REG - Ashmore Group Plc - Final Results
06/09/2023 07:00
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RNS Number : 4849L Ashmore Group PLC 06 September 2023
Ashmore Group plc
6 September 2023
Results for the year ended 30 June 2023
Ashmore Group plc (Ashmore, the Group), the specialist Emerging Markets asset
manager, today announces its audited results for the year ended 30 June
2023.
- Financial performance reflects early point in recovery cycle
- Assets under management (AuM) of US$55.9 billion(1)
- Positive performance of US$3.4 billion as Ashmore outperformed strong
market returns
- Net outflow of $11.5 billion as a result of institutional de-risking,
primarily by developed world investors
- Momentum building, higher performance and improved net flows in H2
- Adjusted net revenue of £195.4 million, 24% lower YoY and reflecting
opening AuM 23% below prior year average AuM level
- Adjusted operating costs reduced by 4% YoY. Variable remuneration
reduced by 24% YoY, representing 25% of EBVCIT
- Adjusted EBITDA of £106.2 million, 35% lower YoY, and adjusted EBITDA
margin of 54%
- Profit before tax of £111.8 million, 6% lower YoY, benefiting from
lower, unrealised mark-to-market seed capital losses and higher interest on
cash balances
- Diluted EPS of 12.2 pence, 4% lower than in the prior year
- Consistent strong and liquid balance sheet with over £700 million of
capital resources including c.£470 million of cash
- Final ordinary dividend maintained at 12.1 pence per share, to give
total dividends per share of 16.9 pence
- Active management delivering outperformance in a stronger year for
Emerging Markets
- Index returns of +2% to +11% over the 12 months
- Improving relative performance: 67% of AuM outperforming benchmarks over
one year; 69% over three years; and 49% over five years (30 June 2022: 45%,
28% and 48%, respectively)
- Consistent strategy implementation with meaningful AuM growth available
in each phase
- Phase 1 offers upside from higher allocations, particularly following a
period of market volatility
- Phase 2 ongoing, diversification through equities, alternatives capital
raising and cyclical upside from intermediary retail flows
- Phase 3 successfully delivering diversification benefits, and local
markets network can expand over time. AuM from Emerging Markets clients
increased by US$1.1 billion from 27% to 33% of Group AuM
- Clear opportunity for further recovery in Emerging Markets asset
prices
- Consistent structural themes support long-term Emerging Markets growth,
assets currently undervalued
- Emerging Markets have controlled inflation and central banks are cutting
rates; GDP growth is significantly higher than in the developed world; China
stimulus to counter weak consumer confidence
- Valuations remain highly attractive
Commenting on the Group's results, Mark Coombs, Chief Executive Officer,
Ashmore Group said:
"Ashmore has delivered meaningful investment outperformance for clients this
year and momentum is building as the recovery in Emerging Markets continues.
While the Group's financial performance naturally lags this pick-up in markets
and relative performance, as has been experienced after previous down cycles,
the consistent strategy underpins Ashmore's medium-term growth potential and
the business model is designed to mitigate the impact of market volatility.
"There is mounting evidence that the negative cycle has turned and, while the
recovery may not be a straight line, it is well-supported by improving
fundamentals across the larger emerging countries. Some investors remain
cautious, but client activity levels are increasing and the combination of
positive performance and attractive valuations available across Emerging
Markets should drive capital flows over the medium term.
"Ashmore remains highly profitable, is delivering outperformance for clients
and has a scalable operating platform, which means it is well-positioned to
benefit from the ongoing recovery in Emerging Markets."
1. As reported on 14 July 2023.
Analysts briefing
There will be a presentation for sell-side analysts at 9.30am on 6 September
2023 at UBS, 5 Broadgate, London, EC2M 2QS. A copy of the presentation will be
made available on the Group's website at ir.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
Consistent strategy implementation
With the experience of more than 30 years of specialist investing, Ashmore's
strategy is to capitalise on the long-term opportunitiesin Emerging Markets,
and its established business model responds to the shorter-term impact of
market volatility. Ashmore is delivering outperformance for clients and is
well-positioned for an ongoing recovery in markets.
The past year provided encouraging evidence that the cyclical recovery has
begun across Emerging Markets, with higher asset prices, an improving growth
outlook, falling inflation and the benefits of a weaker US dollar. There
remains, however, a degree of caution among some investors, particularly those
in the US, given macroeconomic concerns such as policy tightening by developed
world central banks and conflict or geopolitical tension in Europe and Asia.
Additionally, the largest Emerging Market, China, needs to navigate the
headwinds of lower consumer confidence and demand following the reopening of
its economy.
