional
mandates combined with fees recognised on the successful
realisation of assets in the alternatives theme delivered
performance fees of GBP11.9 million, higher than in the prior year
(FY2019/20: GBP3.9 million).
At 30 June 2021, 13% of the Group's AuM was eligible to earn
performance fees (30 June 2020: 13%), of which a substantial
proportion is subject to rebate agreements. As at 31 August 2021,
there are no material realised performance fees and the Group
continues to expect its net revenues to comprise primarily net
management fee income.
Translation of the Group's non-Sterling assets and liabilities,
excluding seed capital, resulted in an unrealised foreign exchange
loss of GBP4.9 million reflecting a higher GBP:USD dollar rate at
the period end. The net realised and unrealised gain on the Group's
foreign exchange hedges was GBP9.2 million. Therefore, the total
foreign exchange gain recognised in revenues was GBP4.3 million
(FY2019/20: GBP7.0 million gain).
Other revenue includes transaction and project management fees
and at GBP4.6 million was at a similar level to the prior year
(FY2019/20: GBP4.1 million).
Operating costs
Total operating costs of GBP104.3 million include GBP1.7 million
of expenses incurred by seeded funds that are required to be
consolidated, as disclosed in note 20. On an adjusted basis,
excluding the impact of seed capital and the variable compensation
accrual on foreign exchange translation gains, operating costs were
reduced by 2% to GBP103.7 million (FY2019/20: GBP105.9 million). At
constant FY2019/20 average exchange rates, adjusted operating costs
were flat compared with the prior year period.
Operating costs
FY2020/21 FY2019/20
GBPm GBPm
--------------------------------------- --------- ---------
Fixed staff costs (26.7) (27.6)
Other operating costs (19.5) (21.0)
Depreciation & amortisation (2.8) (3.4)
--------------------------------------- --------- ---------
Operating costs before VC (49.0) (52.0)
Variable compensation (53.6) (55.0)
VC accrual on FX gains/losses (1.1) 1.1
--------------------------------------- --------- ---------
Adjusted operating costs (103.7) (105.9)
Consolidated funds costs (1.7) (2.2)
Add back VC accrual on FX gains/losses 1.1 (1.1)
--------------------------------------- --------- ---------
Total operating costs (104.3) (109.2)
--------------------------------------- --------- ---------
Adjusted operating costs before variable compensation were
reduced by 6% to GBP49.0 million (FY2019/20: GBP52.0 million), and
were 2% lower at constant FY2019/20 average exchange rates.
The Group's headcount rose slightly over the year to 310
employees, of which 298 are involved in investment
management-related activities (30 June 2020: 306 and 291,
respectively). The average headcount was flat compared with the
prior year. The Group's fixed staff costs of GBP26.7 million fell
by 3% as a result of stronger Sterling.
Other operating costs, excluding consolidated fund expenses and
depreciation and amortisation, were reduced by 7% to GBP19.5
million, primarily as a result of significantly lower
travel-related expenses and reduced office expenses while the
majority of employees were working remotely. The current year
includes a GBP1.0 million charitable contribution equivalent to
0.5% of profit before tax excluding unrealised seed capital gains,
as described in the Chief Executive's review (FY2019/20: GBP0.4
million charitable donations).
The accrual for variable compensation of GBP53.6 million is 3%
lower than in the prior year and represents 22.0% of EBVCIT
excluding the charitable contribution (FY2019/20: GBP55.0 million,
19.5%), reflecting the balance of strong investment performance
versus the lower adjusted profits compared with the prior year.
The combined depreciation and amortisation charges for the
period were GBP2.8 million.
Adjusted EBITDA
Adjusted EBITDA fell by 12% from GBP222.5 million to GBP195.7
million as a result of the 9% fall in adjusted net revenue that was
partially offset by the 2% reduction in adjusted operating costs.
The adjusted EBITDA margin was 66%.
Finance income
Net finance income of GBP23.9 million (FY2019/20: GBP12.0
million) includes items relating to seed capital investments, which
are described in more detail below. Excluding these items, net
interest income for the period was GBP0.6 million (FY2019/20:
GBP5.8 million), with the reduction due to lower interest
rates.
Profit before tax
Statutory profit before tax of GBP282.5 million was 28% higher
than the prior year (FY2019/20: GBP221.5 million) as a result of
the strong mark-to-market gains delivered by the Group's seed
capital programme.
Taxation
The majority of the Group's profit is subject to UK taxation. Of
the total current tax charge for the year of GBP41.3 million
(FY2019/20: GBP38.7 million), GBP24.4 million relates to UK
corporation tax (FY2019/20: GBP24.7 million).
The Group's effective tax rate for the financial year is 14.4%
(FY2019/20: 16.6%), which is lower than the prevailing UK
corporation tax rate of 19.0%. This reflects the impact of the
Group's share price on the allowable value of share-based
remuneration provided to employees, the impact of non-taxable
unrealised seed capital gains, the geographic mix of the Group's
profit in the period and the impact on the Group's deferred tax
balances of the planned rise in the UK corporation tax rate to 25%
in 2023. Note 12 to the financial statements provides a
reconciliation of this difference compared with the UK corporation
tax rate.
Earnings per share
Basic earnings per share for the period increased by 33% to 36.4
pence (FY2019/20: 27.4 pence) and diluted earnings per share
increased by 33% to 34.2 pence (FY2019/20: 25.7 pence).
On an adjusted basis, excluding the effects of seed capital
items, foreign exchange translation and relevant tax, diluted
earnings per share fell by 11% to 23.3 pence (FY2019/20: 26.1
pence). In FY2019/20, the post-tax impact of seed capital items and
foreign exchange translation was -0.9 pence per share and +0.5
pence per share, respectively. The weighted average share count for
adjusted diluted earnings per share is shown in note 13.
Balance sheet
Ashmore's policy is to maintain a strong balance sheet through
market cycles in order to meet regulatory capital requirements, to
support the commercial demands of current and prospective
investors, and to fund strategic development opportunities across
the business.
As at 30 June 2021, total equity attributable to shareholders of
the parent was GBP911.6 million (30 June 2020: GBP856.4 million).
Capital resources available to the Group totalled GBP765.1 million
as at 30 June 2021, equivalent to 107 pence per share, and
significantly exceeded the Group's regulatory capital requirement
of GBP155.9 million, equivalent to 22 pence per share. The Group
has no debt.
Cash
Ashmore's business model consistently delivers a high conversion
rate of operating profits to cash. Based on operating profit of
GBP258.3 million for the period (FY2019/20: GBP209.7 million), the
Group generated GBP213.5 million of cash from operations
(FY2019/20: GBP254.9 million). The operating cash flows after
excluding consolidated funds represent 109% of the adjusted EBITDA
for the period of GBP195.7 million (FY2019/20: 116%).
Cash and cash equivalents by currency
30 June 30 June
2021 2020
GBPm GBPm
---------- ------- -------
Sterling 76.0 66.0
US dollar 351.5 391.1
Other 28.6 43.8
---------- ------- -------
Total 456.1 500.9
---------- ------- -------
Cash generated in the period was used to pay corporation tax, to
distribute ordinary dividends to shareholders, to purchase shares
into the Employee Benefit Trust (EBT) and to make seed capital
investments. The decline in cash held compared with the prior year
end is the result of the impact of stronger Sterling on the
translation of foreign currency holdings, particularly US dollar
balances.
Seed capital investments
The Group's actively managed seed capital programme supports
growth in third-party AuM with more than US$10 billion of AuM in
funds that have been seeded, representing 11% of total Group
AuM.
During the year, the Group made new seed investments of GBP134.6
million and realised GBP106.0 million from previous investments.
The consequent net investment of GBP28.6 million together with
market-to-market gains of GBP69.8 million means the market value of
the Group's seed capital investments increased from GBP238.4
million as at 30 June 2020 to GBP336.8 million as at 30 June 2021.
Additionally, Ashmore has seed capital commitments of GBP8.9
million to funds in the alternatives theme that were undrawn at the
period end, giving a total committed value for the Group's seed
capital programme of approximately GBP345 million.
As at 30 June 2021, the original cost of the Group's current
seed capital investments was GBP255.2 million, representing 31% of
Group net tangible equity. Approximately two-thirds of the Group's
seed capital is held in funds with better than one-month dealing
frequency, such as SICAV or US 40-Act mutual funds.
The increase in market value over the period reflects the strong
market recovery and investment performance delivered by Ashmore's
liquid strategies (approximately GBP35 million impact on profit
before tax), together with the consequent increase in valuations
applied to assets held by funds in the alternatives theme
(approximately GBP48 million impact on profit before tax).
The new investments support distribution initiatives in Latin
America, add scale to equity funds to enhance access to
intermediary retail investors, and provide capital for new
investment grade and dedicated ESG funds to establish investment
track records. The redemptions were as a result of successful
realisations and subsequent return of capital in the alternatives
theme and client flows into equity strategies.
Seed capital market value by currency
30 June 30 June
2021 2020
GBPm GBPm
------------------- ------- -------
US dollar 297.6 213.7
Colombian peso 16.2 13.9
Other 23.0 10.8
------------------- ------- -------
Total market value 336.8 238.4
------------------- ------- -------
Seed capital
The table below summarises the principal IFRS line items to
assist in the understanding of the impact of the Group's seed
capital programme on the consolidated statement of comprehensive
income. The seed capital investments generated a total gain of
GBP92.5 million in the period (FY2019/20: GBP7.6 million loss)
including a realised gain of GBP8.5 million. This comprises a
GBP72.5 million mark-to-market gain in respect of consolidated
funds, including GBP3.3 million of finance income, and a GBP20.0
million gain in respect of unconsolidated funds that is reported in
finance income.
Financial impact of seed capital investments
FY2020/21 FY2019/20
GBPm GBPm
------------------------------------------------------ --------- ---------
Consolidated funds (note 20):
Gains/(losses) on investment securities 123.5 (19.1)
Change in third-party interests in consolidated funds (52.6) 7.5
Operating costs (1.7) (2.2)
Finance income 3.3 4.8
------------------------------------------------------ --------- ---------
Sub-total: consolidated funds 72.5 (9.0)
Unconsolidated funds (note 8):
Market return 25.3 1.6
Foreign exchange (5.3) (0.2)
------------------------------------------------------ --------- ---------
Sub-total: unconsolidated funds 20.0 1.4
------------------------------------------------------ --------- ---------
Total seed capital profit/(loss) 92.5 (7.6)
------------------------------------------------------ --------- ---------
- realised 8.5 4.0
- unrealised 84.0 (11.6)
------------------------------------------------------ --------- ---------
Foreign exchange
The majority of the Group's fee income is received in US dollars
and it is the Group's policy for the Foreign Exchange Management
Committee to hedge up to two-thirds of the notional value of
budgeted foreign currency-denominated net management fees. Foreign
currency assets and liabilities, including cash, are marked to
market at the period end exchange rate with movements reported in
either revenues or other comprehensive income (OCI).
Stronger Sterling over the period reduced net management fees by
6%, reduced operating costs by 2%, and resulted in translation
losses of GBP4.9 million on the Group's foreign currency assets and
liabilities and GBP5.3 million on the Group's unconsolidated seed
capital investments. Active management of the Group's foreign
currency exposures delivered a gain of GBP9.2 million reported in
revenues.
Included in OCI is a foreign exchange loss of GBP74.9 million
(FY2019/20: GBP12.8 million gain) reflecting the translation of
non-Sterling assets and liabilities at the balance sheet date, and
primarily comprising the impact on cash and cash equivalents
(GBP40.5 million), seed capital investments (GBP22.7 million) and
goodwill (GBP9.0 million).
Goodwill and intangible assets
At 30 June 2021, goodwill and intangible assets on the Group's
balance sheet totalled GBP80.5 million (30 June 2020: GBP89.7
million). The movement in the period is the result of an
amortisation charge of GBP0.2 million (FY2019/20: GBP0.2 million)
and a foreign exchange revaluation loss in reserves of GBP9.0
million (FY2019/20: GBP2.6 million gain).
Shares held by Employee Benefit Trust (EBT)
The Group's EBT purchases and holds shares in anticipation of
the vesting of share awards. At 30 June 2021, the EBT owned
52,345,869 ordinary shares (30 June 2020: 56,477,466 ordinary
shares), representing 7.3% of the Group's issued share capital (30
June 2020: 7.9%).
Regulatory capital
Ashmore Group plc is subject to consolidated regulatory capital
requirements, whereby the Board is required to assess the degree of
risk across the Group's business, and the Group is required to hold
sufficient capital against these risks.
The table below summarises the Group's financial resources and
Pillar II regulatory capital requirement determined by the Board
through the Internal Capital Adequacy Assessment Process (ICAAP).
The increase in the requirement is primarily the result of a higher
market risk charge resulting from the increase in the market value
of the Group's seed capital investments.
Regulatory capital
FY2020/21 FY2019/20
GBPm GBPm
------------------------------ --------- ---------
Total equity 932.7 879.0
Less deductions:
Investments in associates (0.9) (0.6)
Foreseeable dividends (85.7) (85.5)
Intangibles & goodwill (81.0) (90.4)
------------------------------ --------- ---------
Capital resources 765.1 702.5
Pillar II capital requirement 155.9 147.3
------------------------------ --------- ---------
The Group has total capital resources of GBP765.1 million as at
30 June 2021, equivalent to 107 pence per share, giving a solvency
ratio of 391% and excess regulatory capital of GBP609.2 million
above the Pillar II requirement. Therefore, the Board is satisfied
that the Group is adequately capitalised.
Dividend
The Board intends to pay a progressive ordinary dividend over
time, taking into consideration factors such as the prospects for
the Group's earnings, demands on the Group's financial resources,
and the markets in which the Group operates.
Consistent with this approach and recognising the strong
statutory profit growth, driven by largely unrealised seed capital
gains, and the lower adjusted profits, the Directors have
recommended a final dividend of 12.1 pence per share for the year
ending 30 June 2021 (FY2019/20: 12.1 pence), which if approved by
shareholders will be paid on 10 December 2021 to all shareholders
on the register on 5 November 2021. Total dividends paid and
recommended for the year of 16.9 pence (FY2019/20: 16.9 pence) are
covered 2.0x by diluted earnings per share.
Tom Shippey
Group Finance Director
2 September 2021
Alternative performance measures
Ashmore discloses non-GAAP financial alternative performance
measures (APMs) in order to assist shareholders' understanding of
the operational performance of the Group during the accounting
period and to make comparisons with prior periods.
The calculation of APMs is consistent with the financial year
ending 30 June 2020 and unless otherwise stated reconciliations to
statutory IFRS results are provided in the Business review.
Historical reconciliations of APMs to statutory IFRS results can be
found in the respective interim financial reports and annual
reports and accounts.
Net revenue
As shown on the face of the consolidated statement of
comprehensive income, net revenue is total revenue less
distribution costs and including foreign exchange. This provides a
comprehensive view of the revenues recognised by the Group in the
period.
Reconciliation sources: Consolidated statement of comprehensive
income
Net management fee margin
The net management fee margin is defined as the ratio of
management fees less distribution costs to average assets under
management for the period and is a commonly used industry
performance measure.
Reconciliation sources: Consolidated statement of comprehensive
income; average AuM
Variable compensation ratio
The charge for employee variable compensation as a proportion of
earnings before variable compensation, interest and tax (EBVCIT).
The linking of variable annual pay awards to the Group's
profitability is one of the principal methods by which the Group
controls its operating costs. The charge for variable compensation
is a component of personnel expenses and comprises share-based
payments and performance-related cash bonuses.
EBVCIT is defined as operating profit excluding the charge for
variable compensation and seed capital-related items. The latter
comprises gains/losses on investment securities; change in
third-party interests in consolidated funds; and other expenses in
respect of consolidated funds.
Reconciliation sources: Consolidated statement of comprehensive
income; notes 9 & 11
EBITDA
The standard definition of earnings before interest, tax,
depreciation and amortisation is operating profit before
depreciation and amortisation. It provides a view of the operating
performance of the business before certain non-cash items,
financing income and charges, and taxation.
Reconciliation sources: Financial statements; note 11
Adjusted net revenue, adjusted operating costs and adjusted
EBITDA
Adjusted figures exclude items relating to foreign exchange
translation and seed capital. This provides a better understanding
of the Group's operational performance excluding the mark-to-market
volatility of foreign exchange translation and seed capital
investments.
Reconciliation sources: Financial statements; notes 7, 10, 11
& 20
Adjusted EBITDA margin
The ratio of adjusted EBITDA to adjusted net revenue, both of
which are defined above. This is an appropriate measure of the
Group's operational efficiency and its ability to generate returns
for shareholders.
Reconciliation sources: Financial statements; notes 7, 10, 11
& 20
Adjusted diluted EPS
Diluted earnings per share excluding items relating to foreign
exchange translation and seed capital, as described above, and the
related tax impact.
Reconciliation sources: Consolidated statement of total
comprehensive income, note 13
Conversion of operating profits to cash
This compares adjusted EBITDA to cash generated from operations,
which excludes consolidated funds to enable a better understanding
of the Group's operating performance, and is a measure of the
effectiveness of the Group's operations at converting profits to
cash. Excluding consolidated funds also ensures consistency between
the adjusted EBITDA and cash flow.
Reconciliation sources: Consolidated cash flow statement; note
20 d)
Risk management
Risk management and internal control systems
In accordance with provision 29 of the Code, the Board is
ultimately responsible for the Group's risk management and internal
control systems and for reviewing their effectiveness. Such systems
and their review are designed to manage rather than eliminate the
risk of failure to achieve business objectives, and can only
provide reasonable and not absolute assurance against material
misstatement or loss.
Ashmore considers a number of risks and has described in the
table below those that it has assessed as being most significant in
this period, together with examples of associated controls and
mitigants. Reputational and conduct risks are common to most
aspects of the strategy and business model.
The Group considers the assessment and management of emerging
risks alongside principal risks within its internal control
framework, examples of which are:
- the impact of passive funds on the asset management
industry;
- global political uncertainty;
- high level of new regulatory obligations for the industry;
- ESG focus on social matters including diversity and inclusion;
and
- the transition from an extended period of remote working back
to an office-based business model.
Principal risks and associated controls and mitigants
Description of principal Examples of associated controls and mitigants
risks
========================================================= ============================================================
Strategic and business risks (Responsibility: Ashmore Group plc Board)
=========================================================================================================================
* Long-term downturn in Emerging Markets * Group strategy is reviewed and approved by a Board
fundamentals/technicals/sentiment, and impact of with relevant industry experience
broader industry changes
* Diversification of investment capabilities and
products
* Ashmore has a strong balance sheet with no debt
* The Board reviews diversity data on an annual basis
========================================================= ============================================================
* Market capacity issues and increased competition * Experienced Emerging Markets investment professionals,
constrain growth with deep market knowledge, participate in investment
committees
* Periodic investment theme capacity reviews
* Barriers to entry remain high, e.g. demonstration of
long-term investment track record
========================================================= ============================================================
* Failure to understand and plan for the potential * Oversight by ESG Committee, which has overall
impact of investor sentiment and regulatory changes responsibility for Ashmore's sustainability and
relating to sustainability and climate change responsible investing framework across its corporate
and investment activities
* Head of Sustainability and ESG Integration provides
updates to the Board
* Dedicated ESG funds
========================================================= ============================================================
* Sustainability risks, including those relating to * ESG Committee has oversight of risks, and Head of ESG
climate, have implications for individuals, and Sustainability Integration updates the Board
businesses and investors regularly
* Dedicated ESG funds with minimum scoring thresholds
========================================================= ============================================================
Client risks (Responsibility: Product Committee and Group Risk and Compliance
Committee)
=========================================================================================================================
* Inappropriate marketing strategy and/or ineffective * Frequent and regular Product Committee meetings
management of existing and potential fund investors review product suitability and appropriateness
and distributors, including impact of net outflows
and fee margin pressure
* Experienced distribution team with appropriate
geographic coverage
* Investor education to ensure understanding of Ashmore
investment themes and products
========================================================= ============================================================
* Inadequate client oversight including alignment of * Monitoring of client-related issues including a
interests formal complaints handling process
* Compliance and legal oversight to ensure clear and
fair terms of business and disclosures, and
appropriate client communications and financial
promotions
* Global distribution team appropriately structured for
institutional and intermediary retail clients
========================================================= ============================================================
Treasury risks (Responsibility: Chief Executive Officer and Group Finance Director)
=========================================================================================================================
* Inaccurate financial projections and hedging of * Defined risk appetite, and risk appetite measures
future cash flows and balance sheet updated quarterly
* Group foreign exchange (FX) hedging policy and FX and
Liquidity Management Committee
========================================================= ============================================================
Description of principal risks Examples of associated controls and mitigants
========================================================== ============================================================
Investment risks (Responsibility: Group Investment Committees)
==========================================================================================================================
* Downturn in long-term performance * Consistent investment philosophy over more than 28
years and numerous market cycles, with dedicated
Emerging Markets focus including country visits and
network of local offices
========================================================== ============================================================
* Manager non-performance including i) ineffective ESG * Funds in the same investment theme are managed by
integration and similar portfolios being managed consistent investment management teams, and
inconsistently; and ii) neglect of duty, market abus allocations approved by investment committees
e
* Comprehensive policies in place to cover, for example,
conflicts, best execution, market abuse and client
order handling
* Tools to manage liquidity issues as a result of
redemptions including restrictions on illiquid
exposures and ability to use in specie redemptions
========================================================== ============================================================
* Insufficient number of trading counterparties * Group Trading counterparty policy and sufficient
counterparties to provide access to liquidity.
Extensive trading relationships developed over the
firm's history of focusing on Emerging Markets
investing
========================================================== ============================================================
Operational risks (Responsibility: Group Risk and Compliance Committee)
==========================================================================================================================
* Inadequate security of information including cyber * Information security and data protection policies,
security and data protection subject to annual review including cyber security
review
========================================================== ============================================================
* Inadequate business continuity planning (BCP) * Established BCP process with periodic updates to
Group RCC
========================================================== ============================================================
* Inaccurate or invalid data including manual * Dedicated teams responsible for Transaction
processes/reporting Processing, Fund Administration, and Pricing and Data
Management
* Pricing Oversight and Pricing Methodology and
Valuation Committees, with PMVC valuations subject to
external audit
* Annual ISAE 3402 process and report
========================================================== ============================================================
* Failure of IT infrastructure, including inability to * Appropriate IT policies with annual review cycle
support business growth
* IT systems and environmental monitoring
* Group IT platform incorporates local offices
========================================================== ============================================================
* Legal action, fraud or breach of contract perpetrate * Independent Internal Audit function that considers
d risk of fraud in each audit
against the Group, its funds or investments
* Financial crime policy covering the Group and its
service providers
* Whistleblowing policy including independent reporting
line, and Board sponsor (the Senior Independent
Director and ARC Chairman)
* Due diligence on all new, and regular reviews of
existing, service providers
* Insurance policies with appropriate cover to ensure
appropriate client litigation cover
========================================================== ============================================================
* Insufficient resources, including loss of key staff, * Committee-based investment management reduces key man
inability to attract staff, and an extended period o risk
f
remote working, which hampers growth or the Group's
ability to execute its strategy * Appropriate Remuneration Policy with emphasis on
performance-related pay and long-dated deferral of
equity awards
* Regular reviews of resource requirements and updates
provided to the Board
* Annual Culture and Conduct report to the Board
========================================================== ============================================================
* Lack of understanding and compliance with global and * Regulatory Development Working Group and compliance
local regulatory requirements, as well as conflicts monitoring programme, which covers financial crime
of interest and not treating customers fairly; and risks such as money laundering and bribery
financial crime, which includes money laundering,
bribery and corruption, leading to high level
publicity or regulatory sanction * Compliance policies covering global and local offices,
for example global conflicts of interest and
inducements policies
* Conduct risk and organisational culture indicators
are considered on a monthly basis by the Group RCC
and on an annual basis by the Board
* Internal Capital Adequacy Assessment Process (ICAAP)
with ongoing engagement with the Board
* Mandatory compliance training for all employees
========================================================== ============================================================
* Inadequate tax oversight or advice * Dedicated in-house tax specialist and Group Tax
policy covering all Group entities with external
advice sought as appropriate
========================================================== ============================================================
* Inadequate oversight of Ashmore overseas offices * Group Finance Director has oversight responsibility
for overseas offices, and RCC has oversight of the
operating model with annual reviews. Senior staff
take local board/advisory positions
* Dual reporting lines into local management and Group
department heads, with adherence to Group policies
* Local RCCs held and Group RCC receives updates
* Internal Audit reviews, and annual governance reviews
reported to RCC
========================================================== ============================================================
Consolidated statement of comprehensive income
For the year ended 30 June 2021
2021 2020
Notes GBPm GBPm
--------------------------------------------------- ----- ------ ------
Management fees 276.4 330.0
Performance fees 11.9 3.9
Other revenue 4.6 4.1
--------------------------------------------------- ----- ------ ------
Total revenue 292.9 338.0
Distribution costs (5.5) (14.5)
Foreign exchange 7 4.3 7.0
--------------------------------------------------- ----- ------ ------
Net revenue 291.7 330.5
Gains/(losses) on investment securities 20 123.5 (19.1)
Change in third-party interests in consolidated
funds 20 (52.6) 7.5
Personnel expenses 9 (80.3) (82.6)
Other expenses 11 (24.0) (26.6)
--------------------------------------------------- ----- ------ ------
Operating profit 258.3 209.7
Finance income 8 23.9 12.0
Share of gains/(losses) from associates 26 0.3 (0.2)
--------------------------------------------------- ----- ------ ------
Profit before tax 282.5 221.5
Tax expense 12 (40.7) (36.8)
--------------------------------------------------- ----- ------ ------
Profit for the year 241.8 184.7
Other comprehensive income/(loss), net of related
tax effect
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation differences arising
on foreign operations (74.9) 12.8
Cash flow hedge intrinsic value gains/(losses) 1.2 (0.1)
--------------------------------------------------- ----- ------ ------
Other comprehensive income/(loss), net of tax (73.7) 12.7
--------------------------------------------------- ----- ------ ------
Total comprehensive income for the year 168.1 197.4
--------------------------------------------------- ----- ------ ------
Profit attributable to:
Equity holders of the parent 240.1 182.1
Non-controlling interests 1.7 2.6
--------------------------------------------------- ----- ------ ------
Profit for the year 241.8 184.7
--------------------------------------------------- ----- ------ ------
Total comprehensive income attributable to:
Equity holders of the parent 167.5 194.7
Non-controlling interests 0.6 2.7
--------------------------------------------------- ----- ------ ------
Total comprehensive income for the year 168.1 197.4
--------------------------------------------------- ----- ------ ------
Earnings per share
Basic 13 36.40p 27.35p
Diluted 13 34.23p 25.68p
--------------------------------------------------- ----- ------ ------
Consolidated balance sheet
As at 30 June 2021
2021 2020
Notes GBPm GBPm
---------------------------------------------- ----- ------- -------
Assets
Non-current assets
Goodwill and intangible assets 15 80.5 89.7
Property, plant and equipment 16 11.2 11.7
Investment in associates 26 0.9 0.6
Non-current financial assets measured at fair
value 20 34.0 28.0
Deferred acquisition costs 0.5 0.7
Deferred tax assets 18 34.8 30.6
---------------------------------------------- ----- ------- -------
161.9 161.3
---------------------------------------------- ----- ------- -------
Current assets
Investment securities 20 318.1 234.5
Financial assets measured at fair value 20 41.0 11.6
Trade and other receivables 17 83.4 96.2
Derivative financial instruments 21 1.3 -
Cash and cash equivalents 456.1 500.9
---------------------------------------------- ----- ------- -------
899.9 843.2
---------------------------------------------- ----- ------- -------
Financial assets held for sale 20 46.2 43.1
---------------------------------------------- ----- ------- -------
Total assets 1,108.0 1,047.6
---------------------------------------------- ----- ------- -------
Equity and liabilities
Capital and reserves - attributable to equity
holders of the parent
Issued capital 22 0.1 0.1
Share premium 15.6 15.6
Retained earnings 941.0 813.2
Foreign exchange reserve (46.2) 27.6
Cash flow hedging reserve 1.1 (0.1)
---------------------------------------------- ----- ------- -------
911.6 856.4
Non-controlling interests 30 21.1 22.6
---------------------------------------------- ----- ------- -------
Total equity 932.7 879.0
---------------------------------------------- ----- ------- -------
Liabilities
Non-current liabilities
Lease liabilities 16 7.3 8.2
Deferred tax liabilities 18 10.5 6.9
---------------------------------------------- ----- ------- -------
17.8 15.1
---------------------------------------------- ----- ------- -------
Current liabilities
Current tax - 8.5
Lease liabilities 16 2.5 2.0
Derivative financial instruments 21 - 1.7
Third-party interests in consolidated funds 20 105.7 86.1
Trade and other payables 24 45.5 50.7
---------------------------------------------- ----- ------- -------
153.7 149.0
Financial liabilities held for sale 20 3.8 4.5
---------------------------------------------- ----- ------- -------
Total liabilities 175.3 168.6
---------------------------------------------- ----- ------- -------
Total equity and liabilities 1,108.0 1,047.6
---------------------------------------------- ----- ------- -------
Approved by the Board on 2 September 2021 and signed on its
behalf by:
Mark Coombs Tom Shippey
Chief Executive Officer Group Finance Director
Consolidated statement of changes in equity
For the year ended 30 June 2021
Attributable to equity holders
of the parent
-----------------------------------------------------------
Cash
Foreign flow
Issued Share Retained exchange hedging Non-controlling Total
capital premium earnings reserve reserve Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- -------- --------- --------- -------- ------- --------------- -------
Balance at 1 July 2019 0.1 15.6 812.4 14.9 - 843.0 10.9 853.9
Profit for the year - - 182.1 - - 182.1 2.6 184.7
Other comprehensive
income/(loss):
Foreign currency translation
differences
arising on foreign
operations - - - 12.7 - 12.7 0.1 12.8
Cash flow hedge intrinsic
value
losses - - - - (0.1) (0.1) - (0.1)
Total comprehensive
income/(loss) - - 182.1 12.7 (0.1) 194.7 2.7 197.4
Transactions with owners:
Purchase of own shares - - (89.5) - - (89.5) - (89.5)
Share-based payments - - 28.6 - - 28.6 - 28.6
Acquisition of subsidiary
with
non-controlling interest - - (0.4) - - (0.4) 11.7 11.3
Dividends to equity holders - - (120.0) - - (120.0) - (120.0)
Dividends to non-controlling
interests - - - - - - (2.7) (2.7)
------------------------------- -------- -------- --------- --------- -------- ------- --------------- -------
Total contributions and
distributions - - (181.3) - - (181.3) 9.0 (172.3)
------------------------------- -------- -------- --------- --------- -------- ------- --------------- -------
Balance at 30 June 2020 0.1 15.6 813.2 27.6 (0.1) 856.4 22.6 879.0
------------------------------- -------- -------- --------- --------- -------- ------- --------------- -------
Profit for the year - - 240.1 - - 240.1 1.7 241.8
Other comprehensive
income/(loss):
Foreign currency translation
differences
arising on foreign
operations - - - (73.8) - (73.8) (1.1) (74.9)
Cash flow hedge intrinsic
value
gains - - - - 1.2 1.2 - 1.2
------------------------------- -------- -------- --------- --------- -------- ------- --------------- -------
Total comprehensive
income/(loss) - - 240.1 (73.8) 1.2 167.5 0.6 168.1
Transactions with owners:
Purchase of own shares - - (23.3) - - (23.3) - (23.3)
Share-based payments - - 29.3 - - 29.3 - 29.3
Increase in non-controlling
interests - - - - - - 0.8 0.8
Dividends to equity holders - - (118.3) - - (118.3) - (118.3)
Dividends to non-controlling
interests - - - - - - (2.9) (2.9)
------------------------------- -------- -------- --------- --------- -------- ------- --------------- -------
Total contributions and
distributions - - (112.3) - - (112.3) (2.1) (114.4)
------------------------------- -------- -------- --------- --------- -------- ------- --------------- -------
Balance at 30 June 2021 0.1 15.6 941.0 (46.2) 1.1 911.6 21.1 932.7
------------------------------- -------- -------- --------- --------- -------- ------- --------------- -------
Consolidated cash flow statement
For the year ended 30 June 2021
2021 2020
GBPm GBPm
------------------------------------------------------------- -------- -------
Operating activities
Profit for the year 241.8 184.7
Adjustments for non-cash items:
Depreciation and amortisation 2.8 3.4
Accrual for variable compensation 33.4 33.9
Unrealised foreign exchange gains (4.3) (7.0)
Finance income (23.9) (12.0)
Net (gains)/losses on investment securities (70.9) 11.6
Tax expense 40.7 36.8
Other non-cash items (0.3) (0.8)
------------------------------------------------------------- -------- -------
Cash generated from operations before working capital
changes 219.3 250.6
Changes in working capital:
Decrease in trade and other receivables 2.4 9.1
Decrease/(increase) in derivative financial instruments (3.0) 0.6
Decrease in trade and other payables (5.2) (5.4)
------------------------------------------------------------- -------- -------
Cash generated from operations 213.5 254.9
Taxes paid (64.3) (52.1)
------------------------------------------------------------- -------- -------
Net cash generated from operating activities 149.2 202.8
------------------------------------------------------------- -------- -------
Investing activities
Interest and investment income received 3.2 14.7
Proceeds on disposal of associates - 0.6
Purchase of non-current financial assets measured
at fair value (8.1) (3.6)
Purchase of financial assets held for sale (42.2) (43.6)
Purchase of financial assets measured at fair value (14.4) -
Purchase of investment securities (33.3) (9.1)
Sale of non-current financial assets measured at fair
value 2.6 2.5
Sale of financial assets held for sale 7.2 8.4
Sale of financial assets measured at fair value 58.4 25.1
Net cash on initial consolidation of seed capital
investments (5.2) (0.4)
Purchase of property, plant and equipment (0.7) (1.0)
------------------------------------------------------------- -------- -------
Net cash used in investing activities (32.5) (6.4)
------------------------------------------------------------- -------- -------
Financing activities
Dividends paid to equity holders (118.3) (120.0)
Dividends paid to non-controlling interests (2.9) (2.7)
Third-party subscriptions into consolidated funds 54.9 50.0
Third-party redemptions from consolidated funds (0.6) (29.6)
Distributions paid by consolidated funds (28.8) (1.9)
Contribution by non-controlling interests 0.5 11.3
Payment of lease liabilities (2.1) (2.3)
Interest paid (0.4) (0.5)
Purchase of own shares (23.3) (89.5)
------------------------------------------------------------- -------- -------
Net cash used in financing activities (121.0) (185.2)
------------------------------------------------------------- -------- -------
Net increase in cash and cash equivalents (4.3) 11.2
Cash and cash equivalents at beginning of year 500.9 477.2
Effect of exchange rate changes on cash and cash equivalents (40.5) 12.5
------------------------------------------------------------- -------- -------
Cash and cash equivalents at end of year 456.1 500.9
------------------------------------------------------------- -------- -------
Cash and cash equivalents at end of year comprise:
Cash at bank and in hand 51.4 68.5
Daily dealing liquidity funds 333.5 368.0
Deposits 71.2 64.4
------------------------------------------------------------- -------- -------
456.1 500.9
------------------------------------------------------------- -------- -------
Company balance sheet
As at 30 June 2021
2021 2020
Notes GBPm GBPm
-------------------------------------------- ----- ----- -----
Assets
Non-current assets
Goodwill 15 4.1 4.1
Property, plant and equipment 16 6.8 6.8
Investment in subsidiaries 25 19.9 19.9
Deferred acquisition costs 0.5 0.7
Deferred tax assets 18 25.1 20.6
-------------------------------------------- ----- ----- -----
56.4 52.1
-------------------------------------------- ----- ----- -----
Current assets
Trade and other receivables 17 521.8 518.2
Derivative financial instruments 21 1.3 -
Cash and cash equivalents 86.1 91.8
-------------------------------------------- ----- ----- -----
609.2 610.0
-------------------------------------------- ----- ----- -----
Total assets 665.6 662.1
-------------------------------------------- ----- ----- -----
Equity and liabilities
Capital and reserves
Issued capital 22 0.1 0.1
Share premium 15.6 15.6
Retained earnings 540.6 583.5
Cash flow hedging reserve 1.1 (0.1)
-------------------------------------------- ----- ----- -----
Total equity attributable to equity holders
of the Company 557.4 599.1
-------------------------------------------- ----- ----- -----
Liabilities
Non-current liabilities
Lease liability 16 4.4 4.8
Current liabilities
Lease liability 16 1.3 1.1
Derivative financial instruments 21 - 1.7
Trade and other payables 24 102.5 55.4
-------------------------------------------- ----- ----- -----
108.2 63.0
-------------------------------------------- ----- ----- -----
Total equity and liabilities 665.6 662.1
-------------------------------------------- ----- ----- -----
The Company has taken the exemption under section 408 of the
Companies Act 2006 not to present its profit and loss account and
related notes. The Company's profit for the year ended 30 June 2021
was GBP69.4 million (30 June 2020: GBP120.7 million).
Approved by the Board on 2 September 2021 and signed on its
behalf by:
Mark Coombs Tom Shippey
Chief Executive Officer Group Finance Director
Company statement of changes in equity
For the year ended 30 June 2021
Total
equity
attributable
to equity
Cash flow holders
Issued Share Retained hedging of the
capital premium earnings reserve parent
GBPm GBPm GBPm GBPm GBPm
--------------------------------------- -------- -------- --------- --------- -------------
Balance at 30 June 2019 0.1 15.6 632.6 - 648.3
Profit for the year - - 120.7 - 120.7
Cash flow hedge intrinsic value losses - - - (0.1) (0.1)
Purchase of own shares - - (89.5) - (89.5)
Share-based payments - - 39.7 - 39.7
Dividends to equity holders - - (120.0) - (120.0)
--------------------------------------- -------- -------- --------- --------- -------------
Balance at 30 June 2020 0.1 15.6 583.5 (0.1) 599.1
--------------------------------------- -------- -------- --------- --------- -------------
Profit for the year - - 69.4 - 69.4
Cash flow hedge intrinsic value gains - - - 1.2 1.2
Purchase of own shares - - (23.3) - (23.3)
Share-based payments - - 29.3 - 29.3
Dividends to equity holders - - (118.3) - (118.3)
--------------------------------------- -------- -------- --------- --------- -------------
Balance at 30 June 2021 0.1 15.6 540.6 1.1 557.4
--------------------------------------- -------- -------- --------- --------- -------------
Company cash flow statement
For the year ended 30 June 2021
2021 2020
GBPm GBPm
------------------------------------------------------------- ------- -------
Operating activities
Profit for the year 69.4 120.7
Adjustments for:
Depreciation and amortisation 1.4 1.5
Accrual for variable compensation 25.2 21.7
Unrealised foreign exchange losses/(gains) 35.6 (13.9)
Finance income - (0.8)
Tax expense (16.5) (3.0)
Dividends received from subsidiaries (110.1) (122.0)
------------------------------------------------------------- ------- -------
Cash generated from operations before working capital
changes 5.0 4.2
Changes in working capital:
Decrease in trade and other receivables 6.9 22.4
Decrease/(increase) in derivative financial instruments (3.0) 1.0
Increase in trade and other payables 97.4 17.2
------------------------------------------------------------- ------- -------
Cash generated from operations 106.3 44.8
Taxes paid (38.2) (38.4)
------------------------------------------------------------- ------- -------
Net cash generated from operating activities 68.1 6.4
------------------------------------------------------------- ------- -------
Investing activities
Interest received 0.3 1.4
Loans advanced to subsidiaries (110.2) (111.8)
Loans repaid by subsidiaries 67.3 135.1
Dividends received from subsidiaries 110.1 122.0
Purchase of property, plant and equipment (0.6) (0.9)
------------------------------------------------------------- ------- -------
Net cash generated from investing activities 66.9 145.8
------------------------------------------------------------- ------- -------
Financing activities
Dividends paid (118.3) (120.0)
Payment of lease liability (1.1) (1.0)
Interest paid (0.2) (0.3)
Purchase of own shares (23.3) (89.5)
------------------------------------------------------------- ------- -------
Net cash used in financing activities (142.9) (210.8)
------------------------------------------------------------- ------- -------
Net decrease in cash and cash equivalents (7.9) (58.6)
Cash and cash equivalents at beginning of year 91.8 150.3
Effect of exchange rate changes on cash and cash equivalents 2.2 0.1
------------------------------------------------------------- ------- -------
Cash and cash equivalents at end of year 86.1 91.8
------------------------------------------------------------- ------- -------
Cash and cash equivalents at end of year comprise:
Cash at bank and in hand 17.0 16.9
Daily dealing liquidity funds 14.6 31.9
Deposits 54.5 43.0
------------------------------------------------------------- ------- -------
86.1 91.8
------------------------------------------------------------- ------- -------
Notes to the financial statements
1) General information
Ashmore Group plc (the Company) is a public limited company
listed on the London Stock Exchange and incorporated and domiciled
in the United Kingdom. The consolidated financial statements of the
Company and its subsidiaries (together the Group) for the year
ended 30 June 2021 were authorised for issue by the Board of
Directors on 2 September 2021. The principal activity of the Group
is described in the Directors' report.
2) Basis of preparation
The Group and Company financial statements for the year ended 30
June 2021 have been prepared in accordance with International
Financial Reporting Standards (IFRSs) adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006.
The financial statements have been prepared on a going concern
basis under the historical cost convention, except for the
measurement at fair value of derivative financial instruments and
financial assets and liabilities that are held at fair value
through profit or loss.
The Company has taken advantage of the exemption in section 408
of the Companies Act 2006 that allows it not to present its
individual statement of comprehensive income and related notes.
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making the judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates. Further information about key assumptions and other key
sources of estimation and areas of judgement are set out in note
31.
Going concern
The Board of Directors has considered the resilience of the
Group, taking into account its current financial position, and the
principal and emerging risks facing the business in the context of
the current economic outlook. The Board reviewed cash flow
forecasts for a period of 12 months from the date of approval of
these financial statements which indicate that the Group will have
sufficient funds to meet its liabilities as they fall due for that
period. The Board applied stressed scenarios, including severe but
plausible downside assumptions, and the impact on assets under
management, profitability of the Group and known commitments. While
there are wider market uncertainties that may impact the Group, the
stressed scenarios, which assumed a significant reduction in
revenue for the entire forecast period, show that the Group and
Company would continue to operate profitably and meet their
liabilities as they fall due for a period of at least 12 months
from the date of approval of the annual financial statements. The
financial statements have therefore been prepared on a going
concern basis.
3) New Standards and Interpretations not yet adopted
There were no Standards or Interpretations that were in issue
and required to be adopted by the Group as at the date of
authorisation of these consolidated financial statements. No other
Standards or Interpretations have been issued that are expected to
have a material impact on the Group's financial statements.
4) Significant accounting policies
The following principal accounting policies have been applied
consistently where applicable to all years presented in dealing
with items considered material in relation to the Group and Company
financial statements, unless otherwise stated.
Basis of consolidation
The consolidated financial statements of the Group comprise the
financial statements of the Company and its subsidiaries,
associates and joint ventures. This includes an Employee Benefit
Trust (EBT) established for the employee share-based awards and
consolidated investment funds.
Interests in subsidiaries
Subsidiaries are entities, including investment funds, over
which the Group has control as defined by IFRS 10. The Group has
control if it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect
those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until
the date when control ceases. The Group reassesses whether or not
it controls an entity if facts and circumstances indicate that
there are changes to one or more of the elements of control.
The profit or loss and each component of other comprehensive
income are attributed to the equity holders of the Company and to
any non-controlling interests. Based on their nature, the interests
of third parties in consolidated funds are classified as
liabilities and appear as 'Third-party interests in consolidated
funds' on the Group's balance sheet. Associates and joint ventures
are presented as single-line items in the statement of
comprehensive income and balance sheet. Intercompany transactions
and balances are eliminated on consolidation. Consistent accounting
policies have been applied across the Group in the preparation of
the consolidated financial statements as at 30 June 2021.
A change in the ownership interest of a consolidated entity that
does not result in a loss of control by the Group is accounted for
as an equity transaction. If the Group loses control over a
consolidated entity, it derecognises the related assets, goodwill,
liabilities, non-controlling interest and other components of
equity, and any gain or loss is recognised in consolidated
comprehensive income. Any investment retained is recognised at its
fair value at the date of loss of control.
Interests in associates and joint arrangements
Associates are partly owned entities over which the Group has
significant influence but no control. Joint ventures are entities
through which the Group and other parties undertake an economic
activity which is subject to joint control.
Investments in associates and interests in joint ventures are
measured using the equity method of accounting. Under this method,
the investments are initially recognised at cost, including
attributable goodwill, and are adjusted thereafter for the
post-acquisition changes in the Group's share of net assets. The
Group's share of post-acquisition profit or loss is recognised in
the statement of comprehensive income. Where the Group's financial
year is not coterminous with those of its associates or joint
ventures, unaudited interim financial information is used after
appropriate adjustments have been made.
Interests in consolidated structured entities
The Group acts as fund manager to investment funds that are
considered to be structured entities. Structured entities are
entities that have been designed so that voting or similar rights
are not the dominant factor in deciding which party has control:
for example, when any voting rights relate to administrative tasks
only and the relevant activities of the entity are directed by
means of contractual arrangements. The Group's assets under
management are managed within structured entities. These structured
entities typically consist of unitised vehicles such as Société
d'Investissement à Capital Variable (SICAVs), limited partnerships,
unit trusts and open-ended and closed-ended vehicles which entitle
third-party investors to a percentage of the vehicle's net asset
value.
The Group has interests in structured entities as a result of
the management of assets on behalf of its clients. Where the Group
holds a direct interest in a closed-ended fund, private equity fund
or open-ended pooled fund such as a SICAV, the interest is
accounted for either as a consolidated structured entity or as a
financial asset, depending on whether the Group has control over
the fund or not. Control is determined in accordance with IFRS 10,
based on an assessment of the level of power and aggregate economic
interest that the Group has over the fund, relative to third-party
investors. Power is normally conveyed to the Group through the
existence of an investment management agreement and/or other
contractual arrangements. Aggregate economic interest is a measure
of the Group's exposure to variable returns in the fund through a
combination of direct interest, expected share of performance fees,
expected management fees, fair value gains or losses, and
distributions receivable from the fund.
The Group concludes that it acts as a principal when the power
it has over the fund is deemed to be exercised for self-benefit,
considering the level of aggregate economic exposure in the fund
and the assessed strength of third-party investors' kick-out
rights. The Group concludes that it acts as an agent when the power
it has over the fund is deemed to be exercised for the benefit of
third-party investors.
If the Group concludes that acts as a principal, it is deemed to
have control and, therefore, will consolidate a fund as if it were
a subsidiary. If the Group concludes that it does not have control
over the fund, the Group recognises and measures its interest in
the fund as a financial asset.
Interests in unconsolidated structured entities
The Group classifies the following investment funds as
unconsolidated structured entities:
- Segregated mandates and pooled funds managed where the Group
does not hold any direct interest. In this case, the Group
considers that its aggregate economic exposure is insignificant
and, in relation to segregated mandates, the third-party investor
has the practical ability to remove the Group from acting as fund
manager, without cause. As a result, the Group concludes that it
acts as an agent for third-party investors.
- Pooled funds managed by the Group where the Group holds a
direct interest, for example seed capital investments, and the
Group's aggregate economic exposure in the fund relative to
third-party investors is less than the threshold established by the
Group for determining agent versus principal classification. As a
result, the Group concludes that it is an agent for third-party
investors and, therefore, will account for its beneficial interest
in the fund as a financial asset.
The disclosure of the AuM in respect of consolidated and
unconsolidated structured entities is provided in note 27.
Foreign currency
The Group's financial statements are presented in Pounds
Sterling (Sterling), which is also the Company's functional and
presentation currency. Items included in the financial statements
of each of the Group's entities are measured using the functional
currency, which is the currency that prevails in the primary
economic environment in which the entity operates.
Foreign currency transactions
Transactions in foreign currencies are translated into the
respective functional currencies of the Group entities at the spot
exchange rates at the date of the transactions.
Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated into the
functional currency at the spot exchange rate at that date.
Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction.
Foreign currency differences arising on translation are
generally recognised in comprehensive income, except for qualifying
cash flow hedges to the extent that the hedge is effective, in
which case foreign currency differences arising are recognised in
other comprehensive income.
Foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation, are
translated into Sterling at the spot exchange rates at the balance
sheet date. The revenues and expenses of foreign operations are
translated into Sterling at rates approximating to the foreign
exchange rates ruling at the dates of the transactions.
Foreign currency differences are recognised in other
comprehensive income, and accumulated in the foreign currency
translation reserve, except to the extent that the translation
difference is allocated to non-controlling interests.
When a foreign operation is disposed of such that control is
lost, the cumulative amount in the foreign currency translation
reserve related to that foreign operation is reclassified to
comprehensive income as part of the gain or loss on disposal. If
the Group disposes of only part of its interest in a subsidiary
that includes a foreign operation while retaining control, the
relevant proportion of the cumulative amount is reattributed to
non-controlling interests.
If the settlement of a monetary item receivable from or payable
to a foreign operation is neither planned nor likely in the
foreseeable future, foreign currency differences arising on the
item form part of the net investment in the foreign operation and
are recognised in other comprehensive income, and accumulated in
the foreign currency translation reserve within equity.
Business combinations
Business combinations are accounted for using the acquisition
method as at the acquisition date. The acquisition date is the date
on which the acquirer effectively obtains control of the
acquiree.
The consideration transferred for the acquisition is generally
measured at the acquisition date fair value, as are the
identifiable net assets acquired, liabilities incurred (including
any asset or liability resulting from a contingent consideration
arrangement) and equity instruments issued by the Group in exchange
for control of the acquiree.
Acquisition-related costs are expensed as incurred, except if
they are related to the issue of debt or equity securities.
Contingent consideration is classified either as equity or a
financial liability. Amounts classified as a financial liability
are subsequently remeasured to fair value with changes in fair
value recognised in profit or loss. If the contingent consideration
is classified as equity, it will not be remeasured and settlement
is accounted for within equity.
If the business combination is achieved in stages, the
acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is remeasured to fair value at the
acquisition date. Any gains or losses arising from such
remeasurement are recognised in profit or loss.
Goodwill
The cost of a business combination in excess of the fair value
of net identifiable assets or liabilities acquired, including
intangible assets identified, is recognised as goodwill and stated
at cost less any accumulated impairment losses. Goodwill has an
indefinite useful life, is not subject to amortisation and is
tested annually for impairment or when there is an indication of
impairment.
Intangible assets
The cost of intangible assets, such as management contracts and
brand names, acquired as part of a business combination is their
fair value as at the date of acquisition. The fair value at the
date of acquisition is calculated using the discounted cash flow
methodology and represents the valuation of the profits expected to
be earned from the management contracts and brand name in place at
the date of acquisition.
Following initial recognition, intangible assets are carried at
cost less any accumulated amortisation and impairment losses.
Intangible assets with finite life are amortised on a systematic
basis over their useful lives. The useful life of an intangible
asset which has arisen from contractual or other legal rights does
not exceed the period of the contractual or other legal rights.
Non-controlling interests (NCI)
The Group recognises NCI in an acquired entity either at fair
value or at the NCI's proportionate share of the acquired entity's
net identifiable assets. This decision is made on an
acquisition-by-acquisition basis. Changes to the Group's interest
in a subsidiary that do not result in a loss of control are
accounted for as equity transactions.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. Cost is determined
on the basis of the direct and indirect costs that are directly
attributable. Property, plant and equipment are depreciated using
the straight-line method over the estimated useful lives, assessed
to be five years for office equipment and four years for IT
equipment. The residual values and useful lives of assets are
reviewed at least annually.
The Group's property, plant and equipment include right-of use
assets recognised on operating lease arrangements in accordance
with IFRS 16 Leases.
Leases
The Group's lease arrangements primarily consist of operating
leases relating to office space. Obligations and rights under
operating lease agreements are recognised and classified within
property, plant and equipment on the Group's consolidated statement
of financial position in accordance with IFRS 16.
The Group initially records a lease liability reflecting the
present value of the future contractual cash flows to be made over
the lease term, discounted using the rate implicit in the lease,
being the rate that the lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the
right-of-use asset in a similar economic environment with similar
terms, security and conditions. Where this rate is not readily
available, the Group applies the incremental borrowing rate
applicable for each lease arrangement. A right-of-use asset is also
recorded at the value of the lease liability plus any directly
related costs and estimated dilapidation expenses and is presented
within property, plant and equipment. Interest is accrued on the
lease liability using the effective interest rate method to give a
constant rate of return over the life of the lease whilst the
balance is reduced as lease payments are made. The right-of-use
asset is depreciated over the life of the lease as the benefit of
the lease is consumed.
After the commencement date, the Group reassesses the lease term
if there is a significant event or change in circumstances that is
within its control and affects the likelihood that it will exercise
(or not exercise) a term extension option.
The cost of short-term (less than 12 months) leases is expensed
on a straight-line basis over the lease term.
Deferred acquisition costs
Costs that are directly attributable to securing an investment
management contract are deferred if they can be identified
separately and measured reliably and it is probable that they will
be recovered. Deferred acquisition costs represent the incremental
costs incurred by the Group to acquire an investment management
contract, typically on a closed-ended fund. The Group amortises the
deferred acquisition asset recognised on a systematic basis, in
line with the revenue generated from providing the investment
management services over the life of the fund.
Financial instruments
Recognition and initial measurement
Financial instruments are recognised when the Group becomes
party to the contractual provisions of an instrument, initially at
fair value plus transaction costs except for financial assets
classified at fair value through profit or loss. Purchases or sales
of financial assets are recognised on the trade date, being the
date that the Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive
cash flows from the investments have expired or been transferred or
when the Group has transferred substantially all risks and rewards
of ownership. Financial liabilities are derecognised when the
obligation under the liability has been discharged, cancelled or
expires.
Subsequent measurement
The subsequent measurement of financial instruments depends on
their classification in accordance with IFRS 9 Financial
Instruments and IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations.
Under IFRS 9, the Group classifies its financial assets into two
measurement categories: amortised cost and FVTPL. The
classification of financial assets under IFRS 9 is generally based
on the business model in which a financial asset is managed and its
contractual cash flow characteristics. A financial asset is
measured at amortised cost if it meets both of the following
conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
All financial assets not classified as measured at amortised
cost are measured at FVTPL. The Group classifies its financial
liabilities at amortised cost or derivative liabilities measured at
FVTPL.
Amortised cost is the amount determined based on moving the
initial amount recognised for the financial instrument to the
maturity value on a systematic basis using a fixed interest rate
(effective interest rate), taking account of repayment dates and
initial premiums or discounts.
Financial assets
The Group classifies its financial assets into the following
categories: investment securities at FVTPL, financial assets held
for sale, financial assets at FVTPL and financial assets measured
at amortised cost.
The Group may, from time to time, invest seed capital in funds
where a subsidiary is the investment manager or an adviser. Where
the holding in such investments is deemed to represent a
controlling stake and is acquired exclusively with a view to
subsequent disposal through sale or dilution, these seed capital
investments are recognised as financial assets held for sale in
accordance with IFRS 5. The Group recognises 100% of the investment
in the fund as a 'financial asset held for sale' and the interest
held by other parties as a 'financial liability held for sale'.
Where control is not deemed to exist, and the assets are readily
realisable, they are recognised as financial assets measured at
FVTPL in accordance with IFRS 9. Where the assets are not readily
realisable, they are recognised as non-current financial assets
measured at FVTPL. If a seed capital investment remains under the
control of the Group for more than one year from the original
investment date, the underlying fund is consolidated line by
line.
Investment securities at FVTPL
Investment securities represent securities, other than
derivatives, held by consolidated funds. These securities are
measured at fair value with gains and losses recognised through the
consolidated statement of comprehensive income.
Financial assets held for sale (HFS)
Financial assets held for sale are measured at the lower of
their carrying amount and fair value less costs to sell except
where measurement and remeasurement is outside the scope of IFRS 5.
Where investments that have initially been recognised as financial
assets held for sale, because the Group has been deemed to hold a
controlling stake, are subsequently disposed of or diluted such
that the Group's holding is no longer deemed a controlling stake,
the investment will subsequently be classified as a financial asset
measured at FVTPL in accordance with IFRS 9.
Financial assets at FVTPL
Financial assets at FVTPL include certain readily realisable
interests in seeded funds, non-current financial assets measured at
fair value and derivatives. From the date the financial asset is
recognised, all subsequent changes in fair value, foreign exchange
differences, interest and dividends are reflected in the
consolidated statement of comprehensive income and presented in
finance income or expense.
(i) Non-current financial assets measured at fair value
Non-current financial assets include closed-end funds that are
measured at FVTPL. They are held at fair value with changes in fair
value being recognised through the consolidated statement of
comprehensive income.
(ii) Financial assets measured at fair value
The Group classifies readily realisable interests in newly
seeded funds as financial assets measured at FVTPL with fair value
changes being directly recognised through the consolidated
statement of comprehensive income. Fair value is measured based on
the proportionate net asset value in the fund.
(iii) Derivatives
Derivatives include foreign exchange forward contracts and
options used by the Group to manage its foreign currency exposures
and those held in consolidated funds. Derivatives are initially
recognised at fair value on the date on which a derivative contract
is entered into and subsequently remeasured at fair value.
Transaction costs are recognised immediately in the statement of
comprehensive income. All derivatives are carried as financial
assets when the fair value is positive and as financial liabilities
when the fair value is negative.
Any gains or losses arising from changes in the fair value of
derivatives are taken directly in comprehensive income, except for
the effective portion of cash flow hedges, which is recognised in
other comprehensive income.
Financial assets measured at amortised cost
(i) Trade and other receivables
Trade and other receivables are initially recorded at fair value
plus transaction costs. The fair value on acquisition is normally
the cost. Subsequent to initial recognition these assets are
measured at amortised cost less impairment loss allowances.
Impairment losses are recognised in the statement of comprehensive
income for expected credit losses, and changes in those expected
credit losses over the life of the instrument. Loss allowances are
calculated based on lifetime expected credit losses at each
reporting date.
(ii) Cash and cash equivalents
Cash represents cash at bank and in hand, and cash equivalents
comprise short-term deposits and investments in money market
instruments that are redeemable on demand or with an original
maturity of three months or less. The carrying amount of these
assets approximates their fair value.
Financial liabilities
The Group classifies its financial liabilities into the
following categories: financial liabilities held for sale,
financial liabilities at FVTPL and financial liabilities at
amortised cost.
Financial liabilities held for sale
Financial liabilities held for sale represent interests held by
other parties in funds in which the Group recognises 100% of the
investment in the fund as a financial asset held for sale. These
liabilities are carried at fair value with gains or losses
recognised in the statement of comprehensive income within finance
income or expense.
Financial liabilities at FVTPL
Financial liabilities at FVTPL include derivative financial
instruments and third-party interests in consolidated funds. They
are carried at fair value with gains or losses recognised in the
consolidated statement of comprehensive income within finance
income or expense.
Financial liabilities at amortised cost
Other financial liabilities including trade and other payables
are subsequently measured at amortised cost using the effective
interest rate method. Interest expense is recognised as it is
incurred using the effective interest method, which allocates
interest at a constant rate of return over the expected life of the
financial instrument based on the estimated future cash flows.
Fair value of financial instruments
Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability (i.e. the 'exit
price') in an orderly transaction between market participants at
the measurement date. In determining fair value, the Group uses
various valuation approaches and establishes a hierarchy for inputs
used in measuring fair value that maximises the use of relevant
observable inputs and minimises the use of unobservable inputs by
requiring that the most observable inputs be used when available.
Observable inputs are inputs that market participants would use in
pricing the asset or liability developed based on market data
obtained from sources independent of the Group.
Unobservable inputs are inputs that reflect the Group's
judgements about the assumptions other market participants would
use in pricing the asset or liability, developed based on the best
information available in the circumstances.
Securities listed on a recognised stock exchange, or dealt on
any other regulated market that operates regularly, is recognised
and open to the public, are valued at the last known available
closing bid price. If a security is traded on several actively
traded and organised financial markets, the valuation is made on
the basis of the last known bid price on the main market on which
the securities are traded. In the case of securities for which
trading on an actively traded and organised financial market is not
significant, but which are bought and sold on a secondary market
with regulated trading among security dealers (with the effect that
the price is set on a market basis), the valuation may be based on
this secondary market.
Where instruments are not listed on any stock exchange or not
traded on any regulated markets, valuation techniques are used by
valuation specialists. These techniques include the market
approach, the income approach or the cost approach. The use of the
market approach generally consists of using comparable market
transactions or using techniques based on market observable inputs,
while the use of the income approach generally consists of the net
present value of estimated future cash flows, adjusted as deemed
appropriate for liquidity, credit, market and/or other risk
factors.
Investments in funds are valued on the basis of the last
available net asset value of the units or shares of such funds.
The fair value of the derivatives is their quoted market price
at the balance sheet date.
Hedge accounting
The Group applies the general hedge accounting model in IFRS 9.
This requires the Group to ensure that hedge accounting
relationships are aligned with its risk management objectives and
strategy and to apply a more qualitative and forward-looking
approach to assessing hedge effectiveness.
The Group uses forward and option contracts to hedge the
variability in cash flows arising from changes in foreign exchange
rates relating to management fee revenues. The Group designates
only the change in fair value of the spot element of the forward
and option contracts in cash flow hedging relationships. The
effective portion of changes in fair value of hedging instruments
is accumulated in a cash flow hedge reserve as a separate component
of equity.
The Group applies cash flow hedge accounting when the
transaction meets the specified hedge accounting criteria. To
qualify, the following conditions must be met:
- formal documentation of the relationship between the hedging
instrument(s) and hedged item(s) must exist at inception;
- the hedged cash flows must be highly probable and must present
an exposure to variations in cash flows that could ultimately
affect comprehensive income;
- the effectiveness of the hedge can be reliably measured;
and
- the hedge must be highly effective, with effectiveness
assessed on an ongoing basis.
For qualifying cash flow hedges, the change in fair value of the
effective hedging instrument is initially recognised in other
comprehensive income and is released to comprehensive income in the
same period during which the relevant financial asset or liability
affects the Group's results.
Where the hedge is highly effective overall, any ineffective
portion of the hedge is immediately recognised in comprehensive
income. Where the instrument ceases to be highly effective as a
hedge, or is sold, terminated or exercised, hedge accounting is
discontinued.
Derecognition of financial assets and liabilities
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risk and
rewards of ownership of the asset. The Group derecognises a
financial
liability when the Group's obligations are discharged, cancelled
or they expire.
Impairment of financial assets
Under IFRS 9, impairment losses on the Group's financial assets
at amortised cost are measured using an expected credit loss (ECL)
model. Under this model, the Group is required to account for
expected credit losses, and changes in those expected credit losses
over the life of the instrument. The amount of expected credit
losses is updated at each reporting date to reflect changes in
credit risk since initial recognition and, consequently, more
timely information is provided about expected credit losses. A
three stage model is used for calculating expected credit losses,
which requires financial assets to be assessed as:
- Performing (stage 1) financial assets where there has been no
significant increase in credit risk since original recognition;
or
- Under-performing (stage 2) financial assets where there has
been a significant increase in credit risk since initial
recognition, but no default event; or
- Non-performing (stage 3) financial assets that are in
default.
Expected credit losses for stage 1 financial assets are
calculated based on possible default events within the 12 months
after the reporting date. Expected credit losses for stage 2 and 3
financial assets are calculated based on lifetime expected credit
losses that result from all possible default events over the
expected life of a financial instrument. The Group applies the
simplified approach to calculate expected credit losses for
financial assets measured at amortised cost. Under this approach,
financial assets are not categorised into three stages and expected
credit losses are calculated based on the life of the
instrument.
Assets measured at amortised cost
The Group measures loss allowances at an amount equal to
lifetime expected credit losses. Expected credit loss allowances
for financial assets measured at amortised cost are deducted from
the gross carrying amount of the assets. The Group's financial
assets subject to impairment assessment under the ECL model
comprise cash deposits held with banks and trade receivables. In
assessing the impairment of financial assets under the ECL model,
the Group assesses whether the risk of default has increased
significantly since initial recognition, by considering both
quantitative and qualitative information, and the analysis is based
on the Group's historical experience of credit default, including
forward-looking information.
The Group's trade receivables comprise balances due from
management fees, performance fees, expense recoveries from funds
managed, and are generally short term and do not contain financing
components. Factors considered in determining whether a default has
taken place include how many days past the due date a payment is,
deterioration in the credit quality of a counterparty, and
knowledge of specific events that could influence a counterparty's
ability to pay. The Group assesses lifetime expected credit losses
based on historical observed default rates, adjusted by
forward-looking estimates regarding the economic conditions within
the next year. Externally derived credit ratings have been
identified as representing the best available determinant of
counterparty credit risk for cash balances and credit risk is
deemed to have increased significantly if the credit rating has
significantly deteriorated at the reporting date relative to the
credit rating at the date of initial recognition.
Impairment of non-financial assets
For all other assets other than goodwill, an impairment test is
performed annually or whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset's fair value less costs of
disposal and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of
assets (cash-generating units). Non-financial assets, other than
goodwill, that have suffered an impairment are reviewed for
possible reversal of the impairment at the end of each reporting
period.
Goodwill
Goodwill is tested for impairment annually or whenever there is
an indication that the carrying amount may not be recoverable based
on management's judgements regarding the future prospects of the
business, estimates of future cash flows and discount rates. When
assessing the appropriateness of the carrying value of goodwill at
year end, the recoverable amount is considered to be the greater of
fair value less costs to sell or value in use. The pre-tax discount
rate applied is based on the Group's weighted average cost of
capital after making allowances for any specific risks.
The business of the Group is managed as a single unit, with
asset allocations, research and other such operational practices
reflecting the commonality of approach across all fund themes.
Therefore, for the purpose of testing goodwill for impairment, the
Group is considered to have one cash-generating unit to which all
goodwill is allocated and, as a result, no further split of
goodwill into smaller cash-generating units is possible and the
impairment review is conducted for the Group as a whole.
An impairment loss in respect of goodwill cannot be
reversed.
Net revenue
Net revenue is total revenue less distribution costs and
including foreign exchange. The Group's total revenue includes
management fees, performance fees and other revenue. The primary
revenue source for the Group is fee income received or receivable
for the provision of investment management services.
The Group recognises revenue in accordance with the principles
of IFRS 15 Revenue from Contracts with Customers.
The core principle of IFRS 15 is that revenue is recognised to
reflect the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity
expects to be entitled to in exchange for those goods or services.
The Group applies the IFRS 15 five-step model for recognising
revenue, which consists of identifying the contract with the
customer; identifying the relevant performance obligations;
determining the amount of consideration to be received under the
contract; allocating the consideration to each performance
obligation; and earning the revenue as the performance obligations
are satisfied.
The Group's principal revenue recognition policies are
summarised below:
Management fees
Management fees are presented net of rebates, and are calculated
as a percentage of net fund assets managed in accordance with
individual management agreements. Management fees are calculated
and recognised on a monthly basis in accordance with the terms of
the management fee agreements. Management fees are typically
collected on a monthly or quarterly basis.
Performance fees
Performance fees are presented net of rebates, and are
calculated as a percentage of the appreciation in the net asset
value of a fund above a defined hurdle. Performance fees are earned
from some arrangements when contractually agreed performance levels
are exceeded within specified performance measurement periods,
typically over one year. The fees are recognised when they can be
reliably estimated and/or crystallised, and there is deemed to be a
low probability of a significant reversal in future periods. This
is usually at the end of the performance period or upon early
redemption by a fund investor. Once crystallised, performance fees
typically cannot be clawed-back.
Rebates
Rebates relate to repayments of management and performance fees
charged subject to a rebate agreement, typically with institutional
investors, and are calculated based on an agreed percentage of net
fund assets managed and recognised as the service is received.
Where rebate agreements exist, management and performance fees are
presented on a net basis in the consolidated statement of
comprehensive income.
Other revenue
Other revenue principally comprises fees for other services,
which are typically driven by the volume of transactions, along
with revenues that vary in accordance with the volume of fund
project development activities. Other revenue includes transaction,
structuring and administration fees, project management fees, and
reimbursement by funds of costs incurred by the Group. This revenue
is recognised as the relevant service is provided and it is
probable that the fee will be collected.
Distribution costs
Distribution costs are costs of sales payable to external
intermediaries for marketing and investor servicing. Distribution
costs vary based on fund assets managed and the associated
management fee revenue, and are expensed over the period in which
the service is provided.
Employee benefits
Obligations for contributions to defined contribution pension
plans are recognised as an expense in the statement of
comprehensive income when payable in accordance with the scheme
particulars.
Share-based payments
The Group issues share awards to its employees under share-based
compensation plans.
For equity-settled awards, the fair value of the amounts payable
to employees is recognised as an expense with a corresponding
increase in equity over the vesting period after adjusting for the
estimated number of shares that are expected to vest. The fair
value is measured at the grant date using an appropriate valuation
model, taking into account the terms and conditions upon which the
instruments were granted. At each balance sheet date prior to
vesting, the cumulative expense representing the extent to which
the vesting period has expired and management's best estimate of
the awards that are ultimately expected to vest is calculated. The
movement in cumulative expense is recognised in the statement of
comprehensive income with a corresponding entry within equity.
For cash-settled awards, the fair value of the amounts payable
to employees is recognised as an expense with a corresponding
liability on the Group's balance sheet. The fair value is measured
using an appropriate valuation model, taking into account the
estimated number of awards that are expected to vest and the terms
and conditions upon which the instruments were granted. During the
vesting period, the liability recognised represents the portion of
the vesting period that has expired at the balance sheet date
multiplied by the fair value of the awards at that date. Movements
in the liability are recognised in the statement of comprehensive
income.
Finance income and expense
Finance income includes interest receivable on the Group's cash
and cash equivalents, and both realised and unrealised gains on
financial assets at FVTPL.
Finance expense includes both realised and unrealised losses on
financial assets at FVTPL. Interest expense on lease liabilities is
presented within finance expense.
Taxation
Tax expense for the year comprises current and deferred tax. Tax
is recognised in the consolidated statement of comprehensive income
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
Current tax
Current tax comprises the expected tax payable or receivable on
the taxable income or loss for the year, and any adjustment to the
tax payable or receivable in respect of previous years. It is
measured using tax rates enacted or substantively enacted at the
balance sheet date in the countries where the Group operates.
Current tax also includes withholding tax arising from
dividends.
Deferred tax
Deferred tax is recognised using the balance sheet liability
method, in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following
differences are not provided for:
- goodwill not deductible for tax purposes and
- differences relating to investments in subsidiaries to the
extent that they will probably not reverse in the foreseeable
future.
The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively
enacted at the reporting date.
Deferred tax assets are recognised only to the extent that it is
probable that future taxable profits will be available against
which the assets can be utilised. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the balance sheet
date.
Dividends
Dividends are recognised when shareholders' rights to receive
payments have been established.
Equity shares
The Company's ordinary shares of 0.01 pence each are classified
as equity instruments. Ordinary shares issued by the Company are
recorded at the fair value of the consideration received or the
market price at the day of issue. Direct issue costs, net of tax,
are deducted from equity through share premium. When share capital
is repurchased, the amount of consideration paid, including
directly attributable costs, is recognised as a change in
equity.
Own shares
Own shares are held by the Employee Benefit Trust (EBT). The
holding of the EBT comprises own shares that have not vested
unconditionally to employees of the Group. In both the Group and
Company, own shares are recorded at cost and are deducted from
retained earnings.
Segmental information
Key management information, including revenues, margins,
investment performance, distribution costs and AuM flows, which is
relevant to the operation of the Group, is reported to and reviewed
by the Board on the basis of the investment management business as
a whole. Hence, the Group's management considers that the Group's
services and its operations are not run on a discrete geographic
basis and comprise one business segment (being provision of
investment management services).
Company-only accounting policies
In addition to the above accounting policies, the following
specifically relates to the Company:
Investment in subsidiaries
Investments by the Company in subsidiaries are stated at cost
less, where appropriate, provisions for impairment.
5) Segmental information
The Group's operations are reported to and reviewed by the Board
on the basis of the investment management business as a whole,
hence the Group is treated as a single segment. The key management
information considered is adjusted EBITDA which is GBP195.7 million
for the year as reconciled in the Business review (FY2019/20:
adjusted EBITDA of GBP222.5 million was derived by adjusting
operating profit by GBP3.4 million of depreciation and amortisation
expense, GBP7.6 million of income related to seed capital and
GBP4.4 million of foreign exchange gains). The disclosures below
are supplementary, and provide the location of the Group's
non-current assets at year end other than financial assets and
deferred tax assets. Disclosures relating to revenue by location
are in note 6.
Analysis of non-current assets by geography
2021 2020
GBPm GBPm
--------------------------- ----- ------
United Kingdom and Ireland 24.8 26.4
United States 65.1 72.4
Other 3.2 3.9
--------------------------- ----- ------
Total non-current assets 93.1 102.7
--------------------------- ----- ------
6) Revenue
Management fees are accrued throughout the year in line with
prevailing levels of assets under management and performance fees
are recognised when they can be estimated reliably and it is
probable that they will crystallise. The Group is not considered to
be reliant on any single source of revenue. During the year, none
of the Group's funds (FY2019/20: none) provided more than 10% of
total revenue in the year respectively when considering management
fees and performance fees on a combined basis.
Analysis of revenue by geography
2021 2020
GBPm GBPm
--------------------------- ----- ------
United Kingdom and Ireland 229.9 287.0
United States 26.8 24.3
Other 36.2 26.7
--------------------------- ----- ------
Total revenue 292.9 338.0
--------------------------- ----- ------
7) Foreign exchange
The foreign exchange rates which had a material impact on the
Group's results are the US dollar, the Euro, the Indonesian rupiah
and the Colombian peso.
Closing Average Average
Closing rate rate year rate year
rate as as at ended ended
at 30 30 June 30 June 30 June
GBP1 June 2021 2020 2021 2020
------------------ ---------- -------- ---------- ----------
US dollar 1.3815 1.2356 1.3472 1.2637
Euro 1.1649 1.1001 1.1315 1.1331
Indonesian rupiah 20,031 17,651 19,389 18,134
Colombian peso 5,158 4,620 4,968 4,468
------------------ ---------- -------- ---------- ----------
Foreign exchange gains and losses are shown below.
2021 2020
GBPm GBPm
------------------------------------------------------- ----- ------
Net realised and unrealised hedging gains 9.2 1.5
Translation gains on non-Sterling denominated monetary
assets and liabilities (4.9) 5.5
------------------------------------------------------- ----- ------
Total foreign exchange gains 4.3 7.0
------------------------------------------------------- ----- ------
8) Finance income
2021 2020
GBPm GBPm
------------------------------------------------------------ ----- ------
Finance income
Interest and investment income 4.3 11.1
Net realised gains on seed capital investments measured
at fair value 8.5 4.0
Net unrealised gains/(losses) on seed capital investments
measured at fair value 11.5 (2.6)
Interest expense on lease liabilities (note 16) (0.4) (0.5)
------------------------------------------------------------ ----- ------
Total finance income 23.9 12.0
------------------------------------------------------------ ----- ------
Included within interest and investment income are gains of
GBP3.3 million (FY 2019/20: GBP4.8 million gains) from investment
securities on consolidated funds (note 20d).
Included within net realised and unrealised gains on seed
capital investments measured at fair value are GBP10.8 million
gains (FY2019/20: GBP2.8 million gains) in relation to financial
assets held for sale (note 20a), GBP8.2 million gains (FY2019/20:
GBP0.8 million losses) on financial assets measured at FVTPL (note
20b) and GBP2.2 million gains (FY2019/20: GBP4.5 million losses) on
non-current financial assets measured at fair value (note 20c).
9) Personnel expenses
Personnel expenses during the year comprised the following:
2021 2020
GBPm GBPm
--------------------------------- ----- ------
Wages and salaries 21.4 22.2
Performance-related cash bonuses 20.2 21.1
Share-based payments 33.4 33.9
Social security costs 1.8 1.9
Pension costs 1.8 1.9
Other costs 1.7 1.6
--------------------------------- ----- ------
Total personnel expenses 80.3 82.6
--------------------------------- ----- ------
Number of employees
At 30 June 2021, the number of investment management employees
of the Group (including Executive Directors) during the year was as
follows:
Average
Average for the
for the year
year ended ended At At
30 June 30 June 30 June 30 June
2021 2020 2021 2020
Number Number Number Number
-------------------------------------- ----------- -------- -------- --------
Total investment management employees 295 292 298 291
-------------------------------------- ----------- -------- -------- --------
Directors' remuneration
There are retirement benefits accruing to two Executive
Directors under a defined contribution scheme (FY2019/20: two).
10) Share-based payments
The cost related to share-based payments recognised by the Group
in the statement of comprehensive income is shown below:
2021 2020
Group GBPm GBPm
----------------------------------- ----- ------
Omnibus Plan 33.3 33.5
Phantom Bonus Plan 0.1 0.4
----------------------------------- ----- ------
Total share-based payments expense 33.4 33.9
----------------------------------- ----- ------
The total expense recognised for the year in respect of
equity-settled share-based payment awards was GBP29.9 million
(FY2019/20: GBP28.9 million), of which GBP2.5 million (FY2019/20:
GBP2.0 million) relates to share awards granted to key management
personnel.
The Executive Omnibus Incentive Plan (Omnibus Plan)
The Omnibus Plan was introduced prior to the Company listing in
October 2006 and provides for the grant of share awards, market
value options, premium cost options, discounted options, linked
options, phantoms and/or nil-cost options to employees. The Omnibus
Plan will also allow bonuses to be deferred in the form of share
awards with or without matching shares. Awards granted under the
Omnibus Plan typically vest after five years from date of grant,
with the exception of bonus awards which vest after the shorter of
five years from date of grant or on the date of termination of
employment. Awards under the Omnibus Plan are accounted for as
equity-settled, with the exception of phantoms which are classified
as cash-settled.
The combined cash and equity-settled payments below represent
the share-based payments relating to the Omnibus Plan.
Total expense by year awards were granted (excluding national
insurance)
Group and Company 2021 2020
Year of grant GBPm GBPm
---------------------------------------------------- ----- -----
2015 - 3.3
2016 2.6 2.7
2017 3.7 3.7
2018 3.8 3.8
2019 4.4 4.8
2020 3.9 10.9
2021 11.5 -
---------------------------------------------------- ----- -----
Total Omnibus share-based payments expense reported
in comprehensive income 29.9 29.2
---------------------------------------------------- ----- -----
Awards outstanding under the Omnibus Plan were as follows:
i) Equity-settled awards
2021 2021 2020 2020
Number Weighted Number Weighted
of shares average of shares average
subject share subject share
Group and Company to awards price to awards price
------------------------------- ----------- --------- ----------- ---------
Restricted share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 22,073,338 GBP3.27 21,233,773 GBP3.04
Granted 4,189,112 GBP3.62 4,026,981 GBP4.39
Vested (5,945,594) GBP2.47 (3,063,448) GBP3.16
Forfeited (319,463) GBP3.12 (123,968) GBP3.04
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 19,997,393 GBP3.58 22,073,338 GBP3.27
------------------------------- ----------- --------- ----------- ---------
Bonus share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 10,693,287 GBP3.32 9,705,156 GBP3.07
Granted 2,261,160 GBP3.61 2,060,811 GBP4.38
Vested (2,336,799) GBP2.43 (1,072,680) GBP3.09
Forfeited - - - -
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 10,617,648 GBP3.58 10,693,287 GBP3.32
------------------------------- ----------- --------- ----------- ---------
Matching share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 10,750,311 GBP3.33 9,730,005 GBP3.08
Granted 2,273,623 GBP3.61 2,092,986 GBP4.38
Vested (2,230,531) GBP2.43 (1,072,680) GBP3.09
Forfeited (106,268) GBP2.43 - -
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 10,687,135 GBP3.58 10,750,311 GBP3.33
------------------------------- ----------- --------- ----------- ---------
Total 41,302,176 GBP3.58 43,516,936 GBP3.30
------------------------------- ----------- --------- ----------- ---------
ii) Cash-settled awards
2021 2021 2020 2020
Number Weighted Number Weighted
of shares average of shares average
subject share subject share
Group and Company to awards price to awards price
------------------------------- ---------- --------- ---------- ---------
Restricted share awards
------------------------------- ---------- --------- ---------- ---------
At the beginning of the year 141,297 GBP3.45 119,514 GBP3.18
Granted 778 GBP3.60 31,345 GBP4.38
Vested (19,836) GBP2.43 (9,062) GBP3.09
Forfeited - - (500) GBP4.38
------------------------------- ---------- --------- ---------- ---------
Awards outstanding at year end 122,239 GBP3.53 141,297 GBP3.45
------------------------------- ---------- --------- ---------- ---------
Bonus share awards
------------------------------- ---------- --------- ---------- ---------
At the beginning of the year 86,944 GBP3.47 68,054 GBP3.21
Granted - - 18,890 GBP4.38
Vested (6,179) GBP2.43 - -
Forfeited - - - -
------------------------------- ---------- --------- ---------- ---------
Awards outstanding at year end 80,765 GBP3.55 86,944 GBP3.47
------------------------------- ---------- --------- ---------- ---------
Matching share awards
------------------------------- ---------- --------- ---------- ---------
At the beginning of the year 86,944 GBP3.47 68,054 GBP3.21
Granted - - 18,890 GBP4.38
Vested (6,179) GBP2.43 - -
Forfeited - - - -
------------------------------- ---------- --------- ---------- ---------
Awards outstanding at year end 80,765 GBP3.55 86,944 GBP3.47
------------------------------- ---------- --------- ---------- ---------
Total 283,769 GBP3.54 315,185 GBP3.46
------------------------------- ---------- --------- ---------- ---------
iii) Total awards
2021 2021 2020 2020
Number Weighted Number Weighted
of shares average of shares average
subject share subject share
Group and Company to awards price to awards price
------------------------------- ----------- --------- ----------- ---------
Restricted share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 22,214,635 GBP3.27 21,353,287 GBP3.04
Granted 4,189,890 GBP3.62 4,058,326 GBP4.39
Vested (5,965,430) GBP2.47 (3,072,510) GBP3.16
Forfeited (319,463) GBP3.12 (124,468) GBP3.05
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 20,119,632 GBP3.58 22,214,635 GBP3.27
------------------------------- ----------- --------- ----------- ---------
Bonus share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 10,780,231 GBP3.33 9,773,210 GBP3.07
Granted 2,261,160 GBP3.61 2,079,701 GBP4.38
Vested (2,342,978) GBP2.43 (1,072,680) GBP3.09
Forfeited - - - -
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 10,698,413 GBP3.58 10,780,231 GBP3.33
------------------------------- ----------- --------- ----------- ---------
Matching share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 10,837,255 GBP3.33 9,798,059 GBP3.08
Granted 2,273,623 GBP3.61 2,111,876 GBP4.38
Vested (2,236,710) GBP2.43 (1,072,680) GBP3.09
Forfeited (106,268) GBP2.43 - -
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 10,767,900 GBP3.58 10,837,255 GBP3.33
------------------------------- ----------- --------- ----------- ---------
Total 41,585,945 GBP3.58 43,832,121 GBP3.30
------------------------------- ----------- --------- ----------- ---------
The weighted average fair value of awards granted to employees
under the Omnibus Plan during the year was GBP3.62 (FY2019/20:
GBP4.38), calculated based on the average Ashmore Group plc closing
share price for the five business days prior to grant. For
Executive Directors, the fair value of awards also takes into
account the performance conditions set out in the Remuneration
report.
Where the grant of restricted and matching share awards is
linked to the annual bonus process, the fair value of the awards is
spread over a period including the current financial year and the
subsequent five years to their vesting date when the grantee
becomes unconditionally entitled to the underlying shares. The fair
value of the remaining awards is spread over the period from the
date of grant to the vesting date.
The liability arising from cash-settled awards under the Omnibus
Plan at the end of the year and reported within trade and other
payables on the Group consolidated balance sheet is GBP0.8 million
(30 June 2020: GBP0.8 million) of which GBPnil (30 June 2020:
GBPnil) relates to vested awards.
11) Other expenses
Other expenses consist of the following:
2021 2020
GBPm GBPm
---------------------------------------------------- ----- -----
Travel 0.1 1.7
Professional fees 4.8 4.9
Information technology and communications 7.0 6.8
Amortisation of intangible assets (note 15) 0.2 0.2
Operating leases 0.3 0.1
Depreciation of property, plant and equipment (note
16) 2.6 3.2
Premises-related costs 1.0 1.2
Insurance 0.8 0.6
Research costs 0.5 0.5
Auditor's remuneration (see below) 0.8 0.6
Consolidated funds (note 20d) 1.6 2.2
Other expenses 4.3 4.6
---------------------------------------------------- ----- -----
24.0 26.6
---------------------------------------------------- ----- -----
Operating leases expense relates to short-term leases where the
Group has applied the optional exemption contained within IFRS 16,
which permits the cost of short-term leases (less than 12 months)
to be expensed on a straight-line basis over the lease term.
Auditor's remuneration
2021 2020
GBPm GBPm
----------------------------------------------------------- ----- -----
Fees for statutory audit services:
* Fees payable to the Company's auditor for the audit
of the Group's accounts 0.2 0.2
* Fees payable to the Company's auditor and its
associates for the audit of the Company's
subsidiaries pursuant to legislation 0.4 0.3
Fees for non-audit services:
* Other non-audit services 0.2 0.1
----------------------------------------------------------- ----- -----
0.8 0.6
----------------------------------------------------------- ----- -----
12) Taxation
Analysis of tax charge for the year:
2021 2020
GBPm GBPm
--------------------------------------------------------- ----- -----
Current tax
UK corporation tax on profits for the year 24.4 24.7
Overseas corporation tax charge 17.3 16.8
Adjustments in respect of prior years (0.4) (2.8)
--------------------------------------------------------- ----- -----
41.3 38.7
Deferred tax
Origination and reversal of temporary differences
(see note 18) 1.8 (1.2)
Effect on deferred tax balance of changes in corporation
tax rates (2.4) (0.7)
--------------------------------------------------------- ----- -----
Tax expense 40.7 36.8
--------------------------------------------------------- ----- -----
Factors affecting tax charge for the year
2021 2020
GBPm GBPm
------------------------------------------------------------ ----- -----
Profit before tax 282.5 221.5
------------------------------------------------------------ ----- -----
Profit on ordinary activities multiplied by the UK
tax rate of 19% (FY2019/20: 19%) 53.7 42.1
Effects of:
Non-deductible expenses 0.3 0.5
Deduction in respect of vested shares/exercised options
(Part 12, Corporation Tax Act 2009) (3.4) (1.2)
Different rate of taxes on overseas profits (3.8) (4.2)
Non-taxable income(1) (4.1) (0.1)
Effect on deferred tax balances from changes in corporation
tax rates (2.4) -
Derecognition of deferred tax assets 0.4 2.9
Other items - 0.3
Adjustments in respect of prior years - (3.5)
------------------------------------------------------------ ----- -----
Tax expense 40.7 36.8
------------------------------------------------------------ ----- -----
1. Non-taxable income comprises investment income in certain
jurisdictions in which the Group operates for which there are local
tax exemptions.
An increase in the main rate of UK corporation tax from 19% to
25% with effect from 1 April 2023 was enacted in the Finance Act
2021. This rate increase has been taken into account in the
calculation of the Group's UK deferred tax assets and liabilities
as at 30 June 2021, to the extent that they are expected to reverse
after the rate increase comes into effect.
13) Earnings per share
Basic earnings per share at 30 June 2021 of 36.40 pence (30 June
2020: 27.35 pence) is calculated by dividing the profit after tax
for the financial year attributable to equity holders of the parent
of GBP240.1 million (FY2019/20: GBP182.1 million) by the weighted
average number of ordinary shares in issue during the year,
excluding own shares.
Diluted earnings per share is calculated based on basic earnings
per share adjusted for all dilutive potential ordinary shares.
There is no difference between the profit for the year attributable
to equity holders of the parent used in the basic and diluted
earnings per share calculations.
Reconciliation of the weighted average number of shares used in
calculating basic and diluted earnings per share is shown
below.
2021 2020
Number Number
of ordinary of ordinary
shares shares
----------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares used in
the calculation of basic earnings per share 659,341,111 666,019,404
Effect of dilutive potential ordinary shares - share
awards 41,926,476 43,241,702
----------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares used in
the calculation of diluted earnings per share 701,267,587 709,261,106
----------------------------------------------------- ------------ ------------
14) Dividends
Dividends paid in the year
2021 2020
Company GBPm GBPm
--------------------------------------------------- ----- -----
Final dividend for FY2019/20 - 12.10p (FY2018/19:
12.10p) 84.7 86.0
Interim dividend for FY2020/21 - 4.80p (FY2019/20:
4.80p) 33.6 34.0
--------------------------------------------------- ----- -----
118.3 120.0
--------------------------------------------------- ----- -----
In addition, the Group paid GBP2.9 million (FY2019/20: GBP2.7
million) of dividends to non-controlling interests.
Dividends declared/proposed in respect of the year
2021 2020
Company pence pence
---------------------------------- ------ ------
Interim dividend per share paid 4.80 4.80
Final dividend per share proposed 12.10 12.10
---------------------------------- ------ ------
16.90 16.90
---------------------------------- ------ ------
On 2 September 2021, the Board proposed a final dividend of
12.10 pence per share for the year ended 30 June 2021. This has not
been recognised as a liability of the Group at the year end as it
has not yet been approved by shareholders. Based on the number of
shares in issue at the year end that qualify to receive a dividend,
the total amount payable would be GBP85.7 million.
15) Goodwill and intangible assets
Fund management
intangible
Goodwill assets Total
Group GBPm GBPm GBPm
----------------------------------------------- -------- --------------- ------
Cost (at original exchange rate)
----------------------------------------------- -------- --------------- ------
At 30 June 2021 and 2020 70.4 0.9 71.3
----------------------------------------------- -------- --------------- ------
Accumulated amortisation and impairment
----------------------------------------------- -------- --------------- ------
At 30 June 2019 - (0.1) (0.1)
Amortisation charge for the year - (0.2) (0.2)
----------------------------------------------- -------- --------------- ------
At 30 June 2020 - (0.3) (0.3)
Amortisation charge for the year - (0.2) (0.2)
----------------------------------------------- -------- --------------- ------
At 30 June 2021 - (0.5) (0.5)
----------------------------------------------- -------- --------------- ------
Net book value
----------------------------------------------- -------- --------------- ------
At 30 June 2019 86.5 0.8 87.3
Accumulated amortisation for the year - (0.2) (0.2)
Foreign exchange revaluation through reserves* 2.6 - 2.6
----------------------------------------------- -------- --------------- ------
At 30 June 2020 89.1 0.6 89.7
Accumulated amortisation for the year - (0.2) (0.2)
Foreign exchange revaluation through reserves* (9.0) - (9.0)
----------------------------------------------- -------- --------------- ------
At 30 June 2021 80.1 0.4 80.5
----------------------------------------------- -------- --------------- ------
* Foreign exchange revaluation through reserves is a result of
the retranslation of US dollar-denominated intangibles and
goodwill.
Goodwill
Company GBPm
--------------------------------------------- --------
Cost
At the beginning and end of the year 4.1
--------------------------------------------- --------
Net carrying amount at 30 June 2021 and 2020 4.1
--------------------------------------------- --------
Goodwill
The Group's goodwill balance relates to the acquisition of
subsidiaries. The Company's goodwill balance relates to the
acquisition of the business from ANZ in 1999.
Goodwill acquired in a business combination is allocated to the
cash-generating units that are expected to benefit from that
business combination. It is the Group's judgement that the lowest
level of cash-generating unit used to determine impairment is the
investment management segment level. The Group has assessed that it
consists of a single cash-generating unit for the purposes of
monitoring and assessing goodwill for impairment. This reflects the
Group's global operating model, based on a single operating
platform, into which acquired businesses are fully integrated and
from which acquisition-related synergies are expected to be
realised. Based on this model, the Group's investment management
activities are considered as a single cash-generating unit, for
which key management regularly receive and review internal
financial information.
An annual impairment review of goodwill was undertaken for the
year ending 30 June 2021, and no factors indicating potential
impairment of goodwill were noted. Goodwill is tested for
impairment annually or whenever there is an indication that the
carrying amount may not be recoverable based on management's
judgements regarding the future prospects of the business, market
capitalisation, macro-economic and market considerations. The key
assumption used to determine the recoverable amount is based on a
fair value calculation using the Company's market share price.
Based on the calculation as at 30 June 2021 using a market share
price of GBP3.85, the recoverable amount was in excess of the
carrying value of goodwill and no impairment was implied. In
addition, the sensitivity of the recoverable amount to a 10% change
in the Company's market share price will not lead to any
impairment. Therefore, no impairment loss has been recognised in
the current or preceding years.
Fund management intangible assets
Intangible assets as at 30 June 2021 comprise fund management
contracts and a contractually agreed share of carried interest
recognised by the Group on the acquisition of Ashmore Avenida (Real
Estate) Investments LLP in July 2018. An annual impairment review
was undertaken for the year ending 30 June 2021 and no factors were
identified suggesting that fund management contracts intangible
assets were impaired. The remaining amortisation period for fund
management contracts is four years.
16) Property, plant and equipment
The Group's property, plant and equipment include right-of-use
assets recognised on operating lease arrangements as follows:
Group Company
GBPm GBPm
------------------------------------------------- ----- -------
Property, plant and equipment owned by the Group 1.8 1.3
Right-of-use assets 9.4 5.5
------------------------------------------------- ----- -------
Net book value at 30 June 2021 11.2 6.8
------------------------------------------------- ----- -------
The movement in property, plant and equipment is provided
below:
2021 2020
Fixtures, Fixtures,
fittings fittings
and equipment and equipment
Group GBPm GBPm
-------------------------------------------------- -------------- --------------
Cost
At the beginning of the year 20.8 7.7
Right-of-use assets recognition and remeasurement 1.4 12.6
Additions 0.7 1.0
Disposals - (0.3)
Foreign exchange revaluation (1.0) (0.2)
-------------------------------------------------- -------------- --------------
At the end of the year 21.9 20.8
-------------------------------------------------- -------------- --------------
Accumulated depreciation
At the beginning of the year 9.1 6.2
Right-of-use assets recognition and remeasurement (0.8) -
Disposals - (0.3)
Depreciation charge for the year 2.9 3.2
Foreign exchange revaluation (0.5) -
-------------------------------------------------- -------------- --------------
At the end of the year 10.7 9.1
-------------------------------------------------- -------------- --------------
Net book value at 30 June 11.2 11.7
-------------------------------------------------- -------------- --------------
2021 2020
Fixtures, Fixtures,
fittings fittings
and equipment and equipment
Company GBPm GBPm
-------------------------------------------------- -------------- --------------
Cost
At the beginning of the year 12.0 4.2
Right-of-use assets recognition and remeasurement 0.9 6.9
Additions 0.6 0.9
-------------------------------------------------- -------------- --------------
At the end of the year 13.5 12.0
-------------------------------------------------- -------------- --------------
Accumulated depreciation
At the beginning of the year 5.2 3.7
Depreciation charge for year 1.5 1.5
-------------------------------------------------- -------------- --------------
At the end of the year 6.7 5.2
-------------------------------------------------- -------------- --------------
Net book value at 30 June 6.8 6.8
-------------------------------------------------- -------------- --------------
Lease arrangements
The Group leases office space in various countries and enters
into operating lease agreements on office premises for lease
periods of three to eight years. Lease terms are negotiated on an
individual basis and contain varying terms and conditions depending
on location. The lease agreements do not impose any covenants other
than the security interests in the leased assets that are held by
the lessor. The Group calculates the lease liabilities using the
lessee's incremental borrowing rates that resulted in a weighted
average incremental borrowing rate of 4.5% (FY2019/20: 4.8%).
The carrying value of right-of-use assets, lease liabilities and
the movement during the year are set out below.
Group Company
------------------------------------- -------------------------- ------------------------
Right-of-use Lease Right-of-use Lease
assets liabilities asset liability
GBPm GBPm GBPm GBPm
------------------------------------- ------------ ------------ ------------ ----------
At 1 July 2019 12.6 12.8 6.9 6.9
Lease payments - (2.8) - (1.3)
Interest expense (note 8) - 0.5 - 0.3
Depreciation charge (2.5) - (1.2) -
Foreign exchange revaluation through
reserves (0.2) (0.3) - -
------------------------------------- ------------ ------------ ------------ ----------
At 30 June 2020 9.9 10.2 5.7 5.9
------------------------------------- ------------ ------------ ------------ ----------
Additions and remeasurement of lease
obligations 2.2 2.2 0.9 0.9
Lease payments - (2.5) - (1.3)
Interest expense (note 8) - 0.4 - 0.2
Depreciation charge (2.2) - (1.1) -
Foreign exchange revaluation through
reserves (0.5) (0.5) - -
------------------------------------- ------------ ------------ ------------ ----------
At 30 June 2021 9.4 9.8 5.5 5.7
------------------------------------- ------------ ------------ ------------ ----------
The contractual maturities on the minimum lease payments under
lease liabilities are provided below:
Group Company
---------------------------------------------- ---------------- ----------------
30 June 30 June 30 June 30 June
Maturity analysis - contractual undiscounted 2021 2020 2021 2020
cash flows GBPm GBPm GBPm GBPm
---------------------------------------------- ------- ------- ------- -------
Within 1 year 2.5 2.6 1.3 1.3
Between 1 and 5 years 8.1 8.2 5.0 5.2
Later than 5 years 0.5 1.1 - -
---------------------------------------------- ------- ------- ------- -------
Total undiscounted lease liabilities 11.1 11.9 6.3 6.5
Lease liabilities are presented in the
balance sheet as follows:
---------------------------------------------- ------- ------- ------- -------
Current 2.5 2.0 1.3 1.1
Non-current 7.3 8.2 4.4 4.8
---------------------------------------------- ------- ------- ------- -------
Total lease liabilities 9.8 10.2 5.7 5.9
---------------------------------------------- ------- ------- ------- -------
Amounts recognised under financing activities
in the cash flow statement:
---------------------------------------------- ------- ------- ------- -------
Payment of lease liabilities 2.1 2.3 1.1 1.0
Interest paid 0.4 0.5 0.2 0.3
---------------------------------------------- ------- ------- ------- -------
Total cash outflow for leases 2.5 2.8 1.3 1.3
---------------------------------------------- ------- ------- ------- -------
17) Trade and other receivables
Group Company
------------ ------------
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
---------------------------------- ----- ----- ----- -----
Current
Trade debtors 77.9 90.5 1.2 1.6
Prepayments 3.2 3.9 1.9 1.4
Loans due from subsidiaries - - 507.7 464.8
Amounts due from subsidiaries - - 9.1 50.3
Other receivables 2.3 1.8 1.9 0.1
---------------------------------- ----- ----- ----- -----
Total trade and other receivables 83.4 96.2 521.8 518.2
---------------------------------- ----- ----- ----- -----
Group trade debtors include accrued management and performance
fees in respect of investment management services provided up to 30
June 2021. Management fees are received in cash when the funds' net
asset values are determined, typically every month or every
quarter. Performance fees are accrued when crystallised, and
amounted to GBP0.5 million as at 30 June 2021 (30 June 2020: GBP0.1
million). The majority of fees are deducted from the net asset
values of the respective funds by independent administrators and
therefore, the credit risk of fee receivables is minimal. As at 30
June 2021, no balances are past due and the assessed provision for
expected credit losses was immaterial (30 June 2020: no balances
are past due and the assessed provision for expected credit losses
was immaterial).
Loans due from subsidiaries for the Company include an
intercompany loan related to seed capital investments held by
subsidiaries. Amounts due from subsidiaries represent trading
balances that are short term in nature and regularly settled during
the year. The majority of the intercompany loans are held with
subsidiaries that hold seed capital investments and cash invested
in daily-traded investment funds. Under the IFRS 9 expected credit
loss model, credit risk is assessed by determining the borrower's
capacity to meet contractual cash flow obligations, taking into
account the available net assets to repay the intercompany loan in
future periods. Expected credit losses on intercompany loans are
estimated based on the assumption that repayment of the loan is
demanded at the reporting date. If the borrower has sufficient
accessible highly liquid assets in order to repay the loan if
demanded at the reporting date, the expected credit loss has been
assessed to be immaterial. As at 30 June 2021, no balances are past
due and the assessed provision for expected credit losses was
immaterial (30 June 2020: no balances are past due and the assessed
provision for expected credit losses was immaterial).
18) Deferred taxation
Deferred tax assets and liabilities recognised by the Group and
Company at year end are attributable to the following:
2021 2020
--------------------------------- --------------------------------
Other Other
temporary Share-based temporary Share-based
differences payments Total differences payments Total
Group GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------------ ----------- ------ ------------ ----------- -----
Deferred tax assets 7.6 27.2 34.8 7.7 22.9 30.6
Deferred tax liabilities (10.5) - (10.5) (6.9) - (6.9)
------------------------- ------------ ----------- ------ ------------ ----------- -----
(2.9) 27.2 24.3 0.8 22.9 23.7
------------------------- ------------ ----------- ------ ------------ ----------- -----
2021 2020
------------------------- --------------------------------- --------------------------------
Other Other
temporary Share-based temporary Share-based
differences payments Total differences payments Total
Company GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------------ ----------- ------ ------------ ----------- -----
Deferred tax assets - 25.1 25.1 0.1 20.5 20.6
------------------------- ------------ ----------- ------ ------------ ----------- -----
Movement of deferred tax balances
The movement in the deferred tax balances between the balance
sheet dates has been reflected in the statement of comprehensive
income as follows:
Other
temporary Share-based
differences payments Total
Group GBPm GBPm GBPm
----------------------------------------------------- ------------ ----------- -----
At 30 June 2019 3.6 18.2 21.8
Credited/(charged) to the consolidated statement
of comprehensive income (2.8) 4.7 1.9
----------------------------------------------------- ------------ ----------- -----
At 30 June 2020 0.8 22.9 23.7
----------------------------------------------------- ------------ ----------- -----
Credited/(charged) to the consolidated statement
of comprehensive income (3.7) 4.3 0.6
----------------------------------------------------- ------------ ----------- -----
At 30 June 2021 (2.9) 27.2 24.3
----------------------------------------------------- ------------ ----------- -----
Other
temporary Share-based
differences payments Total
Company GBPm GBPm GBPm
----------------------------------------------------- ------------ ----------- -----
At 30 June 2019 0.3 16.3 16.6
Credited/(charged) to the statement of comprehensive
income (0.2) 4.2 4.0
----------------------------------------------------- ------------ ----------- -----
At 30 June 2020 0.1 20.5 20.6
Credited/(charged) to the statement of comprehensive
income (0.1) 4.6 4.5
----------------------------------------------------- ------------ ----------- -----
At 30 June 2021 - 25.1 25.1
----------------------------------------------------- ------------ ----------- -----
Refer to note 12 for details on changes to the UK corporation
tax rate which have been reflected in the Group's deferred tax
position.
19) Fair value of financial instruments
The Group has an established control framework with respect to
the measurement of fair values. This framework includes committees
that have overall responsibility for all significant fair value
measurements. Each committee regularly reviews significant inputs
and valuation adjustments. If third-party information is used to
measure fair value, the committee assesses and documents the
evidence obtained from the third parties to support such
valuations. There are no material differences between the carrying
amounts of financial assets and liabilities and their fair values
at the balance sheet date.
Fair value hierarchy
The Group measures fair values using the following fair value
levels that reflect the significance of inputs used in making the
measurements, based on the degree to which the fair value is
observable:
- Level 1: Valuation is based upon a quoted market price in an
active market for an identical instrument. This fair value measure
relates to the valuation of quoted and exchange traded equity and
debt securities.
- Level 2: Valuation techniques are based upon observable
inputs, either directly (i.e. as prices) or indirectly (i.e.
derived from prices). This fair value measure relates to the
valuation of quoted equity securities in inactive markets or in
interests in unlisted funds whose net asset values are referenced
to the fair values of the listed or exchange traded securities held
by those funds. Valuation techniques may include using a broker
quote in an inactive market or an evaluated price based on a
compilation of primarily observable market information utilising
information readily available via external sources.
- Level 3: Fair value measurements are derived from valuation
techniques that include inputs not based on observable market
data.
For financial instruments that are recognised at fair value on a
recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by reassessing
categorisation (based on the lowest level input that is significant
to the fair value measurement as a whole) at the end of the
financial year.
The fair value hierarchy of financial instruments which are
carried at fair value at year end is summarised below:
2021 2020
-------------------------- ----------------------------
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ----- ----- ----- ----- ------ ----- ----- ------
Financial assets
Investment securities 209.0 66.7 42.4 318.1 125.1 60.6 48.8 234.5
Financial assets held
for sale - 46.2 - 46.2 - 43.1 - 43.1
Financial assets measured
at FVTPL - 39.2 1.8 41.0 - 10.9 0.7 11.6
Derivative financial
instruments - 1.3 - 1.3 - - - -
Non-current financial
assets at fair value - - 34.0 34.0 - 0.1 27.9 28.0
-------------------------- ----- ----- ----- ----- ------ ----- ----- ------
209.0 153.4 78.2 440.6 125.1 114.7 77.4 317.2
-------------------------- ----- ----- ----- ----- ------ ----- ----- ------
Financial liabilities
Third-party interests
in consolidated funds 73.7 15.1 16.9 105.7 65.1 10.6 10.4 86.1
Financial liabilities
held for sale - 3.8 - 3.8 - 4.5 - 4.5
Derivative financial
instruments - - - - - 1.7 - 1.7
73.7 18.9 16.9 109.5 65.1 16.8 10.4 92.3
-------------------------- ----- ----- ----- ----- ------ ----- ----- ------
Transfers between levels
The Group recognises transfers into and transfers out of fair
value hierarchy levels at each reporting period based on
assessments of price inputs used in the valuation of financial
assets. There were no transfers between level 1, level 2 and level
3 of the fair value hierarchy during the year.
Fair value measurements using significant unobservable inputs
(level 3)
The following table presents the changes in level 3 items for
the years ended 30 June 2021 and 2020:
Financial Non-current Third-party
assets financial interests
Investment measured assets at in consolidated
securities at FVTPL fair value funds
GBPm GBPm GBPm GBPm
------------------------------------- ----------- --------- ----------- ----------------
At 30 June 2019 72.5 1.6 31.6 23.8
Additions 11.7 - 3.7 3.9
Disposals (26.7) (0.1) (2.6) (9.8)
Unrealised losses recognised in
finance income (6.1) (0.8) (4.7) (7.5)
Unrealised losses recognised in
reserves (2.6) - (0.1) -
------------------------------------- ----------- --------- ----------- ----------------
At 30 June 2020 48.8 0.7 27.9 10.4
------------------------------------- ----------- --------- ----------- ----------------
Additions 57.2 1.1 8.1 28.6
Disposals (73.8) (0.4) (2.5) (26.9)
Unrealised gains/(losses) recognised
in finance income 11.9 0.4 2.2 4.8
Unrealised gains/(losses) recognised
in reserves (1.7) - (1.7) -
------------------------------------- ----------- --------- ----------- ----------------
At 30 June 20 21 42.4 1.8 34.0 16.9
------------------------------------- ----------- --------- ----------- ----------------
Valuation of level 3 financial assets recognised at fair value
on a recurring basis using valuation techniques
Investments valued using valuation techniques include financial
investments which, by their nature, do not have an externally
quoted price based on regular trades, and financial investments for
which markets are no longer active as a result of market
conditions, e.g. market illiquidity. The valuation techniques used
include comparison to recent arm's length transactions, market
approach making reference to other instruments that are
substantially the same, discounted cash flow analysis, enterprise
valuation and net assets approach. These techniques may include a
number of assumptions relating to variables such as interest rate
and price earnings multiples. Changes in assumptions relating to
these variables could positively or negatively impact the reported
fair value of these instruments. When determining the inputs into
the valuation techniques used, priority is given to publicly
available prices from independent sources when available, but
overall the source of pricing is chosen with the objective of
arriving at a fair value measurement that reflects the price at
which an orderly transaction would take place between market
participants on the measurement date.
The fair value estimates are made at a specific point in time,
based upon available market information and judgements about the
financial instruments, including estimates of the timing and amount
of expected future cash flows. Such estimates could include a
marketability adjustment to reflect illiquidity and/or
non-transferability that could result from offering for sale at one
time the Group's entire holdings of a particular financial
instrument. Further details on the estimates and judgements applied
by the Group are provided in note 31.
The following tables show the valuation techniques and the
significant unobservable inputs used to estimate the fair value of
level 3 investments as at 30 June 2021 and 2020, and the associated
sensitivity to changes in unobservable inputs to a reasonable
alternative.
2021 Significant Change in
Asset class and valuation Fair value unobservable Range of Sensitivity fair value
technique GBPm inputs estimates factor GBPm
-------------------------- ----------- --------------- ---------- ----------- -----------
Unquoted securities
Market multiple and
discount 23.7 EBITDA multiple 5x-15x +/- 1x +/- 1.5
Marketability
adjustment 5%-95% +/- 5% -/+ 2.9(1)
--------------- ---------- ----------- -----------
Marketability
Discounted cash flow 13.4 adjustment 20%-60% +/- 5% -/+ 1.5
Discount rate 10%-20% +/- 5% -/+ 2.9
--------------- ---------- ----------- -----------
Unquoted funds
Net assets approach 41.1 NAV(2) 1x +/- 5% +/- 1.9
-------------------------- ----------- --------------- ---------- ----------- -----------
Total level 3 investments 78.2
-------------------------- ----------- --------------- ---------- ----------- -----------
2020 Significant Change in
Asset class and valuation Fair value unobservable Range of Sensitivity fair value
technique GBPm inputs estimates factor GBPm
---------------------------- ----------- --------------- ---------- ----------- -----------
Unquoted securities
Market multiple and
discount 14.0 EBITDA multiple 10x-20x +/- 1x +/- 1.4
Marketability
adjustment 10%-30% +/- 5% -/+ 0.9
--------------- ---------- ----------- -----------
Market multiple, discounted
cash flows and discount 34.6 Market multiple 5x-10x +/- 1x +/- 2.4
Marketability
adjustment 10%-30% +/- 5% -/+ 4.4
Discount rate 10%-20% +/- 5% -/+ 4.0
--------------- ---------- ----------- -----------
Unquoted funds
Net assets approach 28.8 NAV(2) 1x +/- 5% +/- 1.4
---------------------------- ----------- --------------- ---------- ----------- -----------
Total level 3 investments 77.4
---------------------------- ----------- --------------- ---------- ----------- -----------
1. Includes sensitivities in relation to two unlisted investment
securities held by the Group through a consolidated fund as at the
balance sheet date to take account of significant uncertainties
relating to regulatory and shareholder approvals concerning the
listing of these investments. Further details are provided in the
subsequent events note 32.
2. NAV priced assets include seed capital investments whose
value is determined by the fund administrator using unobservable
inputs. The significant unobservable inputs applied include EBITDA,
market multiples and discount rates as described under note 31.
The sensitivity demonstrates the effect of a change in one
unobservable input while other assumptions remain unchanged. There
may be a correlation between the unobservable inputs and other
factors that have not been considered. It should also be noted that
some of the sensitivities are non-linear, therefore, larger or
smaller impacts should not be interpolated or extrapolated from
these results.
Financial instruments not measured at fair value
Financial assets and liabilities that are not measured at fair
value include cash and cash equivalents, trade and other
receivables, and trade and other payables. The carrying value of
financial assets and financial liabilities not measured at fair
value is considered a reasonable approximation of fair value as at
30 June 2021 and 2020.
20) Seed capital investments
The Group considers itself a sponsor of an investment fund when
it facilitates the establishment of a fund in which the Group is
the investment manager. The Group ordinarily provides seed capital
in order to provide initial scale and facilitate marketing of the
funds to third-party investors. Aggregate interests held by the
Group include seed capital, management fees and performance fees.
The Group generates management and performance fee income from
managing the assets on behalf of third-party investors.
The movements of seed capital investments and related items
during the year are as follows:
Investment Non-current
Financial securities Other Third-party financial
Financial assets (relating (relating interests assets
assets measured to to in measured
held at fair consolidated consolidated consolidated at fair
for sale value funds)1 funds)2 funds value(3) Total
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- --------- --------- ------------- ------------- ------------- ----------- -------
Carrying amount
at 30 June 2019 44.7 16.0 278.7 13.8 (107.0) 31.6 277.8
--------------------- --------- --------- ------------- ------------- ------------- ----------- -------
Reclassification:
HFS investments
to consolidated
funds (35.7) - 44.2 - (8.5) - -
Consolidated funds
to FVTPL - 41.4 (77.1) - 35.7 - -
Additions 43.6 - 8.0 - (3.9) 3.7 51.4
Disposals (16.2) (43.5) (33.9) - 11.6 (2.6) (84.6)
Fair value movement 2.2 (2.3) 14.6 (2.0) (14.0) (4.7) (6.2)
--------------------- --------- --------- ------------- ------------- ------------- ----------- -------
Carrying amount
at 30 June 2020 38.6 11.6 234.5 11.8 (86.1) 28.0 238.4
Reclassification:
HFS investments
to consolidated
funds (44.1) - 53.8 - (9.7) - -
Consolidated funds
to FVTPL - 49.9 (112.0) - 62.1 - -
Additions 42.2 14.4 130.3 - (57.9) 5.6 134.6
Disposals - (41.4) (101.2) - 39.2 (2.6) (106.0)
Fair value movement 5.7 6.5 112.7 (2.2) (53.3) 0.4 69.8
--------------------- --------- --------- ------------- ------------- ------------- ----------- -------
Carrying amount
at 30 June 2021 42.4 41.0 318.1 9.6 (105.7) 31.4 336.8
--------------------- --------- --------- ------------- ------------- ------------- ----------- -------
1. Investment securities in consolidated funds are measured at
FVTPL
2. Relates to cash and other assets in consolidated funds that
are not investment securities, see note 20(d).
3. Excludes GBP2.6 million of other non-current financial assets
measured at fair value that are not classified as seed capital.
a) Financial assets and liabilities held for sale
Where Group companies invest seed capital into funds operated
and controlled by the Group and the Group is actively seeking to
reduce its investment and it is considered highly probable that it
will relinquish control within a year, the interests in the funds
are treated as held for sale and are recognised as financial assets
and liabilities held for sale. During the year, seven funds
(FY2019/20: six) were seeded in this manner, met the above
criteria, and consequently the assets and liabilities of these
funds were initially classified as held for sale.
The financial assets and liabilities held for sale at 30 June
2021 were as follows:
2021 2020
GBPm GBPm
------------------------------------ ----- ------
Financial assets held for sale 46.2 43.1
Financial liabilities held for sale (3.8) (4.5)
------------------------------------ ----- ------
Financial assets held for sale 42.4 38.6
------------------------------------ ----- ------
Investments cease to be classified as held for sale when they
are no longer controlled by the Group. A loss of control may happen
through sale of the investment and/or dilution of the Group's
holding. When investments cease to be classified as held for sale,
they are classified as financial assets at FVTPL. No such fund was
transferred to the FVTPL category during the year (FY2019/20:
none).
If the fund remains under the control of the Group for more than
one year from the original investment date, it will cease to be
classified as held for sale, and will be consolidated line by line
after it is assessed that the Group controls the investment fund in
accordance with the requirements of IFRS 10. During the year, five
such funds (FY2019/20: three) with an aggregate carrying amount of
GBP44.1 million (FY2019/20: GBP35.7 million) were transferred from
held for sale to consolidated funds category. There was no impact
on net assets or comprehensive income as a result of the
transfer.
Included within finance income are gains of GBP10.8 million
(FY2019/20: gains of GBP2.8 million) in relation to financial
assets held for sale.
As the Group considers itself to have one segment (refer to note
4), no additional segmental disclosure of held for sale financial
assets or liabilities is applicable.
b) Financial assets measured at fair value through profit or
loss
FVTPL investments at 30 June 2021 comprise shares held in debt
and equity funds as follows:
2021 2020
GBPm GBPm
---------------------------------------- ----- -----
Equity funds 33.7 3.2
Debt funds 7.3 8.4
---------------------------------------- ----- -----
Financial assets measured at fair value 41.0 11.6
---------------------------------------- ----- -----
Included within finance income are gains of GBP8.2 million
(FY2019/20: losses of GBP0.8 million) on the Group's financial
assets measured at FVTPL.
c) Non-current financial assets measured at fair value
Non-current financial asset investments relate to the Group's
holding in closed-end funds and are measured at FVTPL. Fair value
is assessed by taking account of the extent to which potential
dilution of gains or losses may arise as a result of additional
investors subscribing to the fund where the final close of a fund
has not occurred.
2021 2020
GBPm GBPm
---------------------------------------------------- ----- -----
Real estate funds 1.8 3.5
Infrastructure funds 20.2 17.5
Other funds 9.4 7.0
---------------------------------------------------- ----- -----
Non-current financial assets measured at fair value 31.4 28.0
---------------------------------------------------- ----- -----
Included within finance income are gains of GBP2.2 million
(FY2019/20: losses of GBP4.5 million) on the Group's non-current
financial assets measured at fair value.
d) Consolidated funds
The Group has consolidated 14 investment funds as at 30 June
2021 (30 June 2020: 12 investment funds), over which the Group is
deemed to have control (refer to note 25). Consolidated funds
represent seed capital investments where the Group has held its
position for a period greater than one year and its interest
represents a controlling stake in the fund in accordance with IFRS
10. Consolidated fund assets and liabilities are presented line by
line after intercompany eliminations. The table below sets out an
analysis of the carrying amounts of interests held by the Group in
consolidated investment funds.
2021 2020
GBPm GBPm
-------------------------------------------- ------- -------
Investment securities1 318.1 234.5
Cash and cash equivalents 10.4 10.8
Other2 (0.8) 1.0
Third-party interests in consolidated funds (105.7) (86.1)
-------------------------------------------- ------- -------
Consolidated seed capital investments 222.0 160.2
-------------------------------------------- ------- -------
1. Investment securities represent trading securities held by
consolidated investment funds and are measured at FVTPL. Note 25
provides a list of the consolidated funds by asset class, and
further detailed information at the security level is available in
the individual fund financial statements.
2. Other includes trade receivables, trade payables and
accruals.
The maximum exposure to loss is the carrying amount of the
assets held. The Group has not provided financial support or
otherwise agreed to be responsible for supporting any consolidated
or unconsolidated funds financially.
Included within the consolidated statement of comprehensive
income are net gains of GBP72.5 million (FY2019/20: GBP9.0 million
losses) relating to the Group's share of the results of the
individual statements of comprehensive income for each of the
consolidated funds, as follows:
2021 2020
GBPm GBPm
------------------------------------------------------ ------ -------
Interest and dividend income 3.3 4.8
Gains/(losses) on investment securities 123.5 (19.1)
Change in third-party interests in consolidated funds (52.6) 7.5
Other expenses (1.7) (2.2)
------------------------------------------------------ ------ -------
Net gains/(losses) on consolidated funds 72.5 (9.0)
------------------------------------------------------ ------ -------
Included in the Group's cash generated from operations is GBP0.4
million (FY2019/20: GBP3.0 million cash utilised in operations)
relating to consolidated funds.
As of 30 June 2021, the Group's consolidated funds were
domiciled in Guernsey, Luxembourg, Saudi Arabia and the United
States.
21) Financial instrument risk management
Group
The Group is subject to strategic and business, client,
investment, treasury and operational risks throughout its business.
This note discusses the Group's exposure to and management of the
following principal risks which arise from the financial
instruments it uses: credit risk, liquidity risk, interest rate
risk, foreign exchange risk and price risk. Where the Group holds
units in investment funds, classified either as financial assets
held for sale, FVTPL or non-current financial assets, the related
financial instrument risk disclosures in the note below categorise
exposures based on the Group's direct interest in those funds
without looking through to the nature of underlying securities.
Capital management
It is the Group's policy that all entities within the Group have
sufficient capital to meet regulatory and working capital
requirements and it conducts regular reviews of its capital
requirements relative to its capital resources.
As the Group is regulated by the United Kingdom Financial
Conduct Authority (FCA), it is required to maintain appropriate
capital and perform regular calculations of capital requirements.
This includes development of an Internal Capital Adequacy
Assessment Process (ICAAP), based upon the FCA's methodologies
under the Capital Requirements Directive. The Group's Pillar III
disclosures can be found on the Group's website at
www.ashmoregroup.com. These disclosures indicate that the Group had
excess capital of GBP609.2 million as at 30 June 2021 (30 June
2020: excess capital of GBP555.2 million) over the level of capital
required under a Pillar II assessment. The objective of the
assessment is to check that the Group has adequate capital to
manage identified risks and the process includes conducting stress
tests to identify capital and liquidity requirements under
different future scenarios including a potential downturn.
Credit risk
The Group has exposure to credit risk from its normal activities
where the risk is that a counterparty will be unable to pay in full
amounts when due.
Exposure to credit risk is monitored on an ongoing basis by
senior management and the Group's Risk Management and Control
function. The Group has a counterparty and cash management policy
in place which, in addition to other controls, restricts exposure
to any single counterparty by setting exposure limits and requiring
approval and diversification of counterparty banks and other
financial institutions. The Group's maximum exposure to credit risk
is represented by the carrying value of its financial assets
measured at amortised cost. The table below lists financial assets
subject to credit risk.
2021 2020
Notes GBPm GBPm
---------------------------- ----- ----- -----
Trade and other receivables 17 83.4 96.2
Cash and cash equivalents 456.1 500.9
Total 539.5 597.1
---------------------------- ----- ----- -----
The Group's cash and cash equivalents, comprising short-term
deposits with banks and liquidity funds, are predominantly held
with counterparties with credit ratings ranging from A+ to AAAm as
at 30 June 2021 (30 June 2020: A to AAAm). As at 30 June 2021, the
Group held GBP333.5 million (30 June 2020: GBP368.0 million) in the
Ashmore Global Liquidity Fund.
All trade and other receivables are considered to be fully
recoverable and none were overdue at year end (30 June 2020: none).
They include fee debtors that arise principally within the Group's
investment management business. They are monitored regularly and,
historically, default levels have been insignificant. There is no
significant concentration of credit risk in respect of fees owing
from clients.
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting obligations associated with its financial
liabilities that are settled by delivering cash or other financial
assets.
In order to manage liquidity risk, there is a Group Liquidity
Policy to ensure that there is sufficient access to funds to cover
all forecast committed requirements for the next 12 months.
The maturity profile of the Group's contractual undiscounted
financial liabilities is as follows:
At 30 June 2021
More
Within than
1 year 1-5 years 5 years Total
GBPm GBPm GBPm GBPm
--------------------------------- ------- --------- --------- -----
Current trade and other payables 45.5 - - 45.5
45.5 - - 45.5
--------------------------------- ------- --------- --------- -----
At 30 June 2020
More
Within than
1 year 1-5 years 5 years Total
GBPm GBPm GBPm GBPm
--------------------------------- ------- --------- --------- -----
Derivative financial liabilities 1.7 - - 1.7
Current trade and other payables 50.7 - - 50.7
52.4 - - 52.4
--------------------------------- ------- --------- --------- -----
Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of financial instruments will fluctuate because of
changes in market interest rates.
The principal interest rate risk is the risk that the Group will
sustain a reduction in interest income through adverse movements in
interest rates. This relates to deposits with banks and liquidity
funds held in the ordinary course of business. The Group has a cash
management policy which monitors cash levels and returns within set
parameters on a continuing basis.
Bank and similar deposits held at year end are shown on the
consolidated balance sheet as cash and cash equivalents. The
effective interest earned on bank and similar deposits during the
year is given in the table below:
Effective interest rates applicable to bank deposits
2021 2020
% %
---------------------------------------- ---- ----
Deposits with banks and liquidity funds 0.23 1.31
---------------------------------------- ---- ----
At 30 June 2021, if interest rates over the year had been 50
basis points higher/lower with all other variables held constant,
profit before tax for the year would have been GBP2.3 million
higher/lower (FY2019/20: GBP2.4 million higher/lower), mainly as a
result of higher/lower interest on cash balances. An assumption
that the fair value of assets and liabilities will not be affected
by a change in interest rates was used in the model to calculate
the effect on profit before tax.
In addition, the Group is indirectly exposed to interest rate
risk where the Group holds seed capital investments in funds that
invest in debt securities.
Group
Foreign exchange risk
Foreign exchange risk is the risk that the fair value or future
cash flows of financial instruments will fluctuate because of
changes in foreign exchange rates.
The Group's revenue is almost entirely denominated in US
dollars, while the majority of the Group's costs are denominated in
Sterling. Consequently, the Group has an exposure to movements in
the GBP:USD exchange rate. In addition, the Group operates
globally, which means that it may enter into contracts and other
arrangements denominated in local currencies in various countries.
The Group also holds a number of seed capital investments
denominated mainly in US dollars, Colombian pesos and Indonesian
rupiah.
The Group's policy is to hedge a proportion of the Group's
revenue by using a combination of forward foreign exchange
contracts and options for a period of up to two years forward. The
Group also sells US dollars at spot rates when opportunities
arise.
The table below shows the Group's sensitivity to a 1% exchange
movement in the US dollar, Colombian peso, Indonesian rupiah and
the Euro, net of hedging activities.
2021 2020
---------------------- ----------------------
Impact Impact
on profit on profit
before Impact before Impact
tax on equity tax on equity
Foreign currency sensitivity test GBPm GBPm GBPm GBPm
---------------------------------- ---------- ---------- ---------- ----------
US dollar +/- 1% 0.4 5.3 1.3 5.3
Colombian peso +/- 1% 0.1 0.1 0.1 0.1
Indonesian rupiah +/- 1% - 0.1 - 0.1
Euro +/- 1% 0.1 0.1 0.1 0.1
---------------------------------- ---------- ---------- ---------- ----------
Price risk
Price risk is the risk that the fair value or future cash flows
of financial instruments will fluctuate because of market
changes.
Seed capital
The Group is exposed to the risk of changes in market prices in
respect of seed capital investments. Such price risk is borne by
the Group directly through interests in financial assets measured
at fair value or indirectly either through line-by-line
consolidation of underlying financial performance and positions
held in certain funds. Details of seed capital investments held are
given in note 20.
The Group has procedures defined by the Board governing the
appraisal, approval and monitoring of seed capital investments.
At 30 June 2021, a 5% movement in the fair value of these
investments would have a GBP16.8 million (FY2019/20: GBP11.9
million) impact on net assets and profit before tax.
Management and performance fees
The Group is also indirectly exposed to price risk in connection
with the Group's management fees, which are based on a percentage
of value of AuM, and fees based on performance. Movements in market
prices, exchange and interest rates could cause the AuM to
fluctuate, which in turn could affect fees earned. Performance fee
revenues could also be reduced depending upon market
conditions.
Management and performance fees are diversified across a range
of investment themes and are not measurably correlated to any
single market index in Emerging Markets. In addition, the policy of
having funds with year ends staged throughout the financial year
has meant that in periods of steep market decline, some performance
fees have still been recorded. The profitability impact is likely
to be less than this, as cost mitigation actions would apply,
including the reduction of the variable compensation paid to
employees.
Using the year end AuM level of US$94.4 billion and applying the
year's average net management fee rate of 41bps, a 5% movement in
AuM would have a US$19.4 million impact, equivalent to GBP14.0
million using year end exchange rate of 1.3815, on management fee
revenues (FY2019/20: US$83.6 billion and applying the year's
average net management fee rate of 45bps, a 5% movement in AuM
would have a US$18.7 million impact, equivalent to GBP15.2 million
using year end exchange rate of 1.2356, on management fee
revenues).
Hedging activities
The Group uses forward and option contracts to hedge its
exposure to foreign currency risk. These hedges, which have been
assessed as effective cash flow hedges as at 30 June 2021, protect
a proportion of the Group's revenue cash flows from foreign
exchange movements. The cumulative fair value of the outstanding
foreign exchange hedges asset at 30 June 2021 was GBP1.3 million
(30 June 2020: GBP1.7 million foreign exchange hedges liability)
and is included within the Group's derivative financial instrument
assets.
The notional and fair values of foreign exchange hedging
instruments were as follows:
2021 2020
------------------------ ------------------------
Fair value Fair value
Notional assets/ Notional assets/
amount (liabilities) amount (liabilities)
GBPm GBPm GBPm GBPm
----------------------------------------- -------- -------------- -------- --------------
Cash flow hedges
Foreign exchange nil-cost option collars 100.0 1.3 120.0 (1.7)
----------------------------------------- -------- -------------- -------- --------------
100.0 1.3 120.0 (1.7)
----------------------------------------- -------- -------------- -------- --------------
The maturity profile of the Group's outstanding hedges is shown
below.
2021 2020
Notional amount of option collars maturing: GBPm GBPm
-------------------------------------------- ----- -----
Within 6 months 40.0 60.0
Between 6 and 12 months 40.0 50.0
Later than 12 months 20.0 10.0
-------------------------------------------- ----- -----
100.0 120.0
-------------------------------------------- ----- -----
When hedges are assessed as effective, intrinsic value gains and
losses are initially recognised in other comprehensive income and
later reclassified to comprehensive income as the corresponding
hedged cash flows crystallise. Time value in relation to the
Group's hedges is excluded from being part of the hedging item and,
as a result, the net unrealised loss related to the time value of
the hedges is recognised in the consolidated statement of
comprehensive income for the year.
An intrinsic gain of GBP1.2 million (FY2019/20: GBP0.1 million
loss) on the Group's hedges has been recognised through other
comprehensive income and GBP1.8 million intrinsic value gain
(FY2019/20: GBP0.1 million intrinsic value gain) was reclassified
from equity to the statement of comprehensive income in the
year.
Included within the net realised and unrealised hedging gain of
GBP9.2 million (note 7) recognised at 30 June 2021 (GBP1.5 million
gain at 30 June 2020) are:
- a GBP1.8 million gain in respect of foreign exchange hedges
covering net management fee income for the financial year ending 30
June 2021 (FY2019/20: GBP0.9 million loss); and
- a GBP7.4 million gain in respect of crystallised foreign
exchange contracts (FY2019/20: GBP2.4 million gain).
Company
The risk management processes of the Company, including those
relating to the specific risk exposures covered below, are aligned
with those of the Group as a whole unless stated otherwise.
In addition, the risk definitions that apply to the Group are
also relevant for the Company.
Credit risk
The Company's maximum exposure to credit risk is represented by
the carrying value of its financial assets. The table below lists
financial assets subject to credit risk.
2021 2020
GBPm GBPm
---------------------------- ----- -----
Cash and cash equivalents 86.1 91.8
Trade and other receivables 521.8 518.2
---------------------------- ----- -----
Total 607.9 610.0
---------------------------- ----- -----
The Company's cash and cash equivalents comprise short-term
deposits held with banks and liquidity funds which have credit
ratings ranging from A to AAAm as at 30 June 2021 (30 June 2020: A
to AAAm).
All trade and other receivables are considered to be fully
recoverable and none were overdue at year end (30 June 2020:
none).
Liquidity risk
The contractual undiscounted cash flows relating to the
Company's financial liabilities all fall due within one year.
Details on other commitments are provided in note 29.
Company
Interest rate risk
The principal interest rate risk for the Company is that it
could sustain a reduction in interest revenue from bank deposits
held in the ordinary course of business through adverse movements
in interest rates.
Bank and similar deposits held at year end are shown on the
Company's balance sheet as cash and cash equivalents. The effective
interest earned on bank and similar deposits during the year is
given in the table below:
Effective interest rates applicable to bank deposits
2021 2020
% %
---------------------------------------- ---- ----
Deposits with banks and liquidity funds 0.28 0.66
---------------------------------------- ---- ----
At 30 June 2021, if interest rates over the year had been 50
basis points higher/lower with all other variables held constant,
post-tax profit for the year would have been GBP0.4 million
higher/lower (FY2019/20: GBP0.6 million higher/lower), mainly as a
result of higher/lower interest on cash balances. An assumption
that the fair value of assets and liabilities will not be affected
by a change in interest rates was used in the model to calculate
the effect on post-tax profits.
Foreign exchange risk
The Company is exposed primarily to foreign exchange risk in
respect of US dollar cash balances and US dollar-denominated
intercompany balances. However, such risk is not hedged by the
Company.
At 30 June 2021, if the US dollar had strengthened/weakened by
1% against Sterling with all other variables held constant, profit
before tax for the year would have increased/decreased by GBP4.9
million (FY2019/20: increased/decreased by GBP4.8 million).
22) Share capital
Authorised share capital
2021 2020
2021 Nominal 2020 Nominal
Number of value Number value
Group and Company shares GBP'000 of shares GBP'000
------------------------------ ----------- -------- ----------- --------
Ordinary shares of 0.01p each 900,000,000 90 900,000,000 90
------------------------------ ----------- -------- ----------- --------
Issued share capital - allotted and fully paid
2021 2020
2021 Nominal 2020 Nominal
Number of value Number value
Group and Company shares GBP'000 of shares GBP'000
------------------------------ ----------- -------- ----------- --------
Ordinary shares of 0.01p each 712,740,804 71 712,740,804 71
------------------------------ ----------- -------- ----------- --------
All the above ordinary shares represent equity of the Company
and rank pari passu in respect of participation and voting
rights.
At 30 June 2021, there were equity-settled share awards issued
under the Omnibus Plan totalling 41,302,176 (30 June 2020:
43,516,936) shares that have release dates ranging from September
2021 to May 2026. Further details are provided in note 10.
23) Own shares
The Trustees of The Ashmore 2004 Employee Benefit Trust (EBT)
acquire and hold shares in Ashmore Group plc with a view to
facilitating the vesting of share awards. As at 30 June 2021, the
EBT owned 52,345,869 (30 June 2020: 56,477,466) ordinary shares of
0.01p with a nominal value of GBP5,235 (30 June 2020: GBP5,648) and
shareholders' funds are reduced by GBP179.8 million (30 June 2020:
GBP192.7 million) in this respect. The EBT is periodically funded
by the Company for these purposes.
24) Trade and other payables
Group Group Company Company
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
------------------------------- ----- ----- ------- -------
Current
Trade payables 19.3 20.1 2.8 2.5
Accruals and provisions 26.2 30.6 16.6 20.4
Amounts due to subsidiaries - - 83.1 32.5
------------------------------- ----- ----- ------- -------
Total trade and other payables 45.5 50.7 102.5 55.4
------------------------------- ----- ----- ------- -------
25) Interests in subsidiaries
Operating subsidiaries held by the Company
There were no movements in investments in subsidiaries held by
the Company during the year.
2021 2020
Company GBPm GBPm
------------------------- ----- -----
Cost
------------------------- ----- -----
At 30 June 2021 and 2020 19.9 19.9
------------------------- ----- -----
In the opinion of the Directors, the following subsidiary
undertakings principally affected the Group's results or financial
position at 30 June 2021. A full list of the Group's subsidiaries
and all related undertakings is disclosed in note 33.
Country
of incorporation/
formation % of equity
and principal shares
place held by
Name of operation the Group
------------------------------------------------------- ------------------- -----------
Ashmore Investments (UK) Limited England 100.00
Ashmore Investment Management Limited England 100.00
Ashmore Investment Advisors Limited England 100.00
Ashmore Management Company Colombia SAS Colombia 61.20
Ashmore CAF-AM Management Company SAS Colombia 53.66
Ashmore Avenida (Real Estate) Investments LLP Colombia 56.00
Ashmore Management Company Limited Guernsey 100.00
PT Ashmore Asset Management Indonesia Tbk Indonesia 60.04
Ashmore Investment Management (Ireland) Limited Ireland 100.00
Ashmore Japan Co. Limited Japan 100.00
AA Development Capital Investment Managers (Mauritius)
LLC Mauritius 55.00
Saudi
Ashmore Investments Saudi Arabia Arabia 100.00
Ashmore Investment Management (Singapore) Pte. Ltd. Singapore 100.00
Ashmore Investment Management (US) Corporation USA 100.00
Ashmore Investment Advisors (US) Corporation USA 100.00
------------------------------------------------------- ------------------- -----------
Consolidated funds
The Group consolidated the following 14 investment funds as at
30 June 2021 over which the Group is deemed to have control:
Country % of net
of incorporation/ asset
principal value
place of held by
Name Type of fund operation the Group
-------------------------------------------------- --------------- ------------------- ----------
Ashmore Emerging Markets Debt and Currency
Fund Limited Alternatives Guernsey 57.88
Ashmore SICAV Emerging Markets IG Short Corporate
Duration Fund debt Luxembourg 45.86
Ashmore SICAV Emerging Markets Equity Fund Equity Luxembourg 68.56
Ashmore SICAV Emerging Markets Equity ESG
Fund Equity Luxembourg 99.88
Ashmore SICAV Emerging Markets Indonesian
Equity Fund Equity Luxembourg 100.00
Ashmore SICAV Emerging Markets Global Small-Cap
Equity Fund Equity Luxembourg 39.00
Ashmore SICAV Emerging Markets IG Total
Return Fund Blended debt Luxembourg 100.00
Ashmore SICAV Emerging Markets Total Return
ESG Fund Blended debt Luxembourg 99.99
Ashmore SICAV Emerging Markets Volatility-Managed
Local Currency Bond Fund Local currency Luxembourg 100.00
Ashmore SICAV Emerging Markets China Bond
Fund Local currency Luxembourg 60.07
Ashmore Saudi Equity Fund Equity Saudi Arabia 100.00
Ashmore Emerging Markets Active Equity
Feeder Fund Equity USA 100.00
Ashmore Emerging Markets Equity ESG Fund Equity USA 100.00
Ashmore Emerging Markets Short Duration
Select Fund Equity USA 100.00
-------------------------------------------------- --------------- ------------------- ----------
26) Interests in associates
The Group held interests in the following associates as at 30
June 2021 that are unlisted:
Country of
incorporation/ % of equity
formation shares
and principal held by
Name Type Nature of business place of operation the Group
-------------------------------- ---------- ---------------------- -------------------- -----------
Ashmore Investment Management
India LLP Associate Investment management India 30.00%
Taiping Fund Management Company Associate Investment management China 8.50%
-------------------------------- ---------- ---------------------- -------------------- -----------
The movement in the carrying value of investments in associates
for the year is provided below:
2021 2020
Associates GBPm GBPm
----------------------------- ----- -----
At the beginning of the year 0.6 1.8
Disposals - (1.1)
Share of profit/(loss) 0.3 (0.2)
Foreign exchange revaluation - 0.1
----------------------------- ----- -----
At the end of the year 0.9 0.6
----------------------------- ----- -----
The summarised aggregate financial information is shown
below.
2021 2020
Associates GBPm GBPm
-------------------------------------------- ------ ------
Total assets 30.1 24.1
Total liabilities (21.0) (17.9)
-------------------------------------------- ------ ------
Net assets 9.1 6.2
Group's share of net assets 0.8 0.6
-------------------------------------------- ------ ------
Revenue for the year 16.8 8.9
Profit/(loss) for the year 3.6 (2.3)
Group's share of profit/(loss) for the year 0.3 (0.2)
-------------------------------------------- ------ ------
The carrying value of the investments in associates represents
the cost of acquisition subsequently adjusted for share of profit
or loss and other comprehensive income or loss. No permanent
impairment is believed to exist relating to the associates as at 30
June 2021. The Group had no undrawn capital commitments (30 June
2020: GBPnil) to investment funds managed by the associates.
27) Interests in structured entities
The Group has interests in structured entities as a result of
the management of assets on behalf of its clients. Where the Group
holds a direct interest in a closed-ended fund, private equity fund
or open-ended pooled fund such as a SICAV, the interest is
accounted for either as a consolidated structured entity or as a
financial asset, depending on whether the Group has control over
the fund or not.
The Group's interest in structured entities is reflected in the
Group's AuM. The Group is exposed to movements in AuM of structured
entities through the potential loss of fee income as a result of
client withdrawals. Outflows from funds are dependent on market
sentiment, asset performance and investor considerations. Further
information on these risks can be found in the Strategic
report.
Considering the potential for changes in AuM of structured
entities, management has determined that the Group's unconsolidated
structured entities include segregated mandates and pooled funds
vehicles. Disclosure of the Group's exposure to unconsolidated
structured entities has been made on this basis.
The reconciliation of AuM reported by the Group within
unconsolidated structured entities is shown below.
Less: AuM within
AuM within unconsolidated
consolidated structured
Total AuM funds entities
US$bn US$bn US$bn
------------- --------- ------------- ---------------
30 June 2020 83.6 0.3 83.3
------------- --------- ------------- ---------------
30 June 2021 94.4 0.5 93.9
------------- --------- ------------- ---------------
Included in the Group's consolidated management fees of GBP276.4
million (FY2019/20: GBP330.0 million) are management fees amounting
to GBP275.8 million (FY2019/20: GBP328.3 million) earned from
unconsolidated structured entities.
The table below shows the carrying values of the Group's
interests in unconsolidated structured entities, recognised in the
Group balance sheet, which are equal to the Group's maximum
exposure to loss from those interests.
2021 2020
GBPm GBPm
---------------------------- ------ -----
Management fees receivable 55.6 55.7
Trade and other receivables 0.6 26.6
Seed capital investments* 114.9 78.2
---------------------------- ------ -----
Total exposure 171.1 160.5
---------------------------- ------ -----
* Comprise financial assets held for sale, financial assets
measured at fair value and non-current financial assets measured at
fair value (refer to note 20).
The main risk the Group faces from its beneficial interests in
unconsolidated structured entities arises from a potential decrease
in the fair value of seed capital investments. The Group's
beneficial interests in seed capital investments are disclosed in
note 20. Note 21 includes further information on the Group's
exposure to market risk arising from seed capital investments.
28) Related party transactions
Related parties of the Group include key management personnel,
close family members of key management personnel, subsidiaries,
associates, joint ventures, Ashmore funds, the EBT and The Ashmore
Foundation.
Key management personnel - Group and Company
The compensation paid to or payable to key management personnel
is shown below:
2021 2020
GBPm GBPm
--------------------------------------- ----- -----
Short-term benefits 1.3 0.8
Defined contribution pension costs - -
Share-based payment benefits (note 10) 2.5 2.0
--------------------------------------- ----- -----
3.8 2.8
--------------------------------------- ----- -----
Short-term benefits include salary and fees, benefits and cash
bonus.
Share-based payment benefits represent the cost of
equity-settled awards charged to the statement of comprehensive
income.
During the year, there were no other transactions entered into
with key management personnel (FY2019/20: none). Aggregate key
management personnel interests in consolidated funds at 30 June
2021 were GBP80.2 million (30 June 2020: GBP33.9 million).
Transactions with subsidiaries - Company
Details of transactions between the Company and its subsidiaries
are shown below:
2021 2020
GBPm GBPm
------------------------------------------- ------ -----
Transactions during the year
Management fees 80.7 78.4
Net dividends 110.1 122.0
Loans repaid by/(advanced to) subsidiaries (42.9) 23.3
------------------------------------------- ------ -----
Amounts receivable or payable to subsidiaries are disclosed in
notes 17 and 24 respectively.
Transactions with Ashmore funds - Group
During the year, the Group received GBP124.7 million of gross
management fees and performance fees (FY2019/20: GBP174.9 million)
from the 106 funds (FY2019/20: 109 funds) it manages and which are
classified as related parties. As at 30 June 2021, the Group had
receivables due from funds of GBP8.1 million (30 June 2020: GBP35.0
million) that are classified as related parties.
Transactions with the EBT - Group and Company
The EBT has been provided with a loan facility to allow it to
acquire Ashmore shares in order to satisfy outstanding unvested
share awards. The EBT is included within the results of the Group
and the Company. As at 30 June 2021, the loan outstanding was
GBP160.0 million (30 June 2020: GBP167.0 million).
Transactions with The Ashmore Foundation - Group and Company
The Ashmore Foundation is a related party to the Group. The
Foundation was set up to provide financial grants to worthwhile
causes within the Emerging Markets countries in which Ashmore
invests and/or operates with a view to giving back to the countries
and communities. The Group donated GBP1.0 million to the Foundation
during the year (FY2019/20: GBP0.1 million).
29) Commitments
The Group has undrawn investment commitments relating to seed
capital investments as follows:
2021 2020
Group GBPm GBPm
----------------------------------------------------- ----- -----
Ashmore Andean Fund II, LP 0.1 0.3
Ashmore Avenida Colombia Real Estate Fund I (Cayman)
LP 0.1 0.1
Ashmore I - CAF Colombian Infrastructure Senior Debt
Fund 6.3 11.6
Ashmore KCH HealthCare Fund II 2.4 -
Ashmore Special Opportunities Fund LP - 8.0
----------------------------------------------------- ----- -----
Total undrawn investment commitments 8.9 20.0
----------------------------------------------------- ----- -----
Company
The Company has undrawn loan commitments to other Group entities
totalling GBP203.6 million (30 June 2020: GBP297.8 million) to
support their investment activities but has no investment
commitments of its own (30 June 2020: none).
30) Non-controlling interests
The Group's material NCI as at 30 June 2021 was held in PT
Ashmore Asset Management Indonesia Tbk (Ashmore Indonesia). Set out
below is summarised financial information and the amounts disclosed
are before intercompany eliminations.
40% NCI interest
Ashmore Indonesia
-------------------
2021 2020
Summarised balance sheet GBPm GBPm
--------- --------
Total assets 19.6 22.0
Total liabilities (4.0) (5.0)
----------------------------------------------------- --------- --------
Net assets 15.6 17.0
----------------------------------------------------- --------- --------
Accumulated NCI 13.0 13.4
----------------------------------------------------- --------- --------
Summarised statement of comprehensive income
----------------------------------------------------- --------- --------
Net revenue 10.2 9.7
Profit for the period 5.0 5.1
Other comprehensive income/(loss) (2.0) 0.4
Total comprehensive income 3.0 5.5
----------------------------------------------------- --------- --------
Profit allocated to NCI 1.2 1.9
----------------------------------------------------- --------- --------
Dividends paid to NCI 1.7 0.7
----------------------------------------------------- --------- --------
Summarised cash flows
----------------------------------------------------- --------- --------
Cash flows from operating activities 3.6 3.8
Cash flows from investing activities (3.1) 0.5
Cash flows from financing activities (4.4) 8.9
----------------------------------------------------- --------- --------
Net increase/(decrease) in cash and cash equivalents (3.9) 13.2
----------------------------------------------------- --------- --------
31) Significant accounting estimates and judgements
The preparation of the financial statements in conformity with
IFRS requires the use of certain accounting estimates, and
management to exercise its judgement in the process of applying the
Group's accounting policies. The key assumptions concerning the
future and other key sources of estimation uncertainty at the
reporting date that may have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year relate to the valuation
of unquoted investment securities using unobservable inputs.
Valuation of unquoted investments
In determining the fair value of seed capital investments, the
Group makes estimates to determine the inputs used in valuation
techniques. The degree of estimation involved depends on the
individual financial instrument and is reflected in the fair value
hierarchy. The fair value hierarchy also reflects the extent of
judgements used in the valuation. Judgement may include determining
the accounting classification, the appropriate valuation approach
to use as well as determining appropriate assumptions. For level 3
investments, the judgement applied by the Group gives rise to an
estimate of fair value.
As at 30 June 2021, approximately 7% of the Group's total assets
by value are level 3 investments, whose fair value has been
estimated using valuation techniques incorporating inputs that are
not based on observable market data. The Group's level 3
investments comprise unquoted securities held in consolidated funds
and interests in unconsolidated funds. The securities may include
all asset types but are frequently special situations investments,
typically incorporating distressed, illiquid or private
investments. The methodology and models used to determine fair
value are created in accordance with International Private Equity
and Venture Capital Valuation Guidelines. Due to the high level of
judgement involved, the Group has a separate Pricing Methodology
and Valuation Committee (PMVC) to review the valuation
methodologies, inputs and assumptions used to value individual
investments. Smaller investments may be valued directly by the PMVC
but material investments are valued by an independent third-party
valuation specialist. Such valuations are subject to review and
approval by the PMVC.
Valuation techniques used include the market approach, the
income approach or the net assets approach depending on the
availability of reliable information. The market approach consists
of using comparable transactions and applying either EBITDA
(earnings before interest, tax, depreciation and amortisation)
multiples or market multiples (based on comparable public company
information). The use of the income approach consists of using the
net present value derived from discounting estimated future cash
flows using the weighted average cost of capital, adjusted as
deemed appropriate for liquidity, credit, market and other risk
factors. The net assets approach is based on the net asset value
(NAV) for the level 3 fund investments determined as at year
end.
The significant unobservable inputs used in valuation techniques
are EBITDA and market multiples for the market approach, discount
rate for the income approach and NAV for the net assets approach. A
marketability adjustment is applied for certain level 3 investment
securities to reflect illiquidity and/or non-transferability that
could result from offering for sale at one time the Group's entire
holdings of a particular financial instrument. The valuation of
these investments is considered a significant source of estimation
uncertainty as in aggregate the range of possible outcomes in
respect to the unobservable inputs could have a material impact on
the valuation. Further details on the valuation methodologies
applied by the Group in the valuation of level 3 investments as at
30 June 2021 are provided in note 19, including details of the
significant unobservable inputs and the associated sensitivities to
changes in unobservable inputs to a reasonable alternative.
32) Post-balance sheet events
Subsequent to 30 June 2021, two unlisted investment securities
held by the Group through a consolidated fund, with a combined
carrying value of GBP8.4 million as at the balance sheet date, were
listed on stock exchanges. As at 31 August 2021, the balance sheet
values in respect of these holdings totalled GBP65.2 million. The
Directors do not believe these to be adjusting events due to
uncertainties existing at year end.
33) Subsidiaries and related undertakings
The following is a full list of the Ashmore Group plc
subsidiaries and related undertakings as at 30 June 2021, along
with the registered address and the percentage of equity owned by
the Group. Related undertakings comprise significant holdings in
associated undertakings, joint ventures and Ashmore sponsored
public funds in which the Group owns greater than 20% interest.
% voting Registered address and
Name Classification interest place of incorporation
Ashmore Investments (UK) Limited Subsidiary 100.00 61 Aldwych, London WC2B
4AE United Kingdom
-----------------------
Ashmore Investment Management
Limited Subsidiary 100.00
-----------------------
Ashmore Investment Advisors Limited Subsidiary 100.00
Aldwych Administration Services
Limited Subsidiary 100.00
Ashmore Asset Management Limited Subsidiary 100.00
Ashmore Avenida (Real Estate)
Investments LLP Subsidiary 56.00
------------------------------------ --------------- --------- -----------------------
Ashmore Investment Management Subsidiary 100.00 32 Molesworth Street,
(Ireland) Limited Dublin 2, D02 Y512
------------------------------------ --------------- --------- -----------------------
% voting Registered address and
Name Classification interest place of incorporation
--------------------------------------- --------------- --------- --------------------------------
Ashmore Investment Management Subsidiary 100.00 475 Fifth Avenue, 15th
(US) Corporation Floor
New York, 10017
USA
--------------------------------
Ashmore Investment Advisors (US)
Corporation Subsidiary 100.00
--------------------------------
Ashmore Equities Investment Management
(US) LLC (in liquidation) Subsidiary 100.00
Avenida Partners LLC Subsidiary 100.00
Avenida CREF I Manager Cayman
LLC Subsidiary 100.00
Avenida CREF I Manager LLC Subsidiary 100.00
Avenida A2 Partners LLC Subsidiary 100.00
Avenida Colombia Member LLC Subsidiary 83.30
Avenida CREF II Partners LLC Subsidiary 100.00
Avenida CREF II GP LLC Subsidiary 100.00
MCA Partners LLC (in liquidation) Subsidiary 100.00
--------------------------------------- --------------- --------- --------------------------------
Avenida REF Holding SA Subsidiary 100.00 Yamandu 1321, 11500
Montevideo
Uruguay
--------------------------------
Avenida CREF II Manager SRL Subsidiary 99.00
--------------------------------
Avenida CREF Partners SRL Subsidiary 99.00
Avenida CREF II GP SRL Subsidiary 85.00
--------------------------------------- --------------- --------- --------------------------------
Ashmore Investment Management Subsidiary 100.00 1 George Street, #15-04,
(Singapore) Pte. Ltd. Singapore 049145
--------------------------------------- --------------- --------- --------------------------------
PT Ashmore Asset Management Indonesia Subsidiary 60.04 Pacific Century Place,
Tbk 18th Floor,
SCBD Lot 10, Jl. Jenderal.
Sudirman Kav.
52-53 Jakarta 12190,
Indonesia
--------------------------------------- --------------- --------- --------------------------------
Ashmore Management Company Colombia Subsidiary 61.20 Carrera 7 No. 75 -66,
SAS Office 701 & 702
Bogotá, Colombia
--------------------------------
Ashmore-CAF-AM Management Company
SAS Subsidiary 53.66
--------------------------------
Ashmore Holdings Colombia S.A.S. Subsidiary 100.00
Ashmore Investment Advisors Colombia
S.A. Sociedad Fiduciaria Subsidiary 100.00
Ashmore Management Backup Company
S.A.S Subsidiary 100.00
Avenida Colombia Management Company
SAS Subsidiary 100.00
--------------------------------------- --------------- --------- --------------------------------
Ashmore Peru SAC (in liquidation) Subsidiary 99.00 Av. de la Floresta No.
497, Quinto Piso, San
Borja, Lima, Perú
--------------------------------------- --------------- --------- --------------------------------
Ashmore Japan Co. Limited Subsidiary 100.00 11F, Shin Marunouchi Building
1-5-1 Marunouchi Chiyoda-ku
Tokyo Japan 100-6511
--------------------------------------- --------------- --------- --------------------------------
Ashmore Investments (Colombia) Subsidiary 100.00 c/ Hermosilla 11, 4 A,
SL 28001 Madrid, Spain
--------------------------------------- --------------- --------- --------------------------------
Ashmore Management (DIFC ) Limited Subsidiary 100.00 Office 105, Gate Village
03, Level 1 Dubai International
Financial Centre Dubai,
UAE
--------------------------------------- --------------- --------- --------------------------------
Ashmore Investment Advisors (India) Subsidiary 99.82 507A Kakad Chambers, Dr
Private Limited (in liquidation) Annie Besant Road, Worli
Mumbai 400 018, India
--------------------------------------- --------------- --------- --------------------------------
Ashmore Investment Saudi Arabia Subsidiary 100.00 3rd Floor Tower B, Olaya
Towers
Olaya Main Street
Riyadh, Saudi Arabia
--------------------------------------- --------------- --------- --------------------------------
Consolidated
Ashmore Saudi Equity Fund fund 100.00
--------------------------------------- --------------- --------- --------------------------------
Ashmore AISA Cayman Limited Subsidiary 100.00 Ugland House, Grand Cayman,
KY1-1104, Cayman Islands
--------------------------------------- --------------- --------- --------------------------------
Ashmore Emerging Markets Holdings
LLC Subsidiary 100.00
--------------------------------------- --------------- --------- --------------------------------
Ashmore Emerging Markets Acquisition
Corp 1 Subsidiary 100.00
--------------------------------------- --------------- --------- --------------------------------
AA Development Capital Investment Subsidiary 55.00 Les Cascades Building
Managers (Mauritius) LLC 33 Edith Cavell Street,
Port Louis
Mauritius
--------------------------------------- --------------- --------- --------------------------------
Ashmore Investments (Holdings)
Limited Subsidiary 100.00
--------------------------------------- --------------- --------- --------------------------------
% voting Registered address
Name Classification interest and place of incorporation
------------------------------------ --------------- --------- ---------------------------
Trafalgar Court
Les Banques
St Peter Port
GY1 3QL
Ashmore Management Company Limited Subsidiary 100.00 Guernsey
---------------------------
Ashmore Global Special Situations
Fund 3 (GP) Limited Subsidiary 100.00
---------------------------
Ashmore Global Special Situations
Fund 4 (GP) Limited Subsidiary 100.00
Ashmore Global Special Situations
Fund 5 (GP) Limited Subsidiary 100.00
Ashmore Emerging Markets Debt Consolidated
and Currency Fund Limited fund 57.88
------------------------------------ --------------- --------- ---------------------------
Ashmore SICAV Emerging Markets HFS investment 89.26 10, rue du Chateau
Middle East Equity Fund d'Eau
L-3364 Leudelange
Grand-Duchy of Luxembourg
---------------------------
Ashmore SICAV Emerging Markets
Sovereign Debt ESG Fund HFS investment 100.00
---------------------------
Ashmore SICAV Emerging Markets
Corporate Debt ESG Fund HFS investment 100.00
Ashmore SICAV Emerging Markets Consolidated
China Bond Fund fund 60.07
Ashmore SICAV Emerging Markets Consolidated
Equity Fund fund 68.56
Ashmore SICAV Emerging Markets Consolidated
Global Small-Cap Equity Fund fund 39.00
Ashmore SICAV Emerging Markets Consolidated
IG Total Return Fund fund 100.00
Ashmore SICAV Emerging Markets Consolidated
Total Return ESG Fund fund 99.99
Ashmore SICAV Emerging Markets Consolidated
Indonesian Equity Fund fund 100.00
Ashmore SICAV Emerging Markets Consolidated
Equity ESG Fund fund 99.88
Ashmore SICAV Emerging Markets Consolidated
IG Short Duration Fund fund 45.86
Ashmore SICAV Emerging Markets Consolidated
Volatility-Managed LCBF fund 100.00
Ashmore SICAV Emerging Markets Significant
Multi-Asset Fund holding 23.07
------------------------------------ --------------- --------- ---------------------------
Ashmore Emerging Markets Corporate HFS investment 100.00 50 South LaSalle Street
Debt ESG Fund Chicago, Illinois
60603
---------------------------
Ashmore Emerging Markets Investment
Grade Income Fund HFS investment 100.00
---------------------------
Ashmore Emerging Markets Local
Currency Bond Fund HFS investment 43.34
Ashmore Emerging Markets Active Consolidated
Equity Feeder Fund fund 100.00
Ashmore Emerging Markets Equity Consolidated
ESG Fund fund 100.00
Ashmore Emerging Markets Short Consolidated
Duration Select Fund fund 100.00
Ashmore Emerging Markets Equity Significant
Fund holding 23.81
------------------------------------ --------------- --------- ---------------------------
Ashmore Investment Management Associate 30.00 507A Kakad Chambers,
India LLP Dr Annie Besant Road
Worli,
Mumbai 400 018, India
------------------------------------ --------------- --------- ---------------------------
Taiping Fund Management Company Associate 8.50 Unit 101, Building
No.5, 135 Handan Road,
Shanghai, China
------------------------------------ --------------- --------- ---------------------------
Cautionary statement regarding forward-looking statements
It is possible that this document could or may contain
forward-looking statements that are based on current expectations
or beliefs, as well as assumptions about future events. These
forward-looking statements can be identified by the fact that they
do not relate only to historical or current facts. Forward-looking
statements often use words such as anticipate, target, expect,
estimate, intend, plan, goal, believe, will, may, should, would,
could or other words of similar meaning.
Undue reliance should not be placed on any such statements
because, by their very nature, they are subject to known and
unknown risks and uncertainties and can be affected by other
factors that could cause actual results, and the Group's plans and
objectives, to differ materially from those expressed or implied in
the forward-looking statements. There are several factors that
could cause actual results to differ materially from those
expressed or implied in forward-looking statements. Among the
factors that could cause actual results to differ materially from
those described in the forward-looking statements are changes in
global, political, economic, business, competitive, market and
regulatory forces, future exchange and interest rates, changes in
tax rates and future business combinations or dispositions. The
Group undertakes no obligation to revise or update any
forward-looking statement contained within this document,
regardless of whether those statements are affected as a result of
new information, future events or otherwise.
Statutory accounts
The financial information set out above does not constitute the
Group's statutory accounts for the years ending 30 June 2021 or 30
June 2020. Statutory accounts for 2020 have been delivered to the
registrar of companies, and those for 2021 will be delivered in due
course. The auditors have reported on those accounts; their reports
were (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006 in
respect of the accounts for 2020 or 2021.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
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END
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