REG - Ashmore Group Plc - Final Results
02/09/2022 07:00
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RNS Number : 0255Y Ashmore Group PLC 02 September 2022
Ashmore Group plc
2 September 2022
RESULTS FOR THE YEAR ENDED 30 JUNE 2022
Ashmore Group plc (Ashmore, the Group), the specialist Emerging Markets asset
manager, today announces its audited results for the year ended 30 June 2022.
- Impact of challenging global markets in H2 mitigated by business model
- Assets under management (AuM) of US$64.0 billion(1). Widespread risk
aversion due to Ukraine war, inflation and higher rates globally contributed
to net outflows of US$13.5 billion and negative investment performance of
US$16.6 billion
- Adjusted net revenue of £257.2 million, 13% lower YoY, with net
management fees of £243.5 million and performance fees of £4.5 million
- Continued strong cost management reduced adjusted operating costs by 7%
YoY, delivering adjusted EBITDA of £164.3 million, adjusted EBITDA margin of
64% and operating cash flow of £184.9 million
- H2 market weakness resulted in £49.9 million unrealised mark-to-market
loss on seed capital investments. Consequently, statutory profit before tax
declined by 58% to £118.4 million
- Adjusted diluted EPS of 18.7 pence and final dividend maintained to give
total DPS of 16.9 pence
- Consistent balance sheet strength with approximately £800 million of
capital resources including £542 million of cash
- Local asset management strategy provides diversification
- Resilient AuM of US$6.9 billion, 11% of Group AuM
- Ashmore Colombia raised third private equity fund, delivered growth in
equities AuM
- Ashmore Indonesia continues to develop digital distribution, seeded
blended debt strategy
- Ashmore Saudi Arabia growing AuM with broader product range, launched
healthcare initiative
- Active management in a challenging market environment
- Weak and volatile markets have provided an opportunity to acquire risk at
oversold prices, particularly in high yield
- Investment performance reflects active management approach to deliver
long-term outperformance: 45% of AuM outperforming over one year, 28% over
three years and 48% over five years
- Outlook underpinned by exceptionally attractive valuations across
Emerging Markets
- Potential for improving macroeconomic conditions as inflation moderates
- Diversity of Emerging Markets provides ability to mitigate geopolitical
risks
- Equity and fixed income valuations are highly attractive versus history
and relative to Developed Markets
Commenting on the Group's results, Mark Coombs, Chief Executive Officer,
Ashmore Group said:
"While the global macro environment still presents some near-term uncertainty,
the situation in Emerging Markets is improving and the breadth of investment
opportunity helps to mitigate the risks. Ashmore's long-term investment
approach has been proven across many different market cycles and facilitates
access to the exceptionally attractive valuations currently available across
Emerging Markets. Risk appetite will improve as some of the recent macro
headwinds abate, supporting a recovery in Emerging Markets asset prices and
higher investor allocations.
"Ashmore's business model, with significant cost flexibility and a
well-capitalised and liquid balance sheet, responds to market cycles and
generates meaningful cash flow, as seen again in this period. Together with
Ashmore's consistent focus on its growth strategy, this underpins the delivery
of long-term value for Ashmore's clients, shareholders and employees."
1. As reported on 14 July 2022.
Analysts briefing
There will be a presentation for sell-side analysts at 9.30am on 2 September
2022 at UBS, 5 Broadgate, London, EC2M 2QS. 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) 7771 978 220
Kit Dunford +44 (0) 7717 417 038
CEO review
Ashmore's long-term strategy and established business model respond to
changing market conditions, maintaining a focus on the long term opportunity
while ensuring resilience as the shorter-term cycle evolves. These
characteristics have mitigated the impact of lower AuM on the Group's
performance during the year.
The past 12 months have presented a challenging environment, with the Russian
invasion of Ukraine exacerbating geopolitical and macroeconomic pressures. As
a consequence, the Group's AuM reduced by 32% to US$64.0 billion, with the
majority of the move attributable to the impact of lower market levels, and a
reduction in risk appetite evident in client flows in the second half of the
year.
Focus on strategic Emerging Markets opportunities
The long-term growth opportunities across the Emerging Markets remain
significant and centre on continued superior economic growth compared with the
developed world, delivering rising GDP per capita and a growing share of
global economic activity. These trends are underpinned by structural reforms
that deliver increasingly robust economic and political fundamentals, and
greater diversity across more than 70 investable countries. However, the
impact of the Russian invasion of Ukraine on global capital markets and
investor sentiment led to broad-based de-risking during the second half of the
financial year, with a consequent effect on some institutional clients'
Emerging Markets allocations.
Ashmore's three-phase strategy aims to capture the benefits of Emerging
Markets growth and diversification for clients and shareholders. The
inevitable market cycles mean that not every period will see uniform progress
across all initiatives, but the Group maintains a consistent focus on
execution to deliver diversification and so mitigate the impact of weaker
sentiment towards Emerging Markets.
For example, over the past 12 months, the Group's local asset management
operations, established to drive growth and diversification under the third
phase of the strategy, have continued to develop positively. Collectively,
these businesses manage AuM of US$6.9 billion, which was relatively stable
over the year (30 June 2021: US$7.2 billion).
Progress in the second phase was mixed. Equities AuM increased from 8% to 10%
of the Group total and there was a similar increase in the proportion of
assets in IG strategies from 11% to 14%, while the proportion of AuM sourced
from intermediary retail clients declined from 8% to 5% largely due to the
challenging market environment.
Notwithstanding the cyclical picture, the investable asset classes continue to
evolve, for example with substantial opportunities available in investment
grade credit, continued growth in specific real asset themes such as
infrastructure and private healthcare, and an increasing recognition that ESG
investing has an important role to play in the development of emerging
economies. Ashmore's strategy is well placed to continue to capitalise on
these opportunities.
Business model protects margins
Ashmore's well-capitalised and liquid balance sheet, flexible operating cost
structure and diversified client base and product range have supported the
Group's operating performance despite the decline in AuM over the period.
Although lower AuM levels led to a 13% fall in adjusted net revenue,
disciplined cost management reduced operating costs by 7%, which helped to
limit the impact on profits to a 16% decline in adjusted EBITDA and delivered
an adjusted EBITDA margin of 64%. On an adjusted basis, diluted EPS reduced by
20% to 18.7 pence per share.
The impact of weaker markets affected the mark-to-market valuation of the
Group's seed capital investments. Although the seed capital loss of £49.9
million for the period is unrealised, it was the primary reason for the 58%
fall in statutory profit before tax to £118.4 million.
The Board recognises the importance of the dividend to all shareholders. While
it is mindful of the lower level of statutory profits this year, it also
recognises the unrealised nature of the seed capital loss and has undiminished
confidence in the long-term growth opportunity. The Group also generated cash
flows before dividends of more than £200 million in the year and the Board
has therefore recommended an unchanged final dividend.
Investment performance reflects continued challenging markets
There have been several shocks to global capital markets over the past two
years, with the Ukraine war in 2022 exacerbating some of the macroeconomic
headwinds such as high inflation and monetary policy tightening by central
banks. Ashmore's approach of selectively adding risk in such environments,
combined with the absence to date of a sustained market recovery, is reflected
in the Group's overall relative investment performance with the proportion of
AuM outperforming over one, three and five years at 45%, 28% and 48%,
respectively.
This picture is typical for Ashmore's investment processes following periods
of weak and volatile markets.
Outperformance has been delivered in strategies such as local currency bonds,
all cap equity and investment grade products across fixed income, but
strategies that have exposure to high yield markets have underperformed.
Importantly, history shows that, after a period of market dislocation, the
subsequent recovery returns and outperformance delivered by Ashmore's
investment processes have been substantial and delivered over an extended
period of time. Indeed, this recovery profile had begun in mid 2020 after the
initial impact of COVID-19 on markets but was then curtailed by higher
inflation, actual or expected tighter monetary policy, and the impact of
regulatory tightening in China. When Russia invaded Ukraine, the worldwide
impact on inflation and rates expectations resulted in another challenging
period for risk assets globally. To put the recent market environment in
historical context, the 20% decline in the external debt index in the first
half of 2022 represents the index's worst start to a year since 1995.
Exceptional valuations
These market conditions have left valuations across Emerging Markets at
exceptionally attractive levels. Current asset prices heavily discount the
known risks surrounding inflation, global rates, economic growth and, on
probable scenarios, geopolitical issues. For example, external debt spreads
are as wide as they were in 2008 and early 2020; equities trade at the widest
discount to the US market in nearly 20 years; and local currency bonds offer a
real yield premium of approximately 500bps to developed world bond markets.
Beyond the simple index valuations, the highly diverse asset classes provide
significant investment opportunities to deliver attractive returns and
outperformance as sentiment and risk appetite improve. In previous cycles,
experienced clients have moved early to capture the full extent of recovery
returns available, and prevailing valuations support a repeat of this pattern
of behaviour in the current cycle.
Focus on the importance of ESG
Ashmore has long understood the importance of ESG considerations when
investing in developing countries. It has integrated the consideration of ESG
factors into its investment processes and, this year, made further significant
progress in its sustainability activities through participation in industry
initiatives. For example, in July 2021, Ashmore joined NZAMI and recently
published its interim targets; it joined a second collaborative engagement
through Climate Action 100+; and it has reported its approach to
climate-related risks and opportunities in line with the TCFD recommendations
and as required by the UK FCA. Furthermore, via The Ashmore Foundation, the
Group has supported activities that will offset its FY2020/21 greenhouse gas
emissions.
In the coming year, the Group's incremental focus is on complying with TCFD
recommendations as they apply to investment managers, and continuing to
enhance the reporting of portfolio GHG emissions to clients.
Culture and diversity
A significant development during the year was the return to offices for most
employees following the removal of restrictions imposed by governments in
response to the COVID-19 pandemic. The office environment is optimal for
Ashmore's team-based culture, and provides for efficient and productive
working practices. However, recognising the benefits it can bring, Ashmore
provides a degree of flexibility for employees to work remotely.
This year, Ashmore launched a graduate recruitment programme that will support
an increase in employee diversity over time.
I would like to thank all my colleagues for their commitment and hard work in
striving to deliver for our clients, shareholders and other stakeholders, in
the face of the challenges of the past couple of years.
Outlook
The global macro environment still presents some near-term uncertainty, but
Ashmore's investment approach has been proven across many different market
cycles and facilitates access to the exceptionally attractive valuations
currently available across Emerging Markets. Risk appetite will improve as
some of the recent macro headwinds abate, supporting a recovery in Emerging
Markets asset prices and higher investor allocations. Together with Ashmore's
consistent focus on its growth strategy and resilient business model, this
underpins the delivery of long-term value for Ashmore's clients, shareholders
and employees.
Mark Coombs
Chief Executive Officer
1 September 2022
Market review
The tradable Emerging Markets are well-established with nearly US$80 trillion
of equity and fixed income securities, highly diversified across more than 70
countries, and are predominantly local in nature with domestic bond and equity
markets accounting for more than 90% of the total investment universe. While
the past 12 months have been challenging, the long-term growth potential of
emerging countries is well underpinned and not reflected in the exceptional
valuations currently available across the Emerging Markets.
The macroeconomic pressures that were evident during the first half of the
financial year, resulting from higher inflation, global rates repricing and
slower Chinese growth, were intensified by the immediate and consequential
effects of Russia's invasion of Ukraine in February. In particular, commodity
price inflation has added to the ongoing pressure from supply chain
bottlenecks as countries emerge from the COVID-19 pandemic, which in turn has
caused a more dramatic repricing in global interest rate markets and continued
or accelerated monetary policy tightening by central banks. The full impact on
economic growth remains uncertain, but weak investor sentiment globally
reflects the possibility of a recession.
While the aggregate global macroeconomic picture is challenging, there are
regional and, of course, country-specific developments that deviate from it
for better or worse. For instance, the rally in certain commodity prices
benefited the terms of trade in Latin America, the Middle East, and parts of
Africa, while being negative for commodity importers in Asia and Central
America. In every cycle, an understanding of the diversity of Emerging Markets
is important in order to identify and act upon investment opportunities that
arise from indiscriminate, sentiment-driven price changes.
Emerging Markets returns, as measured by benchmark indices, were negative for
the 12 months to 30 June 2022, but with a small drawdown in the first half
and, in common with most capital markets worldwide, a more significant decline
in prices in the second half of the period. Over the year as a whole, equity
markets declined by 27% and fixed income indices fell by between 14% and 21%.
Continued growth in tradable Emerging Markets
In US dollar terms, the tradable Emerging Markets grew in calendar year 2021,
with 12% growth in the value of bonds outstanding to US$38 trillion, and 9%
growth in equity market capitalisation to US$40 trillion. In fixed income,
local bond markets continue to expand rapidly, with 14% growth in the value of
bonds outstanding and, at US$33 trillion, they now represent 87% of all
Emerging Markets bonds in issue. The external debt markets increased by 5% to
US$5 trillion.
Index representation remains low
The index representation of Emerging Markets fixed income and equities remains
low at less than 20% of the overall securities universe. The
longer-established sovereign and corporate external debt markets have higher
representation, but represent a minority of the bonds outstanding.
There are many reasons why bonds and listed companies are not included in
indices, the common ones being:
- Local capital market accessibility and tax issues
- Minimum issue size requirement
- Remaining years to maturity
- Coupon type
- Minimum free float requirement
Importantly, and particularly in the case of local currency markets, it may
not be the case that these factors infer lower liquidity and/or higher risk.
It can be the case that accessibility for foreigner investors is constrained
and therefore trading and ownership is biased to domestic investors, who
support the continued development of liquid tradable markets. Therefore,
specialist active managers can seek to deliver returns from 'off benchmark'
securities.
Furthermore, while there are passive strategies available in Emerging Markets,
the indexed investment universe is limited, the cost of trading is higher than
for active managers, and active managers retain a significant competitive
advantage through the ability to deliver alpha by accessing the full range of
investment opportunities and taking advantage of price dislocations.
However, the low index representation may also mean that investors do not yet
consider the Emerging Markets to be 'mainstream' asset classes, and this can
be a hurdle to higher allocations. Therefore, it is desirable that over time
the representation increases, which will lead to more effective passive
substitutes but will also underpin the AuM growth opportunity through higher
investor allocations to Emerging Markets.
The increasing significance of Emerging Markets to the world's economy
For the past three decades, Emerging Markets have delivered superior economic
growth to the developed world and consequently have become the dominant force
driving the world's economy. The powerful economic, political and social
convergence trends underpinning this performance are well-established across
emerging countries and are expected to continue.
Geopolitics
The pace of deterioration in international relations accelerated over the past
12 months, most clearly evidenced by Russia invading Ukraine, and with ongoing
geopolitical tension in other parts of the world such as Taiwan. Political
changes continue to affect both developed and emerging countries, for example
with many European countries struggling to find political stability and a
continued shift to the left in parts of Latin America.
While such situations increase uncertainty, there is a sufficiently large and
diverse investment universe in Emerging Markets that provides investors with
an ability to navigate shifting geopolitical patterns.
Indeed, the end of US exceptionalism, and the reshaping of political and trade
relationships because of the Ukraine war and other tensions, mean that
investors must prepare for a multi-polar world in which market leadership is
likely to shift away from the US. In a scenario of permanently elevated
geopolitical risks, countries that remain neutral to both 'cold' and 'hot'
conflicts will become attractive destinations for investments. Most countries
remaining neutral to the current conflicts are in Emerging Markets, in Latin
America, Africa, the Middle East, and Central and South East Asia.
Until the 'winners' emerge from any given situation, portfolio diversification
is paramount; with typically underweight allocations to Emerging Markets,
there is ample scope for investors to gain exposure to higher return asset
classes while managing risk in the face of geopolitical uncertainty.
Inflation
Upward pressure on inflation worldwide has been building for some time due to
structural factors including negative real interest rates resulting from
developed world central banks' monetary policies; the reversal of inequality
driven by populist policies fuelling demand; and the long-term impact of
countries' transition to different energy matrices.
In the short term, this pressure has been amplified by the disruption of
supply chains brought about by the COVID-19 pandemic, and the initial economic
impact of the Ukraine war and related sanctions.
Hence, CPI inflation has been on an upward trend and was subject to an extra
supply side disruption when Russia invaded Ukraine.
However, some of the factors behind the higher inflation prints are moving to
a contractionary phase, namely monetary policy tightening forcing the
financial system to reduce leverage; inventory cycles shifting to become
deflationary; and food prices stabilising due to base effects, with the net
result that inflation is likely to moderate towards the end of 2022.
Interest rates
Central banks have responded to higher inflation with tighter monetary policy,
including bringing quantitative easing to an end as well as raising policy
rates. However, there are important differences between the response of
central banks in emerging countries and the reaction of the Fed and other
developed world central banks.
For historical reasons, governments and central banks in emerging countries
are typically very sensitive to inflation and consequently many central banks
have increased rates, in many cases quite substantially, since early 2021. The
inflationary impact of the Ukraine war means central banks extended their
hiking cycles, but the tightening has already resulted in levels that should
contain inflation pressures and that are highly attractive for local currency
investors.
Once again, the common narrative that higher US rates will result in
widespread sovereign debt distress in Emerging Markets has been exposed as
flawed. The majority of emerging countries' funding is in their own
currencies, not US dollars, and orthodox monetary policies together with
appropriate fiscal management provide additional support.
In contrast, the Fed and the ECB arguably missed a chance to raise interest
rates in 2021 when demand recovered strongly as pandemic lockdowns eased,
governments deployed extraordinary fiscal stimulus, and supply was still
constrained. Those central banks are now tightening policy more aggressively
than in previous cycles into an economic slowdown. This could represent a
second policy mistake, by not looking through the ongoing exogenous supply
shocks, which will not be resolved with higher interest rates.
The same developed world central banks have also announced the end of
quantitative easing, and in some cases the start of quantitative tightening,
alongside rate increases. While the transition from ultra-loose unorthodox
monetary policy means uncertainty and asset price volatility, the process will
ultimately prove beneficial to Emerging Markets allocations. The past decade
has experienced significant imbalances in worldwide capital allocation, in
good part because of QE as artificially low funding costs led to higher
valuations in developed world assets. When this distortion is removed, then
investors will seek out yield and sustainable dividend returns (rather than
QE-inspired capital gains) and, as described below, the valuations in Emerging
Markets provide myriad opportunities to access attractive risk-adjusted
yields.
Nevertheless, central banks are likely to moderate their hawkishness as
inflationary pressures subside over the next six months, and particularly if a
recession becomes more likely. Furthermore, the US mid-term elections in
November 2022 introduce another factor in the market's assessment of the
probable pace of Fed tightening. A less hawkish monetary policy environment
would generally be supportive for higher levels of investor risk appetite.
Growth
The long-term growth potential of Emerging Markets is well understood and
underpinned by structural reforms and rising wealth. Over the past year, the
world had started to recover from the COVID-19 pandemic, but then had to
contend with slower growth in China and the profound impact of the Ukraine war
including the unintended consequences of economic sanctions against Russia.
Nonetheless, emerging countries in aggregate have sustained their economic
growth premium over the developed world and the IMF expects 2022 to be the
cyclical low point in relative growth rates before a meaningful expansion to
historical levels over the next five years.
In the near term, leading indicators of economic activity such as PMI surveys
support the divergence in growth between emerging and developed countries. In
several of the major emerging countries these surveys are in expansionary
territory with manufacturing and new orders PMIs above 50 and rising, whereas
the same surveys show deterioration for developed countries.
China represents approximately 30% of Emerging Markets GDP and hence is
important from both a fundamental perspective and in terms of investor
sentiment. After a period of regulatory tightening in 2020 and 2021,
compounded by its 'zero COVID-19' policy requiring severe lockdowns in major
cities, China has shifted to policy stimulus in 2022. Importantly, the
lockdowns appear to be moderating and the Chinese Communist Party National
Congress in late 2022 provides an additional incentive to support growth.
Faced with mixed global macro signals, market expectations have moved from
fearing stagflation to a worldwide recession, even if the latter view is not
supported by current leading indicators. Although a recession is not yet a
base case, the Emerging Markets are relatively well positioned to deal with
adverse economic scenarios through their policy flexibility, diversity and
lower leverage than developed countries.
Given the macro and geopolitical backdrop, there was widespread investor risk
aversion through the second half of the financial year and the weakness in
Emerging Markets became increasingly indiscriminate. Notably, other asset
classes globally have also repriced in this period of de-risking, with US
equities down 21% and commodity prices rolling over towards the end of the
period; the US dollar benefited (+9% in the six months to 30 June).
Valuations
The recent market environment has caused Emerging Markets index valuations to
overshoot to exceptionally attractive levels compared with history.
Inevitably, while there will be justification for the fall in value of some
securities, others will have been mispriced in a period of risk aversion that
leads to indiscriminate selling.
Although there was a recovery in markets after the initial shock of Russia
invading Ukraine in early 2022, this was short lived and the consequences of
the war in terms of higher inflation and central bank hawkishness led to
further weakness in asset prices globally towards the end of the financial
year.
- In fixed income, the value available is illustrated by spreads on
sovereign and corporate external debt, and the real yields and cheap
currencies in local bond markets. For example, the main sovereign external
debt index (EMBI GD) traded at a spread of 540 basis points over US Treasuries
at the end of June, a level seen only a few times over the past decade, and
the local currency bond index (GBI-EM GD) offered a real yield premium of
around 400 basis points over developed market bonds of similar duration.
- Equity valuations are at historical lows with the MSCI EM index trading
close to 10x earnings. While markets will continue to be influenced by policy
actions and therefore volatility may remain elevated, there is the prospect of
moderating inflation over the coming quarters and China's stimulus should
support the growth outlook.
Valuations alone are insufficient to deliver market returns, but they are an
important pre-requisite for the Emerging Markets asset classes to outperform
when investor risk appetite improves. History shows that the inherent value
can be captured rapidly when markets reach an inflection point, but also that
the recovery returns from a period of extreme and indiscriminate market
weakness can persist for a prolonged period of time, as was the case beginning
in 2009 and 2016.
Outlook
There is considerable geopolitical and macroeconomic uncertainty reflected in
global markets currently, but several factors give Emerging Markets investors
grounds for optimism.
Even without a near-term resolution to the war in Ukraine, which sadly seems
unlikely, inflationary pressures should abate over the coming quarters. Base
effects will play a significant role, as will the deflationary impact of
inventory de-stocking following a period of significant increases as the world
emerged from COVID-19 restrictions.
In turn, this should moderate central banks' hawkishness, and economic growth
should be further supported by ongoing stimulus in China. This scenario would
be consistent with a return to higher levels of investor risk appetite and
improved sentiment towards Emerging Markets, providing meaningful catalysts
for a recovery in asset prices from current levels.
There are risks to this positive outlook, but Emerging Markets are relatively
well positioned since economic growth has held up well relative to developed
countries, central banks in Emerging Markets are already closer to the end of
their rate hiking cycles than developed world banks, and there are
exceptionally attractive valuations in equity and fixed income markets that
more than price in the near-term outlook for worldwide inflation and interest
rates.
In contrast, Developed Markets are more vulnerable since they must contend
with highly indebted governments, slowing economies with the risk of
recession, an energy crisis, political challenges and higher valuations.
On balance, the combination of highly attractive absolute and relative
valuations, resilient growth and the potential easing of macro headwinds, mean
that Emerging Markets assets should outperform. The drivers of long-term
Emerging Markets growth are well-established and continue to underpin higher
investor allocations to the asset classes.
Investment themes
External debt Local currency Corporate debt
Invests in debt instruments issued by sovereigns and quasi-sovereigns and Invests in local currencies and local currency-denominated debt instruments Invests in debt instruments issued by public and private sector companies.
denominated in foreign currencies. issued by sovereigns, quasi-sovereigns and companies.
Equities Alternatives Blended debt
Invests in equity and equity-related instruments including global, regional, Invests in private equity, healthcare, infrastructure, special situations, Asset allocation across the external debt, local currency and corporate debt
country, small cap, frontier and multi-asset opportunities. distressed debt and real estate opportunities. investment themes, measured against tailor-made blended indices.
External debt
The external debt market is large with US$1.6 trillion of bonds outstanding,
of which 67% are included in the benchmark index (EMBI GD). This index is
highly diversified with 70 countries and balanced from a credit risk
perspective with 52% of the bonds rated investment grade.
While emerging nations should naturally progress to local currency issuance,
the external debt opportunity continues to grow as new issuers come to the
market. Approximately half of the 156 developing countries have not issued
publicly-tradable debt and, typically lacking domestic yield curves, can be
expected to issue first in the external debt market.
The EMBI GD declined by 21% over the past 12 months, most of which occurred in
the second half of the year, reflecting higher US Treasury yields, wider
spreads as a result of broad-based risk aversion due to the factors described
in the Market review, and the impact of actual or expected sovereign defaults.
The high yield market underperformed investment grade assets with returns of
-23% and -19%, respectively.
After recent market weakness, as at 30 June the index yields more than 8.5%,
or in spread terms trades 540 basis points over US Treasuries, approximately
twice the level that prevailed before the COVID-19 pandemic and which provides
significant potential for spread compression and relative performance even as
the Federal Reserve continues to raise interest rates. While some countries
will inevitably face challenges with tighter financial conditions,
the diversity of the index provides some protection against credit events.
Over the past 12 months, Ashmore has delivered outperformance in investment
grade strategies (-17.8% composite gross return compared with -19.3% for the
benchmark index) and underperformed in broad external debt strategies (-28.5%
composite gross return compared with -21.2% for the benchmark index). The
picture is similar over three years, with IG outperformance (-2.5% composite
annualised gross return versus -3.4% for the index) and underperformance in
broad external debt (-9.5% versus -5.2%). A bias towards high yield markets,
with some areas of the asset class trading at distressed levels, is the
principal reason for underperformance in the broad strategies.
Local currency
The local currency government bond markets are substantial, with US$16.4
trillion of bonds outstanding, and continue to grow as countries understand
the merits of funding in their own currencies. While these markets are
approximately 10 times the size of the sovereign external debt markets, index
representation and index diversification lags the more established asset
class: the benchmark GBI-EM GD index includes 16% of the total bonds
outstanding, and comprises 20 countries.
In unhedged US dollar terms, the index fell 19% over the 12 months, broadly
split between currency movements against a stronger US dollar and the impact
of higher local rates.
Following this recent repricing, the index yields 7% in nominal terms, and
around -1% in ex-post real terms, which is substantially more than the real
yields available in Developed Markets of -5% to -7%. An important factor
supporting valuations is that Emerging Markets central banks started their
rate hiking cycles much earlier, thereby anchoring inflation expectations and
providing relatively high yields, which, together with relatively cheap
currencies, means the asset class offers attractive overall returns.
Ashmore has delivered outperformance in local currency bond strategies over
the period, with a composite gross return of -16.1% compared with -19.3% for
the benchmark index. There is also outperformance over three years, with a
gross annualised return of -4.6% compared with -5.8% for the benchmark index.
Corporate debt
The scale of the Emerging Markets corporate debt opportunity is also
significant with US$20.4 trillion of bonds outstanding. As is the case with
sovereign credit, the majority of the issuance is in local currency (US$17.0
trillion) with hard currency bonds representing US$3.4 trillion. Similarly,
the index representation is biased to the latter, with 34% of hard currency
bonds in the benchmark CEMBI BD across 60 countries and comprising 799
issuers, but only 5% of the local currency-denominated bonds are in a
benchmark index. The CEMBI BD is balanced from a credit quality perspective,
with 57% of bonds rated investment grade.
The CEMBI BD outperformed sovereign markets over the past year, with a return
of -14%, but still reflecting higher US Treasury yields and wider spreads.
In common with external debt over this period, the HY and IG sub-indices
delivered similar returns to the overall index with -15% and -13%,
respectively.
The default rate is 3.7% at the end of June, broadly unchanged compared with a
year ago. EM debt typically outperforms the US HY market due to greater
diversity, lower leverage, and the potential for implicit or explicit
sovereign support in certain industries.
Leverage for EM corporates tends to result from operational and investment
needs rather than financial engineering, and management teams are acutely
aware of the challenges presented by changing political and liquidity
environments. Hence, in both IG and HY markets, leverage tends to be lower
than in equivalent developed world corporate bond markets.
In this context, the pricing of EM corporate debt today represents an
exceptional opportunity with spreads over US Treasuries above pre-pandemic
levels. This applies equally to HY and IG markets, with the latter an
increasingly attractive asset class for investors seeking diversification,
attractive yields, and highly-rated credits.
Over the past 12 months, Ashmore has delivered outperformance in its IG
composite (-13.5% gross return compared with -15.5% for the benchmark index)
and underperformance in its broad composite (-23.7% compared with -14.3% for
the benchmark index). Over three years, the broad composite has returned -4.5%
on a gross annualised basis and the IG composite has delivered -1.3%, both
underperforming their benchmarks (-1.1% and -0.6%, respectively). As with
external debt, the underperformance in broad corporate debt strategies is
primarily due to positioning in high yield markets, which have underperformed
and, in certain cases such as Chinese real estate, have faced specific
challenges that are in the process of being addressed.
Blended debt
An allocation to a blended debt strategy provides access to the full range of
investment opportunities in the broad and diversified Emerging Markets fixed
income universe, comprising approximately US$38 trillion of bonds in issue.
The standard blended debt index is 50% EMBI GD, 25% GBI-EM GD and 25% ELMI+
and, reflecting the performance of the constituent asset classes described
above, this index returned -18.5% over the past 12 months, with the investment
grade index returning -17.6%.
The blended debt approach suits both the first-time investor in Emerging
Markets fixed income, by providing exposure to the broad array of external
debt, local currency and corporate debt asset classes, and the experienced
investor that wishes to define bespoke investment objectives and benchmarks
that comprise multiple fixed income markets. Furthermore, investors in blended
debt recognise that there can be substantial differences in the annual returns
from the constituent fixed income asset classes, with a minimum difference in
the range of annual returns over the past 20 years of more than 500 basis
points.
Ashmore's blended debt IG composite has marginally underperformed its
benchmark index over the past year (-18.2% gross return versus -17.6%) and
over three years (-3.7% gross annualised return versus -3.6%). The broad
composite has also underperformed with a gross return of -28.5% over one year
compared with the benchmark index return of -18.5%, and a gross annualised
return of -9.7% compared with the benchmark index return of -4.8% over three
years. The broad strategy's allocation to external debt, and an off-benchmark
allocation to corporate debt, both with a bias to high yield assets, explains
the underperformance compared with the benchmark.
Equities
The Emerging Markets equity investment universe is similar in size to the
aggregate fixed income markets, at US$40.4 trillion of market capitalisation.
The established large cap markets represent the majority of the universe, but
there are meaningful, and rapidly growing, opportunities in small cap and
frontier equities. In Emerging Markets equity, the drivers of profits and
short-term valuations vary, but can be domestic in nature, particularly in
frontier countries, and therefore provide longer-term investment opportunities
that are uncorrelated with global macro factors.
Over the past 12 months, the challenging macro environment and a stronger US
dollar mean that the main Emerging Markets equity indices fell in value. As a
consequence, the Small Cap index fell by 21% and the Frontier Markets index
performed better and was 5% lower over the period. The MSCI EM index declined
by 25%, with weakness in Chinese assets being an important driver.
The attractions of Emerging Market equities are centred on the superior
economic growth prospects compared with developed countries, the distinct and
uncorrelated returns available in Frontier Markets, and the substantial
valuation discounts that prevail compared with both history and developed
world equities. The first two factors are structural, and the recent market
weakness has delivered an exceptional opportunity to capture significant
upside from current asset price levels.
Ashmore's equity strategies have underperformed over the 12 months but have
delivered good outperformance over the past three years. For example, the all
cap composite has a gross return of -31.5% over one year compared with -25.3%
for the benchmark index, but has delivered a gross annual return of +4.9% over
three years versus the benchmark index return of +0.6%.
Business review
The combination of lower market levels and consequent net outflows reduced AuM
by 32%. Ashmore's established business model, with a high degree of cost
flexibility, mitigated the impact and delivered a 64% adjusted EBITDA margin.
The balance sheet remains robust with £664 million of excess capital
resources.
£m Reclassification of
FY2021/22 Reported Seed capital- Foreign FY2021/22 Adjusted FY2020/21 Adjusted
related items
exchange
translation
Net management fees 243.5 - - 243.5 270.9
Performance fees 4.5 - - 4.5 11.9
Other revenue 2.9 - - 2.9 4.6
Foreign exchange 11.6 - (5.3) 6.3 9.2
Net revenue 262.5 - (5.3) 257.2 296.6
Gains on investment securities (61.3) 61.3 - - -
Change in third-party interests in consolidated funds 16.5 (16.5) - - -
Personnel expenses (73.4) - 1.1 (72.3) (81.4)
Other expenses excluding depreciation and amortisation (22.0) 1.4 (20.6) (19.5)
EBITDA 122.3 46.2 (4.2) 164.3 195.7
EBITDA margin 47% - - 64% 66%
Depreciation and amortisation (3.1) - - (3.1) (2.8)
Operating profit 119.2 46.2 (4.2) 161.2 192.9
Net finance income/(expense) (2.1) 3.7 - 1.6 0.6
Associates and joint ventures 1.3 - - 1.3 0.3
Profit before tax 118.4 49.9 (4.2) 164.1 193.8
Foreign exchange translation - - 4.2 4.2 (3.8)
Seed capital-related items - (49.9) - (49.9) 92.5
Profit before tax 118.4 - - 118.4 282.5
Diluted EPS (p) 12.6 6.6 (0.5) 18.7 23.3
Assets under management
AuM declined by 32% over the year to US$64.0 billion, with the majority of the
movement attributable to negative investment performance of US$16.6 billion
and net outflows of US$13.5 billion. Average AuM were 7% lower than in the
prior year at US$83.6 billion (FY2020/21: US$90.0 billion).
Gross subscriptions of US$13.1 billion represent 14% of opening AuM, lower
than in the prior year period primarily as a consequence of lower risk
appetite in the second half of the year (FY2020/21: US$17.6 billion, 21% of
opening AuM).
New client mandates represented approximately 30% of institutional
subscriptions with particular demand for external debt, blended debt and local
currency strategies. Existing institutional clients added to mandates across a
broad range of themes, including external debt, local currency, equities and
blended debt.
Demand continues for investment grade products in sovereign and corporate
debt, and clients recognised the attractive yields on offer with flows into
Asia-focused corporate debt funds. Ashmore Colombia raised US$0.2 billion into
its third private equity fund, which will focus on investments in domestic and
regional infrastructure projects.
Gross redemptions of US$26.6 billion, or 28% of opening AuM, were higher than
in the prior year period (FY2020/21: US$16.4 billion, 20% of opening AuM) and
include US$6.0 billion of overlay redemptions (FY2020/21: US$0.7 billion)
driven by lower market levels, particularly in the second half of the year.
The combination of geopolitical tension, high inflation figures and central
banks tightening monetary policy, including the Fed in the second half of the
year, with the consequent negative impact on market levels, meant that
investor risk appetite was markedly lower as the period developed.
Institutional asset allocation decisions based on risk appetite therefore led
to redemptions in the fixed income and equities asset classes.
Some pension funds reduced risk exposure during the year as market performance
in other asset classes, together with higher liability discount rates, have
delivered fully-funded positions.
Additionally, strategies that have a high yield bias and have underperformed,
notably in external debt and blended debt, also saw redemptions.
The total net outflow for the period of US$13.5 billion (FY2020/21: US$1.2
billion net inflow) comprises a net outflow from retail clients of US$2.3
billion (33% of opening intermediary retail AuM), reflecting a shorter
investment horizon, and net redemptions from institutional clients of US$11.2
billion (13% of opening institutional AuM). Intermediary retail redemptions
represented 15% of the total redemptions in the period compared with the 8%
share of opening AuM.
AuM movements by investment theme
The development during the period of AuM by theme is shown in the table below.
The local currency investment theme includes US$7.2 billion of overlay funds
(30 June 2021: US$12.3 billion). During the period, assets totalling US$0.5
billion were reclassified from the local currency theme to the blended debt
theme as a result of changes to benchmarks and/or investment guidelines. There
was also a US$0.3 billion fall in local currency AuM as a result of the
reduction in the Group's interest in Taiping Fund Management Company from 8.5%
to 5.2%.
Investment theme AuM Gross Gross Net flows Reclassifications & other Performance AuM
30 June 2021
subscriptions
redemptions
US$bn
US$bn
US$bn
30 June
US$bn
US$bn
US$bn
2022
US$bn
External debt 18.7 3.6 (3.7) (0.1) - (4.2) 14.4
Local currency 31.9 3.5 (10.8) (7.3) (0.8) (3.2) 20.6
Corporate debt 11.3 0.9 (2.2) (1.3) - (3.2) 6.8
Blended debt 23.4 2.1 (6.4) (4.3) 0.5 (5.2) 14.4
Equities 7.7 2.8 (3.5) (0.7) - (0.7) 6.3
Alternatives 1.4 0.2 - 0.2 - (0.1) 1.5
Total 94.4 13.1 (26.6) (13.5) (0.3) (16.6) 64.0
AuM as invested
The Group's AuM remain geographically diverse and broadly consistent with
recent periods, with 39% of AuM invested in Latin America, 29% in Asia
Pacific, 12% in Eastern Europe and 20% in the Middle East and Africa.
Clients
Ashmore's clients are predominantly a diversified set of institutions,
representing 95% of AuM, with the remainder sourced through intermediary
retail channels. Segregated accounts represent 81% of AuM (30 June 2021: 79%)
and, in line with the third phase of the Group's strategy, 27%
of the Group's AuM has been sourced from clients domiciled in Emerging
Markets (30 June 2021: 26%).
Ashmore's principal mutual fund platforms are in Europe and the US, which in
total represent AuM of US$6.4 billion in 42 funds. The European SICAV range
comprises 30 funds with AuM of US$5.4 billion (30 June 2021: US$10.1 billion
in 29 funds) and the US 40-Act range has 12 funds with AuM of US$1.0 billion
(30 June 2021: US$2.3 billion in 12 funds).
Investment performance
As at 30 June 2022, 45% of AuM is outperforming over one year, 28% over three
years and 48% over five years (30 June 2021: 96%, 57% and 79%, respectively).
While this overall performance picture is characteristic of Ashmore's
investment processes in weak and volatile markets, within the headline figures
there are a number of areas of consistent outperformance including local
currency strategies, investment grade products across all three fixed income
asset classes (external debt, corporate debt and blended debt) and
equity strategies.
Where there is underperformance, it is typically for one of the following
connected reasons.
- The past two years have seen four distinct shocks to markets, including
the Emerging Markets, from which there is yet to be a sustained recovery: the
COVID-19 pandemic, the inflation spike as lockdown restrictions eased, China's
policy tightening in areas such as the real estate sector resulting in slower
economic growth, and the Ukraine war that has exacerbated the inflation/rates
challenges.
- Ashmore's fixed income investment processes tend to acquire risk in
periods of market weakness, to take advantage of dislocated asset prices and
to underpin future outperformance. During the most recent cycles these
processes have been implemented consistently and, as a consequence, there is
substantial inherent value in portfolios, but the performance figures in some
strategies reflect the buying of assets at wider bid/offer spreads in
anticipation of a recovery in pricing.
- The HY markets have generally underperformed in the period and this can
be where the greatest value opportunities arise. Therefore, for clients that
have the ability to invest in these markets, the market dislocation is likely
to have had a more pronounced impact, but the potential recovery is also
commensurately greater.
Financial review
Revenues
Net revenue declined by 10% to £262.5 million, primarily as a result of lower
net management and performance fees compared with the prior year. On an
adjusted basis, excluding foreign exchange translation effects, net revenue
fell by 13% to £257.2 million.
Net revenue
FY2021/22 FY2020/21
£m
£m
Net management fees 243.5 270.9
Performance fees 4.5 11.9
Other revenue 2.9 4.6
FX: hedges 6.3 9.2
Adjusted net revenue 257.2 296.6
FX: balance sheet translation 5.3 (4.9)
Net revenue 262.5 291.7
Net management fee income declined by 10% to £243.5 million. This reflects
the 7% fall in average assets under management, a lower net management fee
margin of 39bps (FY2020/21: 41bps) and the small benefit from a lower average
GBP:US$ rate in this period. At constant FY2020/21 exchange rates, net
management fee income reduced by 11%.
The net management fee margin declined by two basis points compared with the
prior year period but was stable during the 12 months. The year-on-year
movement is attributable to the impact of higher margin intermediary retail
net outflows (one basis point) and the effect of product mix, competition and
other factors (one basis point).
There was no overall margin impact from changes in AuM by investment theme,
with the positive effects of higher equities AuM, lower margin overlay
redemptions and capital raising in alternatives being offset by lower AuM in
the other fixed income themes.
Similarly, flows in and out of large mandates did not result in a material
aggregate change in the Group's revenue margin compared with the prior year,
with new mandates and top-ups countered by redemptions from other
institutional accounts.
The table below summarises the net management fee income, performance fee
income, and average net management fee margin by investment theme.
Net management fees Performance fees Net management fee margin
Investment theme FY2021/22 FY2020/21 FY2021/22 FY2020/21 FY2021/22 FY2020/21
£m
£m
£m
£m
bps
bps
External debt 46.7 52.0 2.0 1.8 35 38
Local currency 54.9 60.4 0.8 1.8 27 29
Corporate debt 26.0 34.6 - 4.2 37 41
Blended debt 69.3 82.7 1.3 2.6 46 47
Equities 33.1 28.9 0.4 0.8 58 62
Alternatives 13.5 12.3 - 0.7 138 132
Total 243.5 270.9 4.5 11.9 39 41
Performance fees of £4.5 million (FY2020/21: £11.9 million) were realised
in the year, and delivered by a range of funds in the external debt, local
currency, blended debt and equities investment themes. Approximately US$8
billion of the Group's AuM, or 12% of the total, is eligible to earn
performance fees at 30 June 2022. The Group continues to expect its diverse
sources of net management fee income to generate the substantial majority of
its net revenues.
Translation of the Group's non-Sterling assets and liabilities, excluding seed
capital, resulted in an unrealised foreign exchange gain of £5.3 million
(FY2020/21: £4.9 million loss) reflecting a lower GBP:US$ dollar rate at the
period end. The Group's effective hedging programme and the active management
of foreign currency exposures during the period meant that realised and
unrealised hedging gains of £6.3 million were generated (FY2020/21: £9.2
million gain). Therefore, the Group recognised a total foreign exchange gain
of £11.6 million in revenues, higher than in the prior year (FY2020/21:
£4.3 million gain).
Other revenue of £2.9 million was comparable to the prior year period
(FY2020/21: £4.6 million).
Operating costs
Total operating costs of £98.5 million (FY2020/21: £104.3 million) include
£1.4 million of expenses incurred by seeded funds that are required to be
consolidated (FY2020/21: £1.7 million), as disclosed in note 20. On an
adjusted basis, taking into account the impact of seed capital and the
variable compensation accrual on foreign exchange translation losses,
operating costs reduced by 7% compared with the prior year period. Adjusted
operating costs fell by 8% at constant FY2020/21 exchange rates.
Operating costs
FY2021/22 FY2020/21
£m
£m
Staff costs (27.8) (26.7)
Other operating costs (20.6) (19.5)
Depreciation and amortisation (3.1) (2.8)
Operating costs before VC (51.5) (49.0)
Variable compensation (VC) (45.6) (53.6)
VC accrual on FX gains/losses 1.1 (1.1)
Adjusted operating costs (96.0) (103.7)
Consolidated funds costs (1.4) (1.7)
Add back VC on FX gains/losses (1.1) 1.1
Total operating costs (98.5) (104.3)
Staff costs increased by 4% to £27.8 million, reflecting the increase in the
Group's headcount from 310 to 315 over the year and the impact of
industry-wide wage inflation.
Other operating costs, excluding consolidated fund expenses and depreciation
and amortisation, increased by 6% to £20.6 million. As expected, the easing
of COVID-19 restrictions around the world meant that, notably in the second
half of the year, employees could return to offices and business travel was
possible across a greater number of countries, with a commensurate return
towards pre COVID-19 levels of operating expenses in these areas.
In line with the Board-approved policy, Ashmore accrued charitable donations
of £0.6 million (FY2020/21: £1.0 million), equivalent to 0.5% of profit
before tax.
Variable compensation has been accrued at 21.5% of earnings before variable
compensation, interest and tax, resulting in a charge of £45.6 million, 15%
lower than in the prior year (FY2020/21: £53.6 million) and consistent with
the reduction in adjusted net revenue.
The combined depreciation and amortisation charges for the period of £3.1
million were similar to the prior year.
Adjusted EBITDA
Consistent with the lower revenue base but also lower operating costs,
adjusted EBITDA fell by 16% from £195.7 million to £164.3 million. The
Group's disciplined approach to operating costs means that, notwithstanding
lower AuM and revenues over the period, it delivered an adjusted EBITDA margin
of 64% (FY2020/21: 66%).
Finance income
Net finance expense of £2.1 million (FY2020/21: £23.9 million income)
includes mark-to-market losses relating to seed capital investments, which are
described in more detail below. Excluding such items, net interest income for
the period of £1.6 million was slightly higher than in the prior year as a
consequence of higher prevailing market interest rates (FY2020/21: £0.6
million).
Seed capital
The following table summarises the principal items in the accounts to assist
in understanding the financial impact of the Group's seed capital programme on
profits. The seed capital investments generated a total mark-to-market loss of
£49.9 million (FY2020/21: £92.5 million gain). This comprises a £40.5
million loss in respect of consolidated funds, including £5.7 million of
finance income, and a £9.4 million loss in respect of unconsolidated funds
that is reported in finance income.
Impact of seed capital investments on profits
FY2021/22 FY2020/21
£m
£m
Consolidated funds (note 20):
Gains/(losses) on investment securities (61.3) 123.5
Change in third-party interests in consolidated funds 16.5 (52.6)
Operating costs (1.4) (1.7)
Finance income 5.7 3.3
Sub-total: consolidated funds (40.5) 72.5
Unconsolidated funds (note 8):
Market return (10.6) 25.3
Foreign exchange 1.2 (5.3)
Sub-total: unconsolidated funds (9.4) 20.0
Total seed capital profit/(loss) (49.9) 92.5
- realised 0.1 8.5
- unrealised (50.0) 84.0
Profit before tax
Statutory profit before tax was 58% lower at £118.4 million (FY2020/21:
£282.5 million) as a consequence of the decline in adjusted EBITDA and the
mark-to-market losses on the Group's seed capital investments.
Taxation
The impact of the Group's share price on the allowable value of share-based
remuneration provided to employees and non-deductible unrealised seed capital
losses mean that the effective tax rate of 22.4% (FY2020/21: 14.4%) is higher
than the prevailing UK corporation tax rate of 19.0% (FY2020/21: 19.0%). Note
12 to the financial statements provides a full reconciliation of this
difference compared with the UK corporation tax rate.
The Group's effective tax rate, based on its current geographic mix of profits
and prevailing tax rates, is approximately 17%.
Earnings per share
Basic earnings per share for the period fell by 63% to 13.4 pence (FY2020/21:
36.4 pence) and diluted earnings per share also declined by 63% from 34.2
pence to 12.6 pence.
On an adjusted basis, excluding the effects of foreign exchange translation,
seed capital-related items and relevant tax, diluted earnings per share were
20% lower at 18.7 pence (FY2020/21: 23.3 pence), which is broadly consistent
with the 16% year-on-year decline in adjusted EBITDA.
Balance sheet
Ashmore's consistent approach is to maintain a strong and liquid balance sheet
through market cycles, enabling it to support the commercial demands of
current and prospective investors, and to take advantage of strategic
development opportunities across the business.
As at 30 June 2022, total equity attributable to shareholders of the parent
was £945.0 million (30 June 2021: £911.6 million). The Group has no debt.
Cash
Ashmore's business model continues to deliver a high conversion rate of
operating profits to cash. Based on operating profit of £119.2 million for
the period (FY2020/21: £258.3 million), the Group generated £182.1 million
of cash from operations (FY2020/21: £213.5 million). The operating cash
flows after excluding consolidated funds represent 113% of the adjusted EBITDA
for the financial year of £164.3 million (FY2020/21: 109%).
Cash and cash equivalents by currency
30 June 30 June
2022
2021
£m
£m
Sterling 273.1 76.0
US dollar 247.9 351.5
Other 31.0 28.6
Total 552.0 456.1
Excluding cash held in consolidated funds, the Group's cash and cash
equivalents increased by £96.3 million to £542.0 million (30 June 2021:
£445.7 million). The principal reasons for the change were the significant
net cash generated through successful redemptions of seed capital investments,
and an increase in the value of US dollar-denominated cash balances as the
currency strengthened against Sterling over the year.
Seed capital investments
The Group's seed capital programme has delivered growth in third-party AuM
with approximately US$5 billion of AuM in funds that have been seeded,
representing 8% of total Group AuM.
During the year, the Group made new investments of £7.4 million and
profitably realised £62.2 million from previous investments. As a consequence
of these successful realisations, the Group's seed capital activities
generated net cash flows of £54.7 million in the period.
In addition to the net redemption of £54.8 million, the combination of the
unrealised mark-to-market loss and positive foreign exchange movements in
reserves reduced the market value of seed investments by £10.0 million,
resulting in a closing value of £272.0 million at 30 June 2022 (30 June 2021:
£336.8 million).
New subscriptions in the period were focused on developing the fund ranges in
the Group's local asset management platforms, with Ashmore Indonesia using its
own balance sheet to fund seed investments in the blended debt theme.
The majority of the redemptions were to match client flows into equity funds,
reflecting the Group's success in generating client demand particularly in all
cap strategies. The remainder primarily relates to distributions made by
funds in the alternatives theme following successful investment realisations.
The mark-to-market gain recognised in the first half of the year was unwound
in the second half as the impact of the Ukraine war caused widespread risk
aversion and a fall in the value of risk assets across global markets. There
was a resultant mark-to-market impact on the value of the Group's seed
investments in equity and fixed income strategies, together with downward
pressure on asset values in the alternatives theme. Overall, the impact over
the 12-month period was a net £49.9 million mark-to-market loss, which was
unrealised at the period end.
The diversified mix of seed capital investments means that the underlying fund
portfolios, some of which are consolidated under IFRS 10, have exposure to a
range of Emerging Markets asset classes, including sovereign and corporate
fixed income, listed equities, private equity, real estate and infrastructure,
and a wide array of industries including education, energy, financials,
healthcare, industrials, basic materials, transport and utilities.
The consideration of ESG factors has been integrated into all of Ashmore's
investment processes, which therefore means the Group's seed capital
investments are in funds that are scored in accordance with Ashmore's
proprietary ESG methodology.
Seed capital market value by currency
30 June 30 June
2022
2021
£m
£m
US dollar 222.4 297.6
Colombian peso 19.0 16.2
Other 30.6 23.0
Total market value 272.0 336.8
As at 30 June 2022, approximately 60% 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. Ashmore has also made seed capital commitments to funds of
£12.4 million that were undrawn at the period end, giving a total value for
the Group's seed capital programme of approximately £285 million.
Goodwill and intangible assets
At 30 June 2022, goodwill and intangible assets on the Group's balance sheet
totalled £90.9 million (30 June 2021: £80.5 million). The movement in the
period is primarily the result of a foreign exchange revaluation gain in
reserves of £10.5 million (FY2020/21: £9.0 million loss).
Shares held by EBT
The Group's EBT purchases and holds shares in anticipation of the vesting of
share awards. At 30 June 2022, the EBT owned 55,512,301 ordinary shares (30
June 2021: 52,345,869 ordinary shares), representing 7.8% of the Group's
issued share capital
(30 June 2021: 7.3%).
Foreign exchange
The majority of the Group's fee income is received in US dollars and it is the
Group's policy 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).
Movements in the GBP:US$ and other exchange rates over the period benefited
net management fees by 1%, increased operating costs by 1%, and resulted in
translation gains in net revenue of £5.3 million on the Group's foreign
currency assets and liabilities and a £1.2 million mark-to-market gain on the
Group's unconsolidated seed capital investments.
Included in OCI is a foreign exchange translation gain on non-Sterling assets
and liabilities of £80.2 million (FY2020/21: £74.9 million loss) primarily
comprising a gain of £41.2 million on the Group's cash and a £38.2 million
gain on the value of seed capital investments.
Regulatory capital
In January 2022, the IFPR introduced a new capital adequacy assessment
process, with the ICARA replacing the ICAAP. The ICARA shifts much of the
focus away from risks that a firm faces towards the harm that it may pose to
clients and markets. Ashmore has been reporting under IFPR since 1 January
2022 and will apply the ICARA approach to the calculation of the capital
requirement for its UK regulated entity, AIML, in the second half of 2022.
Using a consistent approach to assessing the Group's regulatory capital
requirement as was adopted under the ICAAP regime, the Board has determined
the Group's capital requirement to be £125.2 million as at 30 June 2022. This
is lower than the equivalent prior year figure (30 June 2021: £155.9 million)
primarily because of a reduced market risk requirement as a result of the
lower market value of seed capital investments.
Ashmore holds total capital resources of £788.7 million as at 30 June 2022,
equivalent to 111 pence per share, and providing an excess of £663.5 million
over the Group capital requirement.
Dividend
The Board's policy is 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.
The primary reason for lower statutory profits this year is the mark-to-market
loss on seed capital investments, while the adjusted diluted EPS is
significantly higher than the statutory figure.
The Board recognises the importance of the ordinary dividend to shareholders
and, taking into consideration the profit for the year, the substantial cash
flows delivered, the strength of the balance sheet and the continued long-term
growth opportunities available to Ashmore, it has recommended a final dividend
of 12.1 pence per share. The cost of the dividends paid and declared in
respect of FY2021/22 is £118.2 million, which represents 54% of the Group's
cash flows before dividends generated in the period.
If approved by shareholders, the dividend will be paid on 9 December 2022 to
all shareholders on the register on 4 November 2022.
Tom Shippey
Group Finance Director
1 September 2022
Risk management
Principal and emerging risks, controls and mitigants
In accordance with the UK Corporate Governance Code 2018, 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.
The table below summarises those principal risks that the Group has assessed
as being most significant currently, together with examples of associated
controls and mitigants. Reputational and conduct risks are common to most
aspects of Ashmore's strategy and business model.
Ashmore's internal control framework considers the assessment and management
of emerging risks alongside its principal risks, current examples of which
are:
- impact of inflation;
- China's regulatory curbs on private companies;
- geopolitical and sanctions risks; and
- ESG risks including regulatory and industry focus on potential
greenwashing, legal uncertainty and litigation risks arising from the
industry's differing interpretation of ESG regulation, and a focus on social
matters.
Principal risks and associated controls and mitigants
Description of principal risks Examples of associated controls and mitigants
Strategic and business risks (Responsibility: the Board)
Long-term downturn in Emerging Markets fundamentals/technicals/sentiment, and - Group strategy is reviewed and approved by a Board with relevant
impact of broader industry changes (including ESG) on Ashmore's strategy and industry experience
business model
- Diversification of investment capabilities and products
- Ashmore has a strong balance sheet with no debt
- ESG and Operating Committees meet regularly
- The Board reviews diversity data on an annual basis
Market capacity issues and increased competition constrain growth - Experienced Emerging Markets investment professionals with deep market
knowledge
- Periodic investment theme capacity reviews
- Emerging Markets asset classes continue to grow, increasing the size of
Ashmore's investable universe
Failure to understand and plan for the potential impact of investor sentiment, - Oversight by ESGC, which covers corporate and investment activities, and
climate change and sustainability regulations may have on product preferences scoring of all issuers for E, S and G factors
and underlying asset prices (including effects of transition to a low carbon
economy) - Head of Responsible Investment and ESG Policy provides updates to the
Board
- NZAMI membership and participation in industry working groups to prepare
for net zero commitments
Client risks (Responsibility: Product Committee and RCC)
Inappropriate marketing or ESG strategy and/or ineffective management of - Regular Product Committee meetings review product suitability
existing and potential fund investors and distributors, including impact of and appropriateness
net outflows and fee margin pressure
- Experienced distribution team with appropriate geographic coverage
- Investor education to ensure understanding of Ashmore investment
themes and products
- ESGC includes distribution team members
Inadequate client oversight including alignment of interests - Global distribution team appropriately structured for institutional and
intermediary retail clients
- Monitoring of client-related issues including a 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
Treasury risks (Responsibility: CEO and GFD)
Inaccurate financial projections and hedging of future cash flows and balance - Defined risk appetite, and risk appetite measures updated quarterly
sheet
- Group foreign exchange (FX) hedging policy and FX and Liquidity
Management Committee
Investment risks (Responsibility: Group Investment Committees)
Downturn in long-term performance - Consistent investment philosophy over nearly 30 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 integration (including - Funds in the same investment theme are managed by consistent investment
greenwashing risks), ineffective cash and liquidity management, similar management teams, and allocations approved by investment committees
portfolios being managed inconsistently; and ii) neglect of duty,
market abuse - 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
Operational risks (Responsibility: RCC)
Inadequate security of information including cyber security and data - Information security and data protection policies, subject to annual
protection review including cyber security review
- Cyber Security Working Group meets quarterly
- Employees receive online training
Inadequate BCP - Established BCP process with periodic updates to Group RCC
Inaccurate or invalid data including manual processes/reporting and ESG data - Dedicated teams responsible for Transaction Processing,
Fund Administration, and Pricing and Data Management
- Pricing Oversight and Pricing Methodology and Valuation Committees, with
such valuations subject to external audit
- Annual ISAE 3402 process and report
Failure of IT infrastructure, including inability to support business growth - Appropriate IT policies with annual review cycle
- IT systems and environmental monitoring
- Group IT platform incorporates local offices
Legal action, fraud or breach of contract perpetrated against the Group, its - Independent Internal Audit function that considers risk of fraud in
funds or investments each audit
- Anti-money laundering and anti-bribery and corruption policies, also
required for service providers
- Whistleblowing policy including independent reporting line
and Board sponsor
- Due diligence on all new, and regular reviews of existing,
service providers
- Insurance policies in place with appropriate cover
Insufficient resources, including loss of key employees, inability to attract - Committee-based investment management reduces key man risk
employees, and impact of 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 review of remuneration and benefits including benchmarking
against industry
- Annual Culture and Conduct report to the Board
Lack of understanding and compliance with global and local regulatory - Regulatory Development Working Group and compliance monitoring
requirements, as well as conflicts of interest and not treating customers programme, which covers financial crime risks such as money laundering
fairly, and financial crime, which includes money laundering, bribery and and bribery
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
- Anti-money laundering and anti-bribery and corruption 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
- ESGC has oversight of regulatory and reporting requirements
- 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
Inappropriate oversight of market, liquidity, credit, counterparty and - Group risk management policies, reviewed regularly
operational risks
- Monthly or more frequent reviews of market and credit risk
- Quarterly reviews of principal risks, counterparties and credit risk
Inadequate oversight of Ashmore overseas offices - GFD has oversight responsibility for overseas offices, and RCC has
oversight of the operating model with annual reviews. Senior employees take
local board/advisory positions
- Dual reporting lines into local management and Group department heads,
with adherence to Group policies
- Local risk and compliance committees held and RCC receives updates
- Internal Audit reviews, and annual governance reviews reported to RCC
Consolidated statement of comprehensive income
For the year ended 30 June 2022
Notes 2022 2021
£m
£m
Management fees 247.0 276.4
Performance fees 4.5 11.9
Other revenue 2.9 4.6
Total revenue 254.4 292.9
Distribution costs (3.5) (5.5)
Foreign exchange 7 11.6 4.3
Net revenue 262.5 291.7
Gains/(losses) on investment securities 20 (61.3) 123.5
Change in third-party interests in consolidated funds 20 16.5 (52.6)
Personnel expenses 9 (73.4) (80.3)
Other expenses 11 (25.1) (24.0)
Operating profit 119.2 258.3
Finance income/(expense) 8 (2.1) 23.9
Share of profit from associates 26 1.3 0.3
Profit before tax 118.4 282.5
Tax expense 12 (26.5) (40.7)
Profit for the year 91.9 241.8
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 80.2 (74.9)
Cash flow hedge intrinsic value gains/(losses) (6.0) 1.2
Other comprehensive income/(loss), net of tax 74.2 (73.7)
Total comprehensive income for the year 166.1 168.1
Profit attributable to:
Equity holders of the parent 88.5 240.1
Non-controlling interests 3.4 1.7
Profit for the year 91.9 241.8
Total comprehensive income attributable to:
Equity holders of the parent 161.9 167.5
Non-controlling interests 4.2 0.6
Total comprehensive income for the year 166.1 168.1
Earnings per share
Basic 13 13.42p 36.40p
Diluted 13 12.61p 34.23p
Consolidated balance sheet
As at 30 June 2022
Notes 2022 2021
£m
£m
Assets
Non-current assets
Goodwill and intangible assets 15 90.9 80.5
Property, plant and equipment 16 9.1 11.2
Investment in associates 26 2.1 0.9
Non-current financial assets measured at fair value 20 39.3 34.0
Deferred acquisition costs 0.4 0.5
Deferred tax assets 18 32.7 34.8
174.5 161.9
Current assets
Investment securities 20 265.1 318.1
Financial assets measured at fair value 20 32.3 41.0
Trade and other receivables 17 74.3 83.4
Derivative financial instruments 21 - 1.3
Cash and cash equivalents 552.0 456.1
923.7 899.9
Financial assets held for sale 20 - 46.2
Total assets 1,098.2 1,108.0
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 901.0 941.0
Foreign exchange reserve 33.2 (46.2)
Cash flow hedging reserve (4.9) 1.1
945.0 911.6
Non-controlling interests 30 21.8 21.1
Total equity 966.8 932.7
Liabilities
Non-current liabilities
Lease liabilities 16 5.8 7.3
Deferred tax liabilities 18 8.8 10.5
14.6 17.8
Current liabilities
Lease liabilities 16 2.2 2.5
Derivative financial instruments 21 5.2 -
Third-party interests in consolidated funds 20 73.0 105.7
Trade and other payables 24 36.4 45.5
116.8 153.7
Financial liabilities held for sale 20 - 3.8
Total liabilities 131.4 175.3
Total equity and liabilities 1,098.2 1,108.0
Approved by the Board on 1 September 2022 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 2022
Attributable to equity holders of the parent
Issued capital £m Share premium Retained earnings Foreign exchange reserve Cash flow hedging reserve Total Non-controlling interests Total
£m
£m
£m
£m
£m
£m
equity
£m
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
Profit for the year - - 88.5 - - 88.5 3.4 91.9
Other comprehensive income/(loss):
Foreign currency translation differences arising on foreign operations - - - 79.4 - 79.4 0.8 80.2
Cash flow hedge intrinsic value losses - - - - (6.0) (6.0) - (6.0)
Total comprehensive income/(loss) - - 88.5 79.4 (6.0) 161.9 4.2 166.1
Transactions with owners:
Purchase of own shares - - (34.5) - - (34.5) - (34.5)
Share-based payments - - 24.5 - - 24.5 - 24.5
Decrease in non-controlling interests - - - - - - (0.5) (0.5)
Dividends to equity holders - - (118.5) - - (118.5) - (118.5)
Dividends to non-controlling interests - - - - - - (3.0) (3.0)
Total contributions and distributions - - (128.5) - - (128.5) (3.5) (132.0)
Balance at 30 June 2022 0.1 15.6 901.0 33.2 (4.9) 945.0 21.8 966.8
Consolidated cash flow statement
For the year ended 30 June 2022
2022 2021
£m
£m
Operating activities
Profit for the year 91.9 241.8
Adjustments for non-cash items:
Depreciation and amortisation 3.1 2.8
Accrual for variable compensation 24.3 33.4
Unrealised foreign exchange gains (11.6) (4.3)
Finance expense/(income) 2.1 (23.9)
Net losses/(gains) on investment securities 44.8 (70.9)
Tax expense 26.5 40.7
Share of profits from associates (1.3) (0.3)
Cash generated from operations before working capital changes 179.8 219.3
Changes in working capital:
Decrease in trade and other receivables 4.9 2.4
Decrease/(increase) in derivative financial instruments 6.5 (3.0)
Decrease in trade and other payables (9.1) (5.2)
Cash generated from operations 182.1 213.5
Taxes paid (24.7) (64.3)
Net cash generated from operating activities 157.4 149.2
Investing activities
Interest and investment income received 8.1 3.2
Purchase of non-current financial assets measured at fair value (1.9) (8.1)
Purchase of financial assets held for sale - (42.2)
Purchase of financial assets measured at fair value (5.5) (14.4)
Sale/(purchase) of investment securities 24.2 (33.3)
Sale of non-current financial assets measured at fair value 1.5 2.6
Sale of financial assets held for sale 0.1 7.2
Sale of financial assets measured at fair value 44.0 58.4
Net cash on initial consolidation of seed capital investments 0.3 (5.2)
Purchase of property, plant and equipment (0.5) (0.7)
Net cash generated from/(used in) investing activities 70.3 (32.5)
Financing activities
Dividends paid to equity holders (118.5) (118.3)
Dividends paid to non-controlling interests (3.0) (2.9)
Third-party subscriptions into consolidated funds 0.5 54.9
Third-party redemptions from consolidated funds (4.2) (0.6)
Distributions paid by consolidated funds (10.7) (28.8)
Increase/(decrease) in non-controlling interests (0.5) 0.5
Payment of lease liabilities (2.0) (2.1)
Interest paid (0.4) (0.4)
Purchase of own shares (34.5) (23.3)
Net cash used in financing activities (173.3) (121.0)
Net increase/(decrease) in cash and cash equivalents 54.4 (4.3)
Cash and cash equivalents at beginning of year 456.1 500.9
Effect of exchange rate changes on cash and cash equivalents 41.5 (40.5)
Cash and cash equivalents at end of year 552.0 456.1
Cash and cash equivalents at end of year comprise:
Cash at bank and in hand 57.4 51.4
Daily dealing liquidity funds 225.7 333.5
Deposits 268.9 71.2
552.0 456.1
Company balance sheet
As at 30 June 2022
Notes 2022 2021
£m
£m
Assets
Non-current assets
Goodwill 15 4.1 4.1
Property, plant and equipment 16 5.5 6.8
Investment in subsidiaries 25 19.9 19.9
Deferred acquisition costs 0.4 0.5
Trade and other receivables 17 132.0 -
Deferred tax assets 18 18.2 25.1
180.1 56.4
Current assets
Trade and other receivables 17 324.9 521.8
Derivative financial instruments 21 - 1.3
Cash and cash equivalents 159.7 86.1
484.6 609.2
Total assets 664.7 665.6
Equity and liabilities
Capital and reserves
Issued capital 22 0.1 0.1
Share premium 15.6 15.6
Retained earnings 600.6 540.6
Cash flow hedging reserve (4.9) 1.1
Total equity attributable to equity holders of the Company 611.4 557.4
Liabilities
Non-current liabilities
Lease liability 16 3.3 4.4
Current liabilities
Lease liability 16 1.3 1.3
Derivative financial instruments 21 5.2 -
Trade and other payables 24 43.5 102.5
53.3 108.2
Total equity and liabilities 664.7 665.6
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 2022 was £188.6 million (30 June
2021: £69.4 million).
The financial statements of Ashmore Group plc (registered number 03675683)
were approved by the Board on 1 September 2022 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 2022
Issued Share Retained earnings Cash flow hedging Total equity attributable to equity holders of the parent
capital
premium
£m
reserve
£m
£m
£m
£m
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
Profit for the year - - 188.6 - 188.6
Cash flow hedge intrinsic value losses - - - (6.0) (6.0)
Purchase of own shares - - (34.1) - (34.1)
Share-based payments - - 24.0 - 24.0
Dividends to equity holders - - (118.5) - (118.5)
Balance at 30 June 2022 0.1 15.6 600.6 (4.9) 611.4
Company cash flow statement
For the year ended 30 June 2022
2022 2021
£m
£m
Operating activities
Profit for the year 188.6 69.4
Adjustments for:
Depreciation and amortisation 1.8 1.4
Accrual for variable compensation 19.3 25.2
Unrealised foreign exchange losses/(gains) (58.4) 35.6
Finance income (0.4) -
Tax expense/(income) 26.0 (16.5)
Dividends received from subsidiaries (174.0) (110.1)
Cash generated from/(used in) operations before working capital changes 2.9 5.0
Changes in working capital:
Decrease/(increase) in trade and other receivables (73.8) 6.9
Decrease/(increase) in derivative financial instruments 6.5 (3.0)
Increase/(decrease) in trade and other payables (59.0) 97.4
Cash generated from/(used in) operations (123.4) 106.3
Taxes paid (12.1) (38.2)
Net cash generated from/(used in) operating activities (135.5) 68.1
Investing activities
Interest received 0.2 0.3
Loans advanced to subsidiaries (0.2) (110.2)
Loans repaid by subsidiaries 184.0 67.3
Dividends received from subsidiaries 174.0 110.1
Purchase of property, plant and equipment (0.4) (0.6)
Net cash generated from investing activities 357.6 66.9
Financing activities
Dividends paid (118.5) (118.3)
Payment of lease liability (1.1) (1.1)
Interest paid (0.2) (0.2)
Purchase of own shares (34.1) (23.3)
Net cash used in financing activities (153.9) (142.9)
Net increase/(decrease) in cash and cash equivalents 68.2 (7.9)
Cash and cash equivalents at beginning of year 86.1 91.8
Effect of exchange rate changes on cash and cash equivalents 5.4 2.2
Cash and cash equivalents at end of year 159.7 86.1
Cash and cash equivalents at end of year comprise:
Cash at bank and in hand 6.3 17.0
Daily dealing liquidity funds 1.9 14.6
Deposits 151.5 54.5
159.7 86.1
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 2022 were authorised for issue
by the Board of Directors on 1 September 2022. 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 2022
have been prepared in accordance with UK-adopted international accounting
standards.
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 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 AuM, 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 2022.
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 it 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 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 and 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.
The Group has in place an intragroup recharge arrangement for equity-settled
share based awards whereby the parent Company is reimbursed based on the
grant-date cost of share awards granted to employees of the subsidiary entity.
During the vest period, the subsidiary entity recognises a share-based payment
expense in accordance with IFRS 2 requirements with an intercompany payable to
parent Company. The parent Company recognise an intercompany receivable and a
corresponding credit within equity as a share-based payment reserve. The
intercompany balances are settled regularly and reported as current
assets/liabilities.
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 £164.3 million for the year as reconciled in the Business
review (FY2020/21: adjusted EBITDA of £195.7 million was derived by adjusting
operating profit by £2.8 million of depreciation and amortisation expense,
£23.3 million of income related to seed capital and £3.8 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
2022 2021
£m
£m
United Kingdom and Ireland 26.5 24.8
United States 73.5 65.1
Other 2.5 3.2
Total non-current assets 102.5 93.1
6) Revenue
Management fees are accrued throughout the year in line with prevailing levels
of AuM 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 (FY2020/21: 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
2022 2021
£m
£m
United Kingdom and Ireland 193.6 229.9
United States 22.0 26.8
Other 38.8 36.2
Total revenue 254.4 292.9
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.
£1 Closing rate Closing rate Average rate Average rate
as at 30 June
as at 30 June
year ended
year ended
2022
2021
30 June
30 June
2022
2021
US dollar 1.2145 1.3815 1.3289 1.3472
Euro 1.1617 1.1649 1.1785 1.1315
Indonesian rupiah 18,092 20,031 19,146 19,389
Colombian peso 5,053 5,158 5,164 4,968
Foreign exchange gains and losses are shown below.
2022 2021
£m
£m
Net realised and unrealised hedging gains 6.3 9.2
Translation gains/(losses) on non-Sterling denominated monetary assets and 5.3 (4.9)
liabilities
Total foreign exchange gains 11.6 4.3
8) Finance income
2022 2021
£m
£m
Interest and investment income 7.7 4.3
Net realised gains on seed capital investments measured at fair value 0.1 8.5
Net unrealised gains/(losses) on seed capital investments measured at fair (9.5) 11.5
value
Interest expense on lease liabilities (note 16) (0.4) (0.4)
Total finance income/(expense) (2.1) 23.9
Included within interest and investment income are gains of £5.7 million
(FY2020/21: £3.3 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 £1.1 million losses (FY2020/21: £10.8 million
gains) in relation to financial assets held for sale (note 20a), £12.5
million losses (FY2020/21: £8.2 million gains) on financial assets measured
at FVTPL (note 20b) and £4.2 million gains (FY2020/21: £2.2 million gains)
on non-current financial assets measured at fair value (note 20c).
9) Personnel expenses
Personnel expenses during the year comprised the following:
2022 2021
£m
£m
Wages and salaries 22.1 21.4
Performance-related cash bonuses 20.7 20.2
Share-based payments (note 10) 24.9 33.4
Social security costs 1.9 1.8
Pension costs 1.8 1.8
Other costs 2.0 1.7
Total personnel expenses 73.4 80.3
Number of employees
At 30 June 2022, the number of investment management employees of the Group
(including Executive Directors) during the year was as follows:
Average for Average for At At
the year
the year
30 June 2022
30 June 2021
ended
ended
Number
Number
30 June 2022
30 June 2021
Number
Number
Total investment management employees 305 295 309 298
Directors' remuneration
Disclosures of Directors' remuneration during the year as required by the
Companies Act 2006 are included in the Remuneration report.
There are retirement benefits accruing to two Executive Directors under a
defined contribution scheme (FY2020/21: 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:
Group 2022 2021
£m
£m
Omnibus Plan 25.1 33.3
Phantom Bonus Plan (0.2) 0.1
Total share-based payments expense 24.9 33.4
The total expense recognised for the year in respect of equity-settled
share-based payment awards was £24.5 million (FY2020/21: £29.9 million), of
which £0.2 million (FY2020/21: £2.5 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 2022 2021
Year of grant
£m
£m
2016 - 2.6
2017 3.2 3.7
2018 2.9 3.8
2019 3.5 4.4
2020 3.5 3.9
2021 5.5 11.5
2022 5.7 -
Total Omnibus share-based payments expense reported in comprehensive income 24.3 29.9
Awards outstanding under the Omnibus Plan were as follows:
i) Equity-settled awards
Group and Company 2022 2022 2021 2021
Number of
Weighted average
Number of shares subject
Weighted average
shares subject
share price
to awards
share price
to awards
Restricted share awards
At the beginning of the year 19,997,393 £3.58 22,073,338 £3.27
Granted 4,423,544 £3.71 4,189,112 £3.62
Vested (3,874,613) £3.44 (5,945,594) £2.47
Forfeited (1,234,829) £3.44 (319,463) £3.12
Awards outstanding at year end 19,311,495 £3.65 19,997,393 £3.58
Bonus share awards
At the beginning of the year 10,617,648 £3.58 10,693,287 £3.32
Granted 2,285,034 £3.75 2,261,160 £3.61
Vested (1,905,089) £3.44 (2,336,799) £2.43
Forfeited - - - -
Awards outstanding at year end 10,997,593 £3.64 10,617,648 £3.58
Matching share awards
At the beginning of the year 10,687,135 £3.58 10,750,311 £3.33
Granted 2,297,585 £3.75 2,273,623 £3.61
Vested (1,881,231) £3.44 (2,230,531) £2.43
Forfeited (723,744) £3.42 (106,268) £2.43
Awards outstanding at year end 10,379,745 £3.65 10,687,135 £3.58
Total 40,688,833 £3.65 41,302,176 £3.58
ii) Cash-settled awards
Group and Company 2022 2022 2021 2021
Number of
Weighted average
Number of
Weighted average
shares subject
share price
shares subject
share price
to awards
to awards
Restricted share awards
At the beginning of the year 122,239 £3.53 141,297 £3.45
Granted 15,741 £3.75 778 £3.60
Vested (27,700) £3.40 (19,836) £2.43
Forfeited - - - -
Awards outstanding at year end 110,280 £3.60 122,239 £3.53
Bonus share awards
At the beginning of the year 80,765 £3.55 86,944 £3.47
Granted 11,276 £3.75 - -
Vested (11,530) £3.40 (6,179) £2.43
Forfeited - - - -
Awards outstanding at year end 80,511 £3.60 80,765 £3.55
Matching share awards
At the beginning of the year 80,765 £3.55 86,944 £3.47
Granted 11,276 £3.75 - -
Vested (11,530) £3.40 (6,179) £2.43
Forfeited - - - -
Awards outstanding at year end 80,511 £3.60 80,765 £3.55
Total 271,302 £3.60 283,769 £3.54
iii) Total awards
Group and Company 2022 2022 2021 2021
Number of
Weighted average
Number of
Weighted average
shares subject
share price
shares subject
share price
to awards
to awards
Restricted share awards
At the beginning of the year 20,119,632 £3.58 22,214,635 £3.27
Granted 4,439,285 £3.71 4,189,890 £3.62
Vested (3,902,313) £3.44 (5,965,430) £2.47
Forfeited (1,234,829) £3.44 (319,463) £3.12
Awards outstanding at year end 19,421,775 £3.65 20,119,632 £3.58
Bonus share awards
At the beginning of the year 10,698,413 £3.58 10,780,231 £3.33
Granted 2,296,310 £3.75 2,261,160 £3.61
Vested (1,916,619) £3.44 (2,342,978) £2.43
Forfeited - - - -
Awards outstanding at year end 11,078,104 £3.64 10,698,413 £3.58
Matching share awards
At the beginning of the year 10,767,900 £3.58 10,837,255 £3.33
Granted 2,308,861 £3.75 2,273,623 £3.61
Vested (1,892,761) £3.44 (2,236,710) £2.43
Forfeited (723,744) £3.42 (106,268) £2.43
Awards outstanding at year end 10,460,256 £3.65 10,767,900 £3.58
Total 40,960,135 £3.65 41,585,945 £3.58
The weighted average fair value of awards granted to employees under the
Omnibus Plan during the year was £3.73 (FY2020/21: £3.62), 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 £0.4 million (30 June 2021: £0.8 million) of
which £nil (30 June 2021: £nil) relates to vested awards.
11) Other expenses
Other expenses consist of the following:
2022 2021
£m
£m
Travel 0.9 0.1
Professional fees 4.7 4.8
Information technology and communications 7.3 7.0
Amortisation of intangible assets (note 15) 0.2 0.2
Operating leases 0.4 0.3
Depreciation of property, plant and equipment (note 16) 2.9 2.6
Premises-related costs 1.3 1.0
Insurance 1.0 0.8
Research costs 0.4 0.5
Auditor's remuneration (see below) 0.9 0.8
Consolidated funds 1.2 1.6
Other expenses 3.9 4.3
25.1 24.0
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
2022 2021
£m
£m
Fees for statutory audit services:
- Fees payable to the Company's auditor for the audit of the Group's 0.2 0.2
accounts
- Fees payable to the Company's auditor and its associates for the audit 0.4
of the Company's subsidiaries pursuant to legislation
0.5
Fees for non-audit services:
- Other non-audit services 0.2 0.2
0.9 0.8
12) Taxation
Analysis of tax charge for the year:
2022 2021
£m
£m
Current tax
UK corporation tax on profits for the year 11.1 24.4
Overseas corporation tax charge 14.9 17.3
Adjustments in respect of prior years (0.5) (0.4)
25.5 41.3
Deferred tax
Origination and reversal of temporary differences (note 18) 1.0 1.8
Effect on deferred tax balance of changes in corporation tax rates (note 18) - (2.4)
Tax expense 26.5 40.7
Factors affecting tax charge for the year
2022 2021
£m
£m
Profit before tax 118.4 282.5
Profit on ordinary activities multiplied by the UK tax rate of 19% (FY2020/21: 22.5 53.7
19%)
Effects of:
Permanent differences including non-taxable income and non-deductible expenses 4.7 (3.1)
Different rate of taxes on overseas profits (3.3) (3.8)
Non-deductible/(non-taxable) investment returns(1) 3.2 (4.1)
Adjustments in respect of prior years (0.6) -
Derecognition of deferred tax assets - 0.4
Effect on deferred tax balances from changes in corporation tax rates - (2.4)
Tax expense 26.5 40.7
1. Non-taxable investment returns comprises seed capital investment
gains/losses in certain jurisdictions in which the Group operates for which
there are local tax exemptions.
The tax charge recognised in reserves within other comprehensive income is as
follows:
2022 2021
£m
£m
Current tax expense on foreign exchange gains 2.9 -
Tax expense recognised in reserves 2.9 -
13) Earnings per share
Basic earnings per share at 30 June 2022 of 13.42 pence (30 June 2021: 36.40
pence) is calculated by dividing the profit after tax for the financial year
attributable to equity holders of the parent of £88.5 million (FY2020/21:
£240.1 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.
2022 2021
Number of ordinary
Number of ordinary
shares
shares
Weighted average number of ordinary shares used in the calculation of basic 659,466,487 659,341,111
earnings per share
Effect of dilutive potential ordinary shares - share awards 42,657,852 41,926,476
Weighted average number of ordinary shares used in the calculation of diluted 702,124,339 701,267,587
earnings per share
14) Dividends
Dividends paid in the year
Company 2022 2021
£m
£m
Final dividend for 2020/21 - 12.10p (FY2019/20: 12.10p) 85.0 84.7
Interim dividend 2021/22 - 4.80p (FY2020/21: 4.80p) 33.5 33.6
118.5 118.3
In addition, the Group paid £3.0 million (FY2020/21: £2.9 million) of
dividends to non-controlling interests.
Dividends declared/proposed in respect of the year
Company 2022 2021
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 1 September 2022, the Board proposed a final dividend of 12.10 pence per
share for the year ended 30 June 2022. 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 £84.7
million.
15) Goodwill and intangible assets
Group Goodwill Fund management intangible assets Total
£m
£m
£m
Cost (at original exchange rate)
At 30 June 2022 and 2021 70.4 0.9 71.3
Accumulated amortisation and impairment
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)
Amortisation charge for the year - (0.1) (0.1)
At 30 June 2022 - (0.6) (0.6)
Net book value
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
Accumulated amortisation for the year - (0.1) (0.1)
Foreign exchange revaluation through reserves* 10.4 0.1 10.5
At 30 June 2022 90.5 0.4 90.9
* Foreign exchange revaluation through reserves is a result of the
retranslation of US dollar-denominated intangibles and goodwill.
Company Goodwill
£m
Cost
At the beginning and end of the year 4.1
Net carrying amount at 30 June 2022 and 2021 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 2022, 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, macroeconomic 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 2022 using a market share price of
£2.22, 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 2022 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 2022 and
no factors were identified suggesting that fund management contracts
intangible assets were impaired. The remaining amortisation period for fund
management contracts is three 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
£m
£m
Property, plant and equipment owned by the Group 1.5 1.1
Right-of-use assets 7.6 4.4
Net book value at 30 June 2022 9.1 5.5
The movement in property, plant and equipment is provided below:
Group 2022 2021
Fixtures,
Fixtures,
fittings and equipment
fittings and equipment
£m
£m
Cost
At the beginning of the year 21.9 20.8
Right-of-use assets recognition and remeasurement - 1.4
Additions 0.5 0.7
Foreign exchange revaluation 0.6 (1.0)
At the end of the year 23.0 21.9
Accumulated depreciation
At the beginning of the year 10.7 9.1
Right-of-use assets recognition and remeasurement - (0.8)
Depreciation charge for the year 2.9 2.9
Foreign exchange revaluation 0.3 (0.5)
At the end of the year 13.9 10.7
Net book value at 30 June 9.1 11.2
Company 2022 2021
Fixtures,
Fixtures,
fittings and equipment
fittings and equipment
£m
£m
Cost
At the beginning of the year 13.5 12.0
Right-of-use assets recognition and remeasurement - 0.9
Additions 0.4 0.6
At the end of the year 13.9 13.5
Accumulated depreciation
At the beginning of the year 6.8 5.2
Depreciation charge for year 1.6 1.5
At the end of the year 8.4 6.7
Net book value at 30 June 5.5 6.8
Lease arrangements
The Group leases office space in various countries and enters into operating
lease agreements on office premises with remaining lease periods of two to six
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 4.6% (FY2020/21: 4.5%).
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 assets Lease liabilities Right-of-use assets Lease liabilities
£m
£m
£m
£m
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
Lease payments - (2.4) - (1.3)
Interest expense (note 8) - 0.4 - 0.2
Depreciation charge (2.1) - (1.1) -
Foreign exchange revaluation through reserves 0.3 0.2 - -
At 30 June 2022 7.6 8.0 4.4 4.6
The contractual maturities on the minimum lease payments under lease
liabilities are provided below:
Group Company
Maturity analysis - contractual undiscounted cash flows 30 June 2022 30 June 2021 30 June 2022 30 June 2021
£m
£m
£m
£m
Within 1 year 2.6 2.5 1.3 1.3
Between 1 and 5 years 6.0 8.1 3.7 5.0
Later than 5 years 0.2 0.5 - -
Total undiscounted lease liabilities 8.8 11.1 5.0 6.3
Lease liabilities are presented in the balance sheet as follows:
Current 2.2 2.5 1.3 1.3
Non-current 5.8 7.3 3.3 4.4
Total lease liabilities 8.0 9.8 4.6 5.7
Amounts recognised under financing activities in the cash flow statement:
Payment of lease liabilities 2.0 2.1 1.1 1.1
Interest paid 0.4 0.4 0.2 0.2
Total cash outflow for leases 2.4 2.5 1.3 1.3
17) Trade and other receivables
Group Company
2022 2021 2022 2021
£m
£m
£m
£m
Trade debtors 66.1 77.9 1.0 1.2
Prepayments 3.5 3.2 2.1 1.9
Amounts due from subsidiaries - - 73.8 9.1
Loans due from subsidiaries - - 376.9 507.7
Other receivables 4.7 2.3 3.1 1.9
Total trade and other receivables 74.3 83.4 456.9 521.8
Group trade debtors include accrued management and performance fees in respect
of investment management services provided up to 30 June 2022. 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 £0.5 million as at 30 June 2022 (30 June 2021:
£0.5 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 2022, the assessed provision
for expected credit losses was immaterial and the Group has not recognised any
expected credit losses in the current year (30 June 2021: £nil).
Amounts due from subsidiaries for the Company represent intercompany trading
balances that are repayable within one year. Loans due from subsidiaries for
the Company include an intercompany loan to a subsidiary related to the
provision of funding for seed capital investments and cash invested by the
subsidiary in daily-traded investment funds. The intercompany loan is
repayable on demand and regularly settled during the year. 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 balance in future
periods. Expected credit losses are estimated based on the assumption that
repayment is demanded at the reporting date. If the borrower has sufficient
accessible highly liquid assets available to settle the balance if demanded at
the reporting date, the expected credit loss has been assessed to be
immaterial. In line with the Company's historical experience, and after
consideration of current credit exposures, the Company does not expect to
incur any credit losses and has not recognised any expected credit losses in
the current year (30 June 2021: £nil).
18) Deferred taxation
Deferred tax assets and liabilities recognised by the Group and Company at
year end are attributable to the following:
2022 2021
Group Other temporary differences Share-based payments Total Other Share-based payments Total
£m
£m
£m
temporary differences
£m
£m
£m
Deferred tax assets 12.5 20.2 32.7 7.6 27.2 34.8
Deferred tax liabilities (8.8) - (8.8) (10.5) - (10.5)
3.7 20.2 23.9 (2.9) 27.2 24.3
2022 2021
Company Other temporary differences Share-based payments Total Other temporary differences Share-based payments Total
£m
£m
£m
£m
£m
£m
Deferred tax assets - 18.2 18.2 - 25.1 25.1
Deferred taxes at the balance sheet date reflected in these financial
statements have been measured using the relevant enacted or substantively
enacted tax rate for the year in which they are expected to be realised or
settled.
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 2022, to the extent that they are
expected to reverse after the rate increase comes into effect.
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:
Group Other Share-based payments Total
temporary differences
£m
£m
£m
At 30 June 2020 0.8 22.9 23.7
Credited/(charged) to the consolidated statement of comprehensive income (3.6) 4.3 0.7
Foreign exchange revaluation (0.1) - (0.1)
At 30 June 2021 (2.9) 27.2 24.3
Credited/(charged) to the consolidated statement of comprehensive income 6.0 (7.0) (1.0)
Foreign exchange revaluation 0.6 - 0.6
At 30 June 2022 3.7 20.2 23.9
Company Other Share-based payments Total
temporary differences
£m
£m
£m
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
Credited/(charged) to the statement of comprehensive income - (6.9) (6.9)
At 30 June 2022 - 18.2 18.2
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:
2022 2021
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£m
£m
£m
£m
£m
£m
£m
£m
Financial assets
Investment securities 158.8 82.7 23.6 265.1 209.0 66.7 42.4 318.1
Financial assets held for sale - - - - - 46.2 - 46.2
Financial assets measured at FVTPL - 32.3 - 32.3 - 39.2 1.8 41.0
Derivative financial instruments - - - - - 1.3 - 1.3
Non-current financial assets at fair value - - 39.3 39.3 - - 34.0 34.0
158.8 115.0 62.9 336.7 209.0 153.4 78.2 440.6
Financial liabilities
Third-party interests in consolidated funds 58.4 6.3 8.3 73.0 73.7 15.1 16.9 105.7
Financial liabilities held for sale - - - - - 3.8 - 3.8
Derivative financial instruments - 5.2 - 5.2 - - - -
58.4 11.5 8.3 78.2 73.7 18.9 16.9 109.5
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. During the year investments with a carrying
value of £3.3 million were transferred out of level 3 into level 1 and level
2 as their fair value was determined based on observable prices. There were no
transfers between level 1 and level 2 of the fair value hierarchy during the
period.
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 2022 and 2021:
Investment Financial Non-current Third-party
securities
assets measured
financial assets at
interests in consolidated
£m
at FVTPL
fair value
funds
£m
£m
£m
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 2021 42.4 1.8 34.0 16.9
Additions - - 1.9 -
Disposals (25.5) - (1.5) (10.7)
Transfers out (1.5) (1.8) - -
Unrealised gains/(losses) recognised in finance income 4.4 - 3.5 2.1
Unrealised gains/(losses) recognised in reserves 3.8 - 1.4 -
At 30 June 2022 23.6 - 39.3 8.3
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.
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 2022 and 2021, and the associated sensitivity to changes in
unobservable inputs to a reasonable alternative.
Asset class and valuation technique 2022 Significant Range of estimates Sensitivity Change in
Fair value
unobservable inputs
factor fair value
£m £m
Unquoted securities
Market multiple and discount 6.2 EBITDA multiple 10x-15x +/- 1x +/- 0.5
Marketability adjustment 20%-30% +/- 5% -/+ 0.4
Discounted cash flow 26.3 Discount rate 10%-20% +/- 1% -/+ 3.6
Marketability adjustment 10%-60% +/- 5% -/+ 1.5
Unquoted funds
Net assets approach 30.4 NAV(1) 1x +/- 5% +/- 1.5
Total level 3 investments 62.9
Asset class and valuation technique 2021 Significant Range of Sensitivity Change in
Fair value
unobservable inputs
estimates
factor
fair value
£m
£m
Unquoted securities
Market multiple and discount 23.7 EBITDA multiple 5x-15x +/- 1x +/- 1.5
Marketability adjustment 5%-95% +/- 5% -/+ 2.9
Discounted cash flow 13.4 Discount rate 10%-20% +/- 5% -/+ 2.9
Marketability adjustment 20%-60% +/- 5% -/+ 1.5
Unquoted funds
Net assets approach 41.1 NAV(1) 1x +/- 5% +/- 1.9
Total level 3 investments 78.2
1. 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, last
observable vendor price and discount rates.
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 2022 and 2021.
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:
Group Financial Financial Investment Other Third-party Non-current financial assets measured at Total
assets
assets
securities
(relating to
interests in
fair value(3)
£m
held for sale
measured at
(relating to
consolidated
consolidated
£m
£m
fair value
consolidated
funds)2
funds
£m
funds)1
£m
£m
£m
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
Reclassification:
HFS investments to consolidated funds (39.1) - 40.5 0.4 (1.8) - -
Consolidated funds to FVTPL - 39.1 (59.5) 0.1 20.3 - -
Additions - 5.5 - - - 1.9 7.4
Disposals (0.1) (44.9) (25.5) - 10.2 (1.5) (61.8)
Fair value movement (3.2) (8.4) (8.5) 1.0 4.0 4.7 (10.4)
Carrying amount at 30 June 2022 - 32.3 265.1 11.1 (73.0) 36.5 272.0
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 £2.8 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, none were
seeded in this manner (FY2020/21: seven were seeded, 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 2022 were as
follows:
2022 2021
£m
£m
Financial assets held for sale - 46.2
Financial liabilities held for sale - (3.8)
Financial assets held for sale - 42.4
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
(FY2020/21: 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, six such funds (FY2020/21: five) with an aggregate carrying
amount of £39.1 million (FY2020/21: £44.1 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 losses of £1.1 million (FY2020/21: gains
of £10.8 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 2022 comprise shares held in debt and equity
funds as follows:
2022 2021
£m
£m
Equity funds 15.5 33.7
Debt funds 16.8 7.3
Financial assets measured at fair value 32.3 41.0
Included within finance income are losses of £12.5 million (FY2020/21: gains
of £8.2 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.
2022 2021
£m
£m
Real estate funds 1.5 1.8
Infrastructure funds 24.1 20.2
Other funds 10.9 9.4
Non-current financial assets measured at fair value(1) 36.5 31.4
1. Excludes £2.8 million (30 June 2021: £2.6m) of other non-current
financial assets measured at fair value that are not classified as seed
capital
Included within finance income are gains of £4.2 million (FY2020/21: gains of
£2.2 million) on the Group's non-current financial assets measured at fair
value.
d) Consolidated funds
The Group has consolidated 18 investment funds as at 30 June 2022 (30 June
2021: 14 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.
2022 2021
£m
£m
Investment securities1 265.1 318.1
Cash and cash equivalents 10.0 10.4
Other2 1.1 (0.8)
Third-party interests in consolidated funds (73.0) (105.7)
Consolidated seed capital investments 203.2 222.0
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
losses of £40.5 million (FY2020/21: £72.5 million net gains) relating to the
Group's share of the results of the individual statements of comprehensive
income for each of the consolidated funds, as follows:
2022 2021
£m
£m
Interest and dividend income 5.7 3.3
Gains/(losses) on investment securities (61.3) 123.5
Change in third-party interests in consolidated funds 16.5 (52.6)
Audit fees (0.2) (0.1)
Other expenses (1.2) (1.6)
Net gains/(losses) on consolidated funds (40.5) 72.5
Included in the Group's cash utilised in operations is £2.8 million
(FY2020/21: £0.4 million cash generated from operations) relating to
consolidated funds.
As of 30 June 2022, 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 as discussed in the Risk
management section. 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.
Risk management is the ultimate responsibility of the Board, as noted in the
Risk management section.
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.
In January 2022, the IFPR introduced a new capital adequacy assessment
process, with the ICARA replacing the ICAAP. The ICARA shifts much of the
focus away from risks that a firm faces towards the harm that it may pose to
clients and markets. Ashmore has been reporting under IFPR since 1 January
2022 and will apply the ICARA approach to the calculation of the capital
requirement for its UK regulated entity, AIML, in the second half of 2022.
Using a consistent approach to assessing the Group's regulatory capital
requirement as was adopted under the ICAAP regime, the Board has determined
the Group's capital requirement to be £125.2 million as at 30 June 2022. This
is lower than the equivalent prior year figure (30 June 2021: £155.9 million)
primarily because of a reduced market risk requirement as a result of the
lower market value of seed capital investments.
Ashmore holds total capital resources of £788.7 million as at 30 June 2022,
providing an excess of £663.5 million over the Group capital requirement.
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.
Notes 2022 2021
£m
£m
Trade and other receivables 17 74.3 83.4
Cash and cash equivalents 552.0 456.1
Total 626.3 539.5
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 2022 (30 June 2021: A+ to
AAAm). As at 30 June 2022, the Group held £225.7 million (30 June 2021:
£333.5 million) in the Ashmore Global Liquidity Fund.
All trade and other receivables are considered to be fully recoverable at year
end. 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 table below summarises the maturity profile of the Group's financial
liabilities at 30 June 2022 and 30 June 2021 based on contractual undiscounted
payments:
At 30 June 2022
Within 1 year 1-5 years More than Total
£m
£m
5 years
£m
£m
Current trade and other payables 36.4 - - 36.4
Lease liabilities 2.6 6.0 0.2 8.8
Total 39.0 6.0 0.2 45.2
At 30 June 2021
Within 1 year 1-5 years More than Total
£m
£m
5 years
£m
£m
Current trade and other payables 45.5 - - 45.5
Lease liabilities 2.5 8.1 0.5 11.1
Total 48.0 8.1 0.5 56.6
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
2022 2021
%
%
Deposits with banks and liquidity funds 0.41 0.23
At 30 June 2022, 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 £2.5 million higher/lower (FY2020/21: £2.3 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.
2022 2021
Foreign currency sensitivity test Impact on Impact on Impact on Impact on
profit
equity
profit
equity
before tax
£m
before tax
£m
£m
£m
US dollar +/- 1% 0.4 3.9 0.4 5.3
Colombian peso +/- 1% 0.1 0.2 0.1 0.1
Indonesian rupiah +/- 1% - 0.1 - 0.1
Euro +/- 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 2022, a 5% movement in the fair value of these investments would
have a £13.6 million (FY2020/21: £16.8 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$64.0 billion and applying the year's
average net management fee rate of 39bps, a 5% movement in AuM would have a
US$12.5 million impact, equivalent to £10.3 million using a year end exchange
rate of 1.2145, on management fee revenues (FY2020/21: 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$19.4 million impact, equivalent to £14.0 million using a
year end exchange rate of 1.3815, on management fee revenues).
Hedging activities
The Group uses forward and option contracts to hedge its exposure to foreign
currency risk. These hedges, which have been assessed as effective cash flow
hedges as at 30 June 2022, protect a proportion of the Group's revenue cash
flows from foreign exchange movements. The cumulative fair value of the
outstanding foreign exchange hedges liability at 30 June 2022 was £5.2
million and is included within the Group's derivative financial instrument
liabilities (30 June 2021: £1.3 million foreign exchange hedges asset
included in derivative financial assets).
The notional and fair values of foreign exchange hedging instruments were as
follows:
2022 2021
Notional Fair value Notional Fair value
amount
assets/
amount
assets/
US$m
(liabilities)
US$m
(liabilities)
£m
£m
Cash flow hedges
Foreign exchange nil-cost option collars 100.0 (5.2) 100.0 1.3
100.0 (5.2) 100.0 1.3
The maturity profile of the Group's outstanding hedges is shown below.
Notional amount of option collars maturing: 2022 2021
US$m
US$m
Within 6 months 40.0 40.0
Between 6 and 12 months 40.0 40.0
Later than 12 months 20.0 20.0
100.0 100.0
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 value loss of £6.0 million (FY2020/21: £1.2 million gain) on
the Group's hedges has been recognised through other comprehensive income and
a £0.5 million intrinsic value loss (FY2020/21: £1.8 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 £6.3 million
(note 7) recognised at 30 June 2022 (30 June 2021: £9.2 million gain) are:
- a £0.5 million loss in respect of foreign exchange hedges covering net
management fee income for the financial year ending 30 June 2022 (FY2020/21:
£1.8 million gain); and
- a £6.8 million gain in respect of crystallised foreign exchange
contracts (FY2020/21: £7.4 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.
2022 2021
£m
£m
Cash and cash equivalents 159.7 86.1
Trade and other receivables 456.9 521.8
Total 616.6 607.9
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 2022 (30 June 2021: A to AAAm).
All trade and other receivables are considered to be fully recoverable and
none were overdue at year end (30 June 2021: none overdue).
Liquidity risk
The Company's exposure to liquidity risk is not considered to be material and,
therefore, no further information is provided.
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
2022 2021
%
%
Deposits with banks and liquidity funds 0.46 0.28
At 30 June 2022, 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 £0.6 million higher/lower (FY2020/21: £0.4 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 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 2022, 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 £3.6 million (FY2020/21:
increased/decreased by £4.9 million).
22) Share capital
Authorised share capital
Group and Company 2022 2022 2021 2021
Number of
Nominal
Number
Nominal
shares
value
of shares
value
£'000
£'000
Ordinary shares of 0.01p each 900,000,000 90 900,000,000 90
Issued share capital - allotted and fully paid
Group and Company 2022 2022 2021 2021
Number of
Nominal
Number
Nominal
shares
value
of shares
value
£'000
£'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 2022, there were equity-settled share awards issued under the
Omnibus Plan totalling 40,688,833 (30 June 2021: 41,302,176) shares that have
release dates ranging from August 2022 to March 2027. 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 2022, the EBT owned 55,512,301 (30 June 2021:
52,345,869) ordinary shares of 0.01p with a nominal value of £5,551 (30 June
2021: £5,235) and shareholders' funds are reduced by £187.6 million (30 June
2021: £179.8 million) in this respect. The EBT is periodically funded by
the Company for these purposes.
24) Trade and other payables
Group Group Company Company
2022
2021
2022
2021
£m
£m
£m
£m
Current
Trade payables 15.8 19.3 2.4 2.8
Accruals and provisions 20.6 26.2 11.4 16.6
Amounts due to subsidiaries - - 29.7 83.1
Total trade and other payables 36.4 45.5 43.5 102.5
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.
Company 2022 2021
£m
£m
Cost
At 30 June 2022 and 2021 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 2022. A full list of the Group's subsidiaries and all related
undertakings is disclosed in note 33.
Name Country of incorporation/ formation and principal place of operation % of equity shares held
by 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
Ashmore Investment Management India LLP India 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
Ashmore Investments (Holdings) Limited Mauritius 100.00
Ashmore Investments Saudi Arabia Saudi 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 18 investment funds as at 30 June 2022
over which the Group is deemed to have control:
Name Type of fund Country of incorporation/ principal place of operation % of net
asset value
held by the Group
Ashmore Emerging Markets Debt and Currency Fund Limited Alternatives Guernsey 57.88
Ashmore SICAV Emerging Markets Corporate Debt ESG Fund Corporate debt Luxembourg 100.00
Ashmore SICAV Emerging Markets Equity ESG Fund Equity Luxembourg 99.89
Ashmore SICAV Emerging Markets Indonesian Equity Fund Equity Luxembourg 100.00
Ashmore SICAV Emerging Markets Global Small-Cap Equity Fund Equity Luxembourg 41.16
Ashmore SICAV Emerging Markets Middle East Equity Fund Equity Luxembourg 88.00
Ashmore SICAV Emerging Markets IG Total Return Fund Blended debt Luxembourg 100.00
Ashmore SICAV Emerging Markets Total Return ESG Fund Blended debt Luxembourg 99.95
Ashmore SICAV Emerging Markets Sovereign Debt ESG Fund External debt Luxembourg 100.00
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 69.78
Ashmore Saudi Equity Fund Equity Saudi Arabia 95.78
Ashmore Growing Multi Strategy Fund Limited Equity Guernsey 100.00
Ashmore Emerging Markets Equity ESG Fund Equity USA 100.00
Ashmore Emerging Markets Short Duration Select Fund Equity USA 100.00
Ashmore Emerging Markets Investment Grade Income Fund Corporate debt USA 100.00
Ashmore Emerging Markets Corporate Debt ESG Fund Corporate debt USA 100.00
Ashmore Emerging Markets Local Currency Bond Fund Local currency USA 53.09
26) Investment in associates
The Group held an interest in the following associate as at 30 June 2022 that
is unlisted:
Name Type Nature of business Country of incorporation/ % of equity shares held by the Group
formation and principal
place of operation
Taiping Fund Management Company Associate Investment management China 5.23%
During the year the Group increased its interest in Ashmore Investment
Management India LLP from 30% to 100% through a restructure and additional
capital injection that resulted in the Group's interest being reclassified
from associate to an investment in a subsidiary.
During the year the Group's interest in Taiping Fund Management Company
decreased from 8.50% to 5.23% following an issue of additional shares by the
investee to other parties. As a result, the Group recognised a gain on
dilution of interest amounting to £1.3 million which has been reported in the
consolidated statement of comprehensive income.
The movement in the carrying value of investments in associates for the year
is provided below:
Associates 2022 2021
£m
£m
At the beginning of the year 0.9 0.6
Reclassification (0.2) -
Gain on dilution 1.3 -
Share of profit for the year - 0.3
Foreign exchange revaluation 0.1 -
At the end of the year 2.1 0.9
The summarised financial information for the associate is shown below.
Associates 2022 2021
£m
£m
Total assets 54.5 30.1
Total liabilities (13.3) (21.0)
Net assets 41.2 9.1
Group's share of net assets 2.1 0.8
Revenue for the year 23.5 16.8
Profit for the year 0.8 3.6
Group's share of profit for the year - 0.3
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 associate as at 30 June 2022. The Group had no undrawn
capital commitments (30 June 2021: £nil) to investment funds managed by the
associate.
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.
Total AuM Less: AuM within
US$bn
AuM within consolidated funds
unconsolidated structured
US$bn
entities
US$bn
30 June 2021 94.4 0.5 93.9
30 June 2022 64.0 0.3 63.7
Included in the Group's consolidated management fees of £247.0 million
(FY2020/21: £276.4 million) are management fees amounting to £246.0 million
(FY2020/21: £275.8 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.
2022 2021
£m
£m
Management fees receivable 47.6 55.6
Trade and other receivables 0.8 0.6
Seed capital investments* 68.8 114.9
Total exposure 117.2 171.1
* 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:
2022 2021
£m
£m
Short-term benefits 0.8 1.3
Defined contribution pension costs - -
Share-based payment benefits (note 10) 0.2 2.5
1.0 3.8
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.
Details of the remuneration of Directors are given in the Remuneration report.
During the year, there were no other transactions entered into with key
management personnel (FY2020/21: none). Aggregate key management personnel
interests in consolidated funds at 30 June 2022 were £62.7 million (30 June
2021: £80.2 million).
Transactions with subsidiaries - Company
Details of transactions between the Company and its subsidiaries are shown
below:
2022 2021
£m
£m
Transactions during the year
Management fees 67.2 80.7
Net dividends 174.0 110.1
Loans repaid by/(advanced to) subsidiaries 183.8 (42.9)
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 £96.2 million of gross management fees
and performance fees (FY2020/21: £124.7 million) from the 99 funds
(FY2020/21: 106 funds) it manages and which are classified as related parties.
As at 30 June 2022, the Group had receivables due from funds of £5.8 million
(30 June 2021: £8.1 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 2022,
the loan outstanding was £163.7 million (30 June 2021: £160.0 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 £0.6 million
to the Foundation during the year (FY2020/21: £1.0 million).
29) Commitments
The Group has undrawn investment commitments relating to seed capital
investments as follows:
Group 2022 2021
£m
£m
Ashmore Andean Fund II, LP 0.1 0.1
Ashmore Avenida Colombia Real Estate Fund I (Cayman) LP 0.1 0.1
Ashmore I - CAF Colombian Infrastructure Senior Debt Fund 6.6 6.3
Ashmore KCH HealthCare Fund II 1.2 2.4
Ashmore KCH HealthCare LLC 4.4 -
Total undrawn investment commitments 12.4 8.9
Company
The Company has undrawn loan commitments to other Group entities totalling
£394.1 million (30 June 2021: £203.6 million) to support their investment
activities but has no investment commitments of its own (30 June 2021: none).
30) Non-controlling interests
The Group's material NCI as at 30 June 2022 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
Summarised balance sheet 2022 2021
£m
£m
Total assets 23.0 19.6
Total liabilities (6.4) (4.0)
Net assets 16.6 15.6
Non-controlling interests 13.6 13.0
Summarised statement of comprehensive income
Net revenue 12.3 10.2
Profit for the period 5.9 5.0
Other comprehensive income/(loss) 1.6 (2.0)
Total comprehensive income 7.5 3.0
Profit allocated to NCI 3.0 1.2
Dividends paid to NCI 2.3 1.7
Summarised cash flows
Cash flows from operating activities 6.5 3.6
Cash flows used in investing activities (3.6) (3.1)
Cash flows used in financing activities (6.3) (4.4)
Net decrease in cash and cash equivalents (3.4) (3.9)
31) Principal accounting estimates and judgements
The preparation of the financial statements in conformity with UK-adopted
international accounting standards requires the use of certain accounting
estimates, and management to exercise its judgement in the process of applying
the Group's accounting policies. If such estimates and assumptions, which are
based on management's best judgement at the date of preparation of the
financial information, deviate from actual circumstances, the original
estimates and assumptions are modified as appropriate in the period in which
the circumstances change.
There are areas of the financial statements where the use of estimation is
important, but where the risk of material adjustment is not significant,
including the assessment of performance conditions attached to certain
executive share awards (note 10), assumptions used in the valuation of level 3
seed capital investments (note 19) and deferred tax assets (note 18). The
areas where judgements are made include the impairment review of goodwill and
intangibles (note 15), the calculation of lease assets and liabilities (note
16) and consolidation of seed capital investments (note 20).
32) Post-balance sheet events
There are no post-balance sheet events that require adjustment or disclosure
in the Group consolidated financial statements.
33) Subsidiaries and related undertakings
The following is a full list of the Ashmore Group plc subsidiaries and related
undertakings as at 30 June 2022, 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.
Name Classification % voting interest Registered address and place of incorporation
Ashmore Group plc Subsidiary 100.00 61 Aldwych, London WC2B 4AE United Kingdom
Ashmore Investments (UK) Limited Subsidiary 100.00
Ashmore Investment Management Limited Subsidiary 100.00
Ashmore Investment Advisors Limited Subsidiary 100.00
Aldwych Administration Services Limited (dormant) Subsidiary 100.00
Ashmore Asset Management Limited(1) Subsidiary 100.00
Ashmore Avenida (Real Estate) Investments LLP Subsidiary 56.00
Ashmore Avenida Devco Holding Company Limited Subsidiary 100.00
Ashmore Investment Management (Ireland) Limited Subsidiary 100.00 32 Molesworth Street, Dublin 2, D02 Y512
Ashmore Investment Management India LLP Subsidiary 100.00 507A Kakad Chambers, Dr Annie Besant Road Worli, Mumbai 400 018, India
Ashmore Investment Advisors (India) Private Limited (in liquidation) Subsidiary 99.82
1. Ashmore Asset Management Limited (registered number 3888504) is exempt
from the requirements relating to the audit of accounts under section 479A of
the UK Companies Act 2006.
Name Classification % voting interest Registered address and place of incorporation
Ashmore Investment Management (US) Corporation Subsidiary 100.00 475 Fifth Avenue, 15th Floor
New York, 10017
USA
Ashmore Investment Advisors (US) Corporation Subsidiary 100.00
Avenida Partners LLC Subsidiary 100.00 200 Park Avenue South
New York, 10003
USA
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 Avenida LatAm Energy Efficient Affordable Housing Fund III GP Subsidiary 100.00 10 rue du Château d'Eau, L-3364 Leudelange, Grand Duchy of Luxembourg
Ashmore Investment Management (Singapore) Pte. Ltd. Subsidiary 100.00 1 George Street, #15-04, Singapore 049145
KCH Cairo Pte. Ltd. Subsidiary 100.00
PT Ashmore Asset Management Indonesia Tbk Subsidiary 60.04 Pacific Century Place, 18th Floor,
SCBD Lot 10, Jl. Jenderal. Sudirman Kav.
52-53 Jakarta 12190, Indonesia
Ashmore Management Company Colombia SAS Subsidiary 61.20 Carrera 7 No. 75 -66,
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. Subsidiary 100.00
Sociedad Fiduciaria
Ashmore Management Backup Company S.A.S Subsidiary 100.00
Avenida Colombia Management Company SAS Subsidiary 100.00
Ashmore Avenida DP General Partner SAS Subsidiary 100.00
Ashmore Avenida Back Office SAS Subsidiary 100.00
Ashmore Peru Backup Management Subsidiary 100.00 Av. Circunvalación del Club Golf Los Incas No. 134, Torre 1, Of. 505, Surco.
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) SL Subsidiary 100.00 c/ Hermosilla 11, 4ºA, 28001 Madrid, Spain
Ashmore Management (DIFC ) Limited Subsidiary 100.00 Unit L30-07, Level 30, ICD Brookfield Place, Dubai International Financial
Centre, Dubai, UAE
Ashmore Investment Saudi Arabia Subsidiary 100.00 3rd Floor Tower B, Olaya Towers
Olaya Main Street, Riyadh, Saudi Arabia
Ashmore Saudi Equity Fund Consolidated fund 96.05
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 Managers Subsidiary 55.00 Les Cascades Building
(Mauritius) LLC
33 Edith Cavell Street, Port Louis
Mauritius
Ashmore Investments (Holdings) Limited Subsidiary 100.00
Name Classification % voting interest Registered address and place of incorporation
Ashmore Management Company Limited Subsidiary 100.00 Trafalgar Court
Les Banques
St Peter Port
GY1 3QL
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 Growing Multi Strategy Fund Limited Consolidated fund 100.00
Ashmore Emerging Markets Debt and Currency Fund Limited Consolidated fund 57.88
Ashmore SICAV Emerging Markets Middle East Equity Fund Consolidated fund 88.00 10, rue du Chateau d'Eau
L-3364 Leudelange
Grand-Duchy of Luxembourg
Ashmore SICAV Emerging Markets Sovereign Debt ESG Fund Consolidated fund 100.00
Ashmore SICAV Emerging Markets Corporate Debt ESG Fund Consolidated fund 100.00
Ashmore SICAV Emerging Markets China Bond Fund Consolidated fund 69.78
Ashmore SICAV Emerging Markets Global Small-Cap Equity Fund Consolidated fund 41.16
Ashmore SICAV Emerging Markets IG Total Return Fund Consolidated fund 100.00
Ashmore SICAV Emerging Markets Total Return ESG Fund Consolidated fund 99.95
Ashmore SICAV Emerging Markets Indonesian Equity Fund Consolidated fund 100.00
Ashmore SICAV Emerging Markets Equity ESG Fund Consolidated fund 99.89
Ashmore SICAV Emerging Markets Volatility-Managed LCBF Consolidated fund 100.00
Ashmore SICAV Emerging Markets IG Short Duration Fund Significant holding 31.32
Ashmore SICAV Emerging Markets Multi-Asset Fund Significant holding 26.13
Ashmore Emerging Markets Corporate Debt ESG Fund Consolidated fund 100.00 50 South LaSalle Street
Chicago, Illinois 60603
Ashmore Emerging Markets Investment Grade Income Fund Consolidated fund 100.00
Ashmore Emerging Markets Local Currency Bond Fund Consolidated fund 53.09
Ashmore Emerging Markets Equity ESG Fund Consolidated fund 100.00
Ashmore Emerging Markets Short Duration Select Fund Consolidated fund 100.00
Taiping Fund Management Company Associate 5.23 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 statements 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 2022 or 30 June 2021.
Statutory accounts for 2021 have been delivered to the registrar of companies,
and those for 2022 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 2021 or 2022.
ALTERNATIVE PERFORMANCE MEASURES
Ashmore discloses APMs in order to assist shareholders' understanding of the
operational performance of the Group during the accounting period and to allow
consistent comparisons with prior periods.
The calculation of APMs is consistent with the financial year ended 30 June
2021. Historical disclosures relating to APMs, including explanations and
reconciliations, can be found in the respective interim financial reports and
Annual Reports and Accounts.
Net revenue
As shown in the CSCI, net revenue is total revenue less distribution costs and
including FX. This provides a comprehensive view of the revenues recognised by
the Group in the period.
Reference FY2021/22 FY2020/21
£m
£m
Total revenue CSCI 254.4 292.9
Less:
Distribution costs CSCI (3.5) (5.5)
Add:
Foreign exchange CSCI 11.6 4.3
Net revenue 262.5 291.7
Net management fees
The principal component of the Group's revenues is management fees, net of
associated distribution costs, earned on AuM.
Reference FY2021/22 FY2020/21
£m
£m
Management fees CSCI 247.0 276.4
Less:
Distribution costs CSCI (3.5) (5.5)
Net management fees 243.5 270.9
Net management fee margin
The net management fee margin is defined as the ratio of annualised management
fees less distribution costs to average AuM for the period, in US$ since it is
the primary currency in which fees are received and matches the Group's AuM
disclosures. The average AuM excludes assets where fees are not recognised in
revenues, for example AuM related to associates and joint ventures. The margin
is a principal measure of the firm's revenue generating capability and is a
commonly used industry performance measure.
FY2021/22 FY2020/21
Net management fee income (US$m) 323.4 367.1
Average AuM (US$bn) 82.8 89.4
Net management fee margin (bps) 39 41
Variable compensation ratio
The variable compensation ratio is defined as the charge for VC as a
proportion of 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 VC is a component of personnel expenses and
comprises share-based payments and performance-related cash bonuses.
EBVCIT is operating profit excluding the charge for VC, charitable donations
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.
Reference FY2021/22 FY2020/21
£m
£m
Operating profit CSCI 119.2 258.3
Less:
Seed capital-related items CSCI, Note 20d 46.2 (69.2)
Add:
Variable remuneration Note 9 45.6 53.6
Charitable donations 0.6 1.0
EBVCIT 211.6 243.7
VC ratio 21.5% 22.0%
EBITDA
EBITDA provides a view of the operating performance of the business before
certain non-cash items, financing income and charges, and taxation.
Reference FY2021/22 FY2020/21
£m
£m
Operating profit CSCI 119.2 258.3
Add:
Depreciation & amortisation Note 11 3.1 2.8
EBITDA 122.3 261.1
Adjusted net revenue, adjusted operating costs and adjusted EBITDA
Adjusted figures exclude items relating to FX translation and seed capital.
This provides an alternative view of performance, excluding the volatility
associated with those items, which is used by management to assess the Group's
operating performance.
Reference FY2021/22 FY2020/21
£m
£m
Net revenue CSCI 262.5 291.7
Less:
Foreign exchange translation Note 7 (5.3) 4.9
Adjusted net revenue 257.2 296.6
Reference FY2021/22 FY2020/21
£m
£m
Personnel expenses CSCI (73.4) (80.3)
Other expenses CSCI (25.1) (24.0)
Less:
Other expenses in consolidated funds Note 20d 1.4 1.7
Add:
VC % on foreign exchange translation Note 7 1.1 (1.1)
Adjusted operating costs (96.0) (103.7)
Reference FY2021/22 FY2020/21
£m
£m
EBITDA 122.3 261.1
Less:
Foreign exchange translation Note 7 (5.3) 4.9
VC % on foreign exchange translation 1.1 (1.1)
Seed capital-related items CSCI, Note 20d 46.2 (69.2)
Adjusted EBITDA 164.3 195.7
Adjusted EBITDA margin
The ratio of adjusted EBITDA to adjusted net revenue, both of which are
defined and reconciled above. This is an appropriate measure of the Group's
operational efficiency and its ability to generate returns for shareholders.
Adjusted diluted EPS
Diluted EPS excluding items relating to FX translation and seed capital, as
described above, and the related tax impact.
Reference FY2021/22 FY2020/21
pence
pence
Diluted EPS CSCI 12.6 34.2
Less:
Foreign exchange translation Note 7 (0.6) 0.6
Tax on foreign exchange translation (19%) 0.1 (0.1)
Seed capital-related items CSCI, Note 8, Note 20d 7.1 (13.2)
Tax on seed capital-related items (0.5) 1.8
Adjusted diluted EPS 18.7 23.3
Conversion of operating profits to cash
This compares cash generated from operations, excluding consolidated funds, to
adjusted EBITDA, and is a measure of the effectiveness of the Group's
operations in converting profits to cash flows for shareholders. Excluding
consolidated funds also ensures consistency between the cash flow and adjusted
EBITDA.
Reference FY2021/22 FY2020/21
£m
£m
Cash generated from operations Consolidated cash flow statement 182.1 213.5
Less:
Cash flows relating to consolidated funds Note 20d 2.8 (0.4)
Operating cash flow 184.9 213.1
Adjusted EBITDA 164.3 195.7
Conversion of operating profits to cash 113% 109%
Capital resources
Ashmore has calculated its capital resources in a manner consistent with the
ICAAP regime. Note that goodwill and intangible assets include deferred
acquisition costs and foreseeable dividends relate to the proposed final
dividend of 12.1 pence per share.
Reference 30 June 2022 30 June 2021
£m
£m
Total equity Balance sheet 966.8 932.7
Less deductions:
Goodwill and intangibles Balance sheet (91.3) (81.0)
Investments in associates Balance sheet (2.1) (0.9)
Foreseeable dividends Note 14 (84.7) (85.7)
Capital resources 788.7 765.1
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