Against this backdrop, Ashmore has delivered meaningful outperformance for
clients and has continued to execute its long-term growth strategy, and its
business model remains appropriate to manage the impact of market volatility.
As has been experienced in previous cycles, after a period of challenging
market conditions the Group's financial performance naturally lags the turn in
markets and the delivery of investment outperformance. The Group started this
financial year with AuM of US$64 billion, which was more than 20% below the
level of average AuM in the prior financial year and therefore represented a
notable revenue headwind for the current year. There was encouraging momentum
over the year with client activity levels, net flows and investment
performance higher in H2 compared with H1. Overall, lower average AuM resulted
in a 35% YoY decline in adjusted EBITDA, but as a result of lower losses on
the Group's seed capital investments and higher interest earned on cash
balances, profit before tax was 6% lower and diluted EPS fell by 4%.
Consequently, the Board has recommended an unchanged final ordinary dividend.
Undiminished long-term growth and investment opportunities in Emerging Markets
Irrespective of events in the short term, the longer-term potential of
Emerging Markets remains undiminished. Superior economic growth is expected to
continue as a result of powerful convergence trends with the developed world.
These trends are supported by ongoing reforms, particularly the shift by
larger countries to local currency funding and high-quality policymaking that
delivers better economic management and greater resilience to external shocks.
The resulting investment opportunities for a specialist, active manager are
diversified across an investment universe spanning more than 70 emerging
countries and with approximately US$75 trillion of fixed income securities and
equity market capitalisation.
Appropriate strategy to deliver long-term growth
The Group's three-phase strategy is to capture these opportunities while
seeking to protect the Group from some of the more significant challenges
facing active asset managers such as the threat of passive competition.
Inevitably, given the cyclical nature of markets, progress made in each of the
three phases will vary.
Phase one
Risk aversion by some investors resulted in an adjustment to allocations to
Emerging Markets in the year, yet this was more pronounced among developed
world investors than those based in Emerging Markets. Ashmore's AuM from the
latter increased over the year by US$1.1 billion and from 27% to 33% of total
AuM.
While interest rates have increased in both developed and emerging countries,
there is additional yield available in Emerging Markets that helps to
compensate for higher risk, whether perceived or actual, and the merits of
equity allocations are underpinned by the superior growth prospects of
emerging economies. Therefore, as the market recovery continues, a broader
range of investors is expected to recognise and act upon the attractive
investment opportunities available in Emerging Markets fixed income and
equities.
Phase two
Ashmore's objective is to diversify its business and revenue streams over
time, and the current focus is on converting the strong equities investment
performance into client flows, with encouraging activity levels picking up
through the period; increasing alternatives AuM; and delivering growth in
intermediary retail assets as risk appetite increases.
The AuM opportunity within each initiative is substantial, with the potential
to deliver a significantly larger and more diversified business, thereby
enhancing further the Group's resilience to market cycles.
Phase three
Ashmore has established a network of local asset management operations across
six emerging countries, from Colombia in the west to Indonesia in the east.
Collectively, they manage US$7 billion for domestic and international
institutions and intermediary retail investors. Importantly, they provide the
Group with diversification benefits, as seen tangibly this year with stable
locally managed AuM compared with a decline for the Group's global business,
and access to significant long-term growth opportunities as each country
develops its capital markets and asset management industry.
Each business continues to develop according to its local strategy, with
listed equities outperformance, investment realisations and further capital
raising planned in Colombia; development of a broader product range and client
diversification in Saudi Arabia; good investment performance and growing AuM
in India; and investment outperformance and successful management of industry
regulatory changes in Indonesia.
The success of Ashmore Indonesia illustrates the near-term development
opportunity in these businesses, and the potential value creation for
Ashmore's shareholders. With the Group's support, the management team
established a highly profitable business of more than US$2 billion AuM, with
significant employee equity ownership and a listing on the local Jakarta Stock
Exchange. The business is currently valued at more than US$150 million.
Consequently, Ashmore has significant organic growth potential available in
each of these countries and will pursue opportunities to expand the network
over time.
Established business model to manage impact of market volatility
Ashmore has experienced many different market environments in more than 30
years of specialist investing in Emerging Markets and, while every cycle is
different, its business model is designed to mitigate the impact of
fluctuating AuM levels on its operational and financial performance.
The Board took the decision to increase the proportion of profits paid to
employees in variable remuneration from 22.5% to 25.0% of EBVCIT. While in
absolute terms the bonus pool is 24% lower, the higher percentage reflects the
cumulative impact of three years of mostly challenging market conditions and
consequently a significant reduction in AuM and pre-bonus profits. The Board
remains mindful of achieving an appropriate balance between overall employee
remuneration and the profits available to shareholders, and has recommended an
unchanged final ordinary dividend this year.
Delivering strong investment performance
As described in the Market review, Emerging Markets benchmark indices
delivered good returns for the year. In fixed income, Ashmore's value-based
investment process delivered outperformance through active management and
adding positions at attractive market levels over the past few years.
Similarly, the main equities strategies have navigated the market volatility
of recent years and delivered consistent outperformance, with a strong track
record over one, three and five years. Overall, 69% of the Group's AuM is
outperforming benchmarks over three years, a significant increase compared
with 28% a year ago.
Ashmore has a well-established pattern of exploiting cyclical market weakness
through active management embedding significant upside value in portfolios,
and the subsequent market recovery leading to outperformance for clients.
While the drivers of each cycle are different, Ashmore's consistent approach
has again delivered a similar profile of investment performance in
this cycle.
Employees
In recent years, Ashmore's employees have experienced significant changes in
working practices, high levels of market volatility and a period of cyclically
lower AuM and profits. Delivering performance for clients is the
responsibility of all colleagues, not just the investment professionals, and
therefore on behalf of the Board, I would like to thank each of them for their
steadfast commitment to Ashmore's purpose, their expertise and high levels of
professionalism, and maintaining the Group's highly effective team-based
culture.
Positive outlook as the market cycle turns
There is mounting evidence that the negative cycle has turned and, while the
recovery may not be a straight line, it is well-supported by improving
fundamentals across the larger emerging countries, although notably China
faces some headwinds from lower consumer confidence after reopening its
economy. Some investors remain cautious, but client activity levels are
increasing and the combination of positive performance and attractive
valuations available across Emerging Markets should drive capital flows over
the medium term, as has occurred after previous down cycles.
Ashmore is focused on pursuing its strategic growth objectives, while managing
the business appropriately to mitigate the impact of market conditions and
competitive pressures, and to deliver upside through operating leverage as AuM
grows as a consequence of performance and client flows.
Ashmore remains highly profitable, is delivering outperformance for clients
and has a scalable operating platform, which means it is well-positioned to
benefit from the ongoing recovery in Emerging Markets.
Mark Coombs
Chief Executive Officer
5 September 2023
MARKET REVIEW
A stronger year in Emerging Markets
Conditions in Emerging Markets improved over the year, leading to fixed income
returns of 6% to 11% and outperformance versus developed markets, and equities
delivered a positive return of 2%. Near-term returns are underpinned by
attractive valuations and further improvement in cyclical factors against a
backdrop of structural growth.
After a weak first quarter in common with global capital markets, Emerging
Markets rallied over the subsequent nine months to deliver positive returns
for the year overall. This reflects the benefit of sound and effective
monetary policies, lower debt levels than developed countries, tighter
sovereign and corporate spreads over the period, and the positive impact of a
weaker US dollar on local currency returns.
The year was characterised by the continued tightening of policy rates by
central banks in response to high inflation, banking failures in the US and
Europe, and ongoing conflict or geopolitical tension in Europe and Asia.
Several important economic indicators underpinned the rally in Emerging
Markets asset prices:
- GDP growth across Emerging Markets is expected to be significantly
higher than in the developed world.
- After more than two years of tighter monetary policy, inflation is
falling in Emerging Markets and interest rates are now higher than expected
CPI inflation. The inflection point in the rates cycle has been reached, the
credibility of most central banks is high, and monetary policy easing by
Emerging Markets central banks is possible in the foreseeable future.
- The US dollar has enjoyed a prolonged bull run, which appears to have
ended in 2022 as the weak underlying fundamentals in the US economy, and the
prospect of a recession and correction in the equity market, put downward
pressure on the currency.
The sections below present the recent performance and prospects for each of
the main fixed income and equity asset classes.
External debt
The EMBI GD delivered a positive return of 7.4% over the 12 months, and the
index spread over US Treasuries tightened by 110bps to 430bps. Although the
first quarter saw a material drawdown (-4.6%) due to high inflation and
hawkish central banks, the index delivered positive returns in each subsequent
quarter. By region, Eastern Europe, Africa and Latin America performed well,
while Asia and the Middle East lagged the index.
The HY index spread briefly exceeded 1,000bps early in the period, which
historically is a level from which substantial positive returns are achieved
over the following 12 months. Indeed, HY assets outperformed over the 12
months with a return of 11.8% compared with 3.4% for the IG index.
Some higher-yielding countries, such as Egypt and Sri Lanka, face challenges,
but each situation is specific to the country in question and the path for
each - in terms of avoiding default, undertaking a credible restructuring, or
remaining in limbo without access to markets - depends as much on the domestic
capacity for reform as it does on the global macro environment. The investment
opportunity in each situation will be determined by the extent to which the
various scenarios have been priced by bond and equity markets.
The US rate cycle is approaching its peak and the external debt asset class is
set to outperform given its still wide spread by historical standards, a yield
in excess of 8%, and substantial diversification available in an index
comprising 69 countries and with 51% of bonds rated IG.
Local currency
The GBI-EM GD performed well with a return of 11.4% over the year, mostly
through a rally in local markets with only 1% coming from stronger Emerging
Markets currencies against the US dollar. The asset class has benefited from
the early and effective monetary policy tightening pursued by many countries'
central banks over the past couple of years, which has delivered macro
stability and anchored inflation expectations in those countries, and also
provided a path for policy easing in the foreseeable future. The index returns
were particularly strong in Latin America and Eastern Europe, while Asia
lagged. Weaker performance in the Middle East and Africa reflected the
country-specific challenges in Egypt and South Africa.
The outlook for the US dollar is important to investor perceptions and
performance of the local currency asset class. After a prolonged bull run,
several factors point to a period of weakness in the US dollar, including
large fiscal deficits, imbalanced external accounts and overly expensive
currency and stocks, particularly in the context of a potential recession. For
context, the trade-weighted real value of the US dollar peaked in 2022 only
10% below the 1985 Plaza Accord level and above the level reached around the
dot-com bubble, thus representing one of the highest levels that the currency
has seen in the past 50 years. In contrast, Emerging Markets currencies trade
at attractive real effective exchange rate valuations.
Notwithstanding the returns delivered over the past 12 months, the local
currency asset class continues to offer substantial value with an attractive
yield of more than 6%, accelerating GDP growth and the potential for interest
rate cuts in many of the 20 countries in the index if inflation continues to
trend down.
Corporate debt
The CEMBI BD performed similarly to the sovereign market, with an investment
return of 5.7% over the year supported by a tightening of spread from 400bps
to 320bps. HY bonds outperformed with a return of 9.9% compared with 2.5% for
IG bonds. In terms of regions, corporate assets performed strongly in Eastern
Europe, with returns closer to the overall index performance in Latin America,
Africa, Asia and the Middle East.
Default rates are low in Latin America, Africa and Middle East (less than 1%)
and comparable to the US market. Higher default rates have been experienced
due to policy tightening in China and as a consequence of the war in Ukraine,
but it appears that overall default rates may have peaked in this cycle.
This asset class has characteristics that are superior to the equivalent US
credit markets and, after a repricing of assets during the current interest
rate cycle, underpin the relative value available in Emerging Markets
corporate debt. These characteristics include:
- The index is highly diversified with more than 750 issuers across 63
countries. More than half (58%) of the bonds in the index are rated IG.
- Companies in Emerging Markets tend to have lower leverage compared with
US and European peers, because management teams have a more conservative
approach given the need to compensate for higher perceived country risk. Net
leverage in the IG market is less than 1.5x EBITDA, compared with 2.5x to 3.5x
in the US and Europe. There is a similar picture in the HY market, with net
leverage of around 2x in Emerging Markets compared with 3.5x to 5x in the US
and Europe.
- Despite lower leverage, Emerging Markets IG bonds offer a significant
spread pick-up of 100bps per turn of leverage, compared with equivalent-rated
US high-grade issuers.
- Similarly, the HY index offers an attractive yield of 9.5%, which
despite the lower leverage is a point higher than the US HY market.
The above factors, when combined with the positive outlook for corporate
earnings as a consequence of accelerating GDP growth and a supportive
technical position given subdued new issuance, mean that the corporate debt
asset class is well-positioned to deliver further positive returns over the
medium term.
Equities
The MSCI EM index rose by 1.8% over the year, with the impact of tighter
financial conditions in the first quarter and weaker than expected Asian
economic data in the final quarter holding back returns compared with the
fixed income markets. Frontier Markets were a little weaker (MSCI Frontier
-2.8%), but small cap markets performed better, with the MSCI EM Small Cap
index rising 13.3%.
After a challenging period in many countries, the outlook for equity market
performance is positive. Importantly, aggregate GDP growth in emerging
countries is expected to accelerate over the next few years, and consequently
the premium to developed world growth will expand. Historically, there has
been an understandable correlation between the relative performance of equity
markets and economic growth differentials, which therefore provides a firm
underpin to the asset class.
Against this backdrop of accelerating economic growth, the return opportunity
in Emerging Markets equities reflects a combination of secular growth
opportunities, particularly in Asian countries such as India and Indonesia,
and other markets trading at substantial discounts to their history and fair
value, for example in Latin America and China. Earnings growth expectations
are modest, and in this context the substantial price/earnings ratio discount
at which Emerging Markets equities trade to developed markets (11.0x compared
with 18.5x for the S&P500) appears unjustified and supports outperformance
of the asset class over the medium term.
Outlook
The structural drivers of growth in Emerging Markets are intact and
underpinned by ongoing reforms in Asia, Latin America and Africa together with
dominance over the world's natural resources and the supply chains necessary
for energy transition. This is reflected in the continued superior GDP growth
expected when compared with the developed world. However, this growth
potential is not reflected in current valuations, providing investors with an
opportunity to participate in the ongoing recovery in asset prices after a
challenging few years in capital markets outside the US.
From a cyclical standpoint, there are several factors that should explicitly
support the performance of Emerging Markets:
- Inflation is falling and interest rates are peaking following early and
effective monetary policy tightening by Emerging Markets central banks, well
ahead of the Fed and other developed world policymakers.
- China has a renewed focus on delivering economic growth and consequently is
providing significant monetary and fiscal stimulus to its economy, which will
have both a domestic impact but also a broader positive effect on trade.
Policy choices must also recognise the need to navigate the headwinds of lower
consumer confidence and demand following the reopening of its economy.
- After a prolonged bull run, the US dollar appears to have peaked in late
2022. Objectively, it is still overvalued, partially as a result of
significant flows into the US equity market that is also vulnerable to a
correction given its high valuation and the potential for a recession in a
lagged response to tighter financial conditions.
With this backdrop, the near-term outlook for the main Emerging Markets asset
classes is positive.
Given the historical strong correlation, equities should benefit from an
expansion of the relative economic growth rate, and a weaker US dollar will
support returns from this asset class for many developed world investors.
Similarly, local currency bond returns will be underpinned by the monetary
easing cycle in many countries together with dollar weakness.
IG sovereign and corporate markets offer meaningful yield enhancement compared
with the developed world, and provide a lower-risk alternative for investors
that remain concerned about aspects of the global macro environment. At the HY
end of the market, distressed credits offer potentially significant recovery
upside as the economic cycle turns.
Given the global macro challenges of the past few years, and the ongoing war
in Europe and geopolitical tension in Asia, there is understandably an element
of risk aversion among some investors, particularly those in the US. However,
a broader set of investors increasingly recognises the opportunities
represented by the superior growth prospects and attractive yields available
across Emerging Markets. As has been seen in previous cycles, an increase in
capital flows and investment supports economic growth in the developing world
and can therefore lead to further asset class outperformance.
Business review
Successfully managing a cycle
Adjusted EBITDA margin of 54% reflects opening AuM below last year's average
level, mitigated by effective cost management. With higher interest income and
seed capital returns, diluted EPS is 12.2 pence, 4% lower YoY, and the balance
sheet remains robust with £705 million of capital resources including more
than £450 million of cash.
Reconciling items:
£m FY2023 Seed capital (gains)/losses FX translation (gains)/losses FY2023 FY2022
Reported Adjusted Adjusted
Net management fees 183.2 - - 183.2 243.5
Performance fees 5.1 - - 5.1 4.5
Other revenue 2.7 - - 2.7 2.9
Foreign exchange 5.4 - (1.0) 4.4 6.3
Net revenue 196.4 - (1.0) 195.4 257.2
Gains on investment securities (44.3) 44.3 - - -
Change in third-party interests in consolidated funds 19.3 (19.3) - - -
Personnel expenses (66.2) - 0.3 (65.9) (72.3)
Other expenses excluding depreciation and amortisation (24.6) 1.3 - (23.3) (20.6)
EBITDA 80.6 26.3 (0.7) 106.2 164.3
EBITDA margin 41% - - 54% 64%
Depreciation and amortisation (3.2) - - (3.2) (3.1)
Operating profit 77.4 26.3 (0.7) 103.0 161.2
Net finance income/(expense) 33.9 (18.0) - 15.9 1.6
Associates and joint ventures 0.5 - - 0.5 1.3
Profit before tax 111.8 8.3 (0.7) 119.4 164.1
Diluted EPS (p) 12.2 0.6 (0.1) 12.7 18.7
Assets under management
AuM declined by 13% over the year to US$55.9 billion, with the movement
attributable to net outflows of US$11.5 billion, offset by positive investment
performance of US$3.4 billion, delivered in each of the six investment themes.
Reflecting the opening AuM level of US$64.0 billion, average AuM was 30% lower
than in the prior year at US$58.2 billion (FY2022: US$83.6 billion).
Gross subscriptions of US$7.2 billion represent 11% of opening AuM, lower than
in the prior year primarily as a consequence of cautious investor sentiment
reflecting concerns over the macroeconomic backdrop in global markets (FY2022:
US$13.1 billion, 14% of opening AuM).
Subscriptions were strongest in the external debt, local currency and equities
investment themes, particularly as clients recognised that Emerging Markets
central banks are ahead of their developed world counterparts in tackling
inflation, and the US dollar appears to have peaked in 2022. External debt
inflows were a combination of existing client top-ups and continued product
development to capture the intrinsic value available in HY markets, and there
were new institutional clients in local currency and equities.
Gross redemptions of US$18.7 billion, or 29% of opening AuM, were lower than
in the prior year (FY2022: US$26.6 billion, 28% of opening AuM) and include
US$2.3 billion of overlay/liquidity redemptions (FY2022: US$6.0 billion), but
remain relatively high as a consequence of global macro concerns and market
volatility, particularly in the first half of the year, meaning some investors
shifted allocations in favour of traditionally perceived safe havens. This
risk aversion was particularly evident in developed world investors, reflected
in a lower proportion of AuM from clients in the Americas and the fact that
Ashmore's Emerging Markets-domiciled clients increased from 27% to 33% of
Group AuM.
Consistent with the rally in markets from the September lows, Ashmore's
investment performance and net flow momentum improved in the second half of
the financial year. Positive investment performance of US$2.6 billion in H2
compares with US$0.8 billion in H1, and net outflows approximately halved from
US$7.6 billion in H1 to US$3.9 billion in H2.
The total net outflow for the period of US$11.5 billion (FY2022: US$13.5
billion net outflow) comprises a net outflow from retail clients of US$0.7
billion (24% of opening intermediary retail AuM), reflecting the typically
shorter investment horizon, and net redemptions from institutional clients of
US$10.8 billion (18% of opening institutional AuM).
Ashmore's local offices continued to perform well and illustrated the benefits
of diversification. Total AuM was stable at US$7.0 billion (30 June 2022:
US$6.9 billion) with only modest net outflows of US$0.3 billion. As described
in the CEO review, these businesses have significant growth potential as they
participate in the development of independent domestic asset management
industries, and there are opportunities to expand the network over time to
enhance the strategic and financial benefits to the Group.
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$6.3 billion of
overlay/liquidity funds (30 June 2022: US$7.2 billion).
Investment theme AuM Gross Gross Net flows Performance AuM
30 June
subscriptions
redemptions
US$bn
US$bn
30 June
2022
US$bn
US$bn
2023
US$bn
US$bn
External debt 14.4 1.7 (5.7) (4.0) 0.6 11.0
Local currency 20.6 2.7 (6.0) (3.3) 1.5 18.8
Corporate debt 6.8 0.2 (0.6) (0.4) 0.1 6.5
Blended debt 14.4 0.7 (4.0) (3.3) 0.8 11.9
Fixed income 56.2 5.3 (16.3) (11.0) 3.0 48.2
Equities 6.3 1.9 (2.3) (0.4) 0.3 6.2
Alternatives 1.5 - (0.1) (0.1) 0.1 1.5
Total 64.0 7.2 (18.7) (11.5) 3.4 55.9
The Group's AuM remain geographically diverse and broadly consistent with
recent periods, with 37% of AuM invested in Latin America, 29% in Asia
Pacific, 13% in Eastern Europe and 21% in the Middle East and Africa.
Clients
Ashmore's clients are predominantly a diversified set of institutions,
representing 96% of AuM (30 June 2022: 95%), with the remainder sourced
through intermediary retail channels. Segregated accounts represent 81% of AuM
(30 June 2022: 81%).
Ashmore's principal mutual fund platforms are in Europe and the US, which in
total represent AuM of US$5.7 billion in 43 funds. The European SICAV range
comprises 31 funds with AuM of US$4.8 billion (30 June 2022: US$5.4 billion in
30 funds) and the US 40-Act range has 12 funds with AuM of US$0.9 billion (30
June 2022: US$1.0 billion in 12 funds).
Investment performance
As at 30 June 2023, 67% of AuM is outperforming over one year, 69% over three
years and 49% over five years (30 June 2022: 45%, 28% and 48%, respectively).
Characteristically, as markets have started to recover from oversold levels,
Ashmore's investment processes have delivered meaningful outperformance. In
addition to the consistently strong relative performance in local currency, IG
and equities strategies, there has been a notable improvement in some of the
other, higher yielding fixed income strategies.
Current valuations across the Emerging Markets asset classes underpin
additional recovery performance in coming periods, and the inherent value in
Ashmore's portfolios support the delivery of further outperformance for
clients.
Financial review
Revenues
Opening AuM and average AuM were 23% and 30%, respectively, below the average
AuM of the prior year, and this lower level of AuM delivered the 25% fall in
net revenue to £196.4 million. On an adjusted basis, excluding FX translation
effects, net revenue fell by 24% to £195.4 million.
Net revenue
FY2023 FY2022
£m
£m
Net management fees 183.2 243.5
Performance fees 5.1 4.5
Other revenue 2.7 2.9
FX: hedges 4.4 6.3
Adjusted net revenue 195.4 257.2
FX: balance sheet translation 1.0 5.3
Net revenue 196.4 262.5
Net management fee income declined by 25% to £183.2 million. This reflects
the lower average AuM and a net management fee margin of 38bps (FY2022:
39bps), partially offset by the benefit of a lower average GBP:US$ rate in
this period. At constant FY2022 exchange rates, net management fee income
reduced by 32%.
The slight decline in the net management fee margin YoY reflects the positive
effects from investment theme mix and large mandate flows offset by the impact
of market performance over the year (stronger performance in lower margin
strategies and accounts) and competition and other mix effects.
Performance fees of £5.1 million (FY2022: £4.5 million) were realised in the
year, and delivered by a range of funds in the local currency, blended debt
and alternatives investment themes. Approximately US$12 billion of the Group's
AuM, or 21% of the total, is eligible to earn performance fees at 30 June
2023. The Group continues to expect its diverse sources of net management fee
income to generate the majority of its net revenues.
Translation of the Group's non-Sterling assets and liabilities, excluding seed
capital, resulted in an unrealised FX gain of £1.0 million (FY2022: £5.3
million gain). The Group's effective hedging programme and the active
management of FX exposures during the period meant that realised and
unrealised hedging gains of £4.4 million were delivered (FY2022: £6.3
million gain). Therefore, the Group recognised a total FX gain of £5.4
million in revenues (FY2022: £11.6 million gain).
Other revenue of £2.7 million was comparable to the prior year (FY2022: £2.9
million).
The table below summarises the net management fee income, performance fee
income and net management fee margin by investment theme.
Investment theme Net management fees Performance fees Net management fee margin
FY2023 FY2022 FY2023 FY2022 FY2023 FY2022
£m
£m
£m
£m
£m
£m
External debt 32.5 46.7 - 2.0 31 35
Local currency 43.0 54.9 3.3 0.8 28 27
Corporate debt 16.2 26.0 - - 30 37
Blended debt 46.8 69.3 1.1 1.3 44 46
Fixed income 138.5 196.9 4.4 4.1 33 35
Equities 29.5 33.1 - 0.4 58 58
Alternatives 15.2 13.5 0.7 - 144 138
Total 183.2 243.5 5.1 4.5 38 39
Operating costs
Total operating costs of £94.0 million (FY2022: £98.5 million) include £1.3
million of expenses incurred by seeded funds that are required to be
consolidated (FY2022: £1.4 million), as disclosed in note 20. On an adjusted
basis, taking into account the impact of seed capital and the proportion of
the accrual for variable compensation that relates to FX translation gains,
operating costs were reduced by 4% compared with the prior year. Adjusted
operating costs fell by 7% at constant FY2022 exchange rates.
FY2023 FY2022
£m
£m
Staff costs (31.4) (27.8)
Other operating costs (23.3) (20.6)
Depreciation and amortisation (3.2) (3.1)
Operating costs before VC (57.9) (51.5)
Variable compensation (VC) (34.8) (45.6)
VC accrual on FX gains/losses 0.3 1.1
Adjusted operating costs (92.4) (96.0)
Consolidated funds costs (1.3) (1.4)
Add back VC on FX gains/losses (0.3) (1.1)
Total operating costs (94.0) (98.5)
Staff costs increased by 13% to £31.4 million, of which nearly half was due
to the lower average GBP:US$ rate. There was also the impact of wage inflation
in certain locations and a 1% higher average headcount. The underlying
increase in staff costs was primarily in the first half of the year, with
costs in the second half being broadly flat on the first half.
Other operating costs, excluding consolidated fund expenses and depreciation
and amortisation, increased by 13% to £23.3 million. FX movements account for
approximately half of the increase and the remainder was due to the full year
impact of returning towards more normal levels of business travel and office
occupancy.
Ashmore accrued charitable donations of £0.5 million (FY2022: £0.6 million),
equivalent to 0.5% of profit before tax.
Variable compensation has been accrued at 25% of EBVCIT, resulting in a charge
of £34.8 million. The higher proportion of profits reflects the point in the
cycle, where Ashmore is delivering investment outperformance for clients as
markets recover, but the financial performance lags with the impact of lower
average AuM levels. In absolute terms, the charge is 24% lower than in the
prior year (FY2022: £45.6 million) and consistent with the fall in adjusted
net revenue.
The combined depreciation and amortisation charges for the period of £3.2
million were similar to the prior year.
Adjusted EBITDA
The impact of the lower revenue base, partially mitigated by lower operating
costs, means that adjusted EBITDA declined by 35% from £164.3 million to
£106.2 million. This delivered an adjusted EBITDA margin of 54% for the year
(FY2022: 64%).
Finance income
Net finance income of £33.9 million (FY2022: £2.1 million finance expense)
includes gains relating to seed capital investments, which are described in
more detail below. Excluding such items, net interest income for the period of
£15.9 million increased compared with the prior year (FY2022: £1.6 million)
due to the benefit of higher market interest rates on the Group's cash
deposits.
Seed capital
The following table summarises the principal IFRS 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 realised gains of
£2.4 million and an unrealised mark-to-market loss of £10.7 million, to give
an aggregate loss of £8.3 million for the year (FY2022: £49.9 million loss).
This comprises a £15.3 million loss in respect of consolidated funds (FY2022:
£40.5 million loss) and a £7.0 million gain in respect of unconsolidated
funds (FY2022: £9.4 million loss).
Impact of seed capital investments on profits
FY2023 FY2022
£m
£m
Consolidated funds (note 20):
Gains/(losses) on investment securities (44.3) (61.3)
Change in third-party interests in consolidated funds 19.3 16.5
Operating costs (1.3) (1.4)
Investment income 11.0 5.7
Sub-total: consolidated funds (15.3) (40.5)
Unconsolidated funds (note 8):
Market return 5.7 (10.6)
FX 1.3 1.2
Sub-total: unconsolidated funds 7.0 (9.4)
Total seed capital profit/(loss) (8.3) (49.9)
- realised 2.4 0.1
- unrealised (10.7) (50.0)
Profit before tax
Statutory profit before tax was 6% lower at £111.8 million (FY2022: £118.4
million) as a consequence of the decline in adjusted EBITDA mitigated by lower
losses on seed capital investments and the benefit of higher interest rates on
finance income.
Taxation
The effective tax rate of 22.6% (FY2022: 22.4%) is slightly higher than the
blended UK corporation tax rate of 20.5% for the year (FY2022: 19.0%) due to
the geographic mix of the Group's profits in the period, the valuation of
deferred tax assets relating to share-based remuneration and the impact of
seed capital gains and losses. Note 12 to the financial statements provides a
full reconciliation of this difference compared with the UK corporation tax
rate.
The Group's current effective tax rate, based on its geographic mix of profits
and prevailing tax rates, is approximately 19% to 20%.
Earnings per share
Basic EPS for the period fell by 7% to 12.4 pence (FY2022: 13.4 pence) and
diluted EPS declined by 4% from 12.6 pence to 12.2 pence.
On an adjusted basis, excluding the effects of FX translation, seed
capital-related items and relevant tax, diluted EPS was 32% lower at 12.7
pence (FY2022: 18.7 pence).
Balance sheet
Ashmore's consistent approach is to maintain a strong and liquid balance sheet
over market cycles, enabling it to support the commercial demands of current
and prospective investors, and to take advantage of strategic development
opportunities.
As at 30 June 2023, total equity attributable to shareholders of the parent
was £898.8 million (30 June 2022: £945.0 million). The Group has no debt.
The level of capital required to support the Group's activities, including its
regulatory requirements, is £80.6 million. As at 30 June 2023, the Group had
total capital resources of £704.8 million, equivalent to 99 pence per share,
and therefore representing an excess of £624.2 million over the Board's level
of required capital.
Cash
Ashmore's business model delivers a high conversion rate of operating profits
to cash. Based on operating profit of £77.4 million for the period (FY2022:
£119.2 million), the Group generated £111.6 million of cash from operations
(FY2022: £182.1 million). The operating cash flows after excluding
consolidated funds represent 105% of adjusted EBITDA (FY2022: 113%).
Cash and cash equivalents by currency
30 June 30 June
2023
2022
£m
£m
Sterling 374.0 273.1
US dollar 71.1 247.9
Other 33.5 31.0
Total 478.6 552.0
Excluding cash held in consolidated funds, the Group's cash and cash
equivalents reduced by £73.7 million to £468.3 million (30 June 2022:
£542.0 million), principally due to new seed capital investments. There was
an increase in the proportion of cash held in Sterling following the sale of
US dollars for Sterling at attractive levels in the first half of the year.
Seed capital investments
The Group's seed capital programme has delivered growth in third-party AuM
with approximately US$6 billion of AuM in funds that have been seeded,
representing 11% of total Group AuM.
During the year, the Group made new investments of £63.9 million and
profitably realised £24.6 million from previous investments. The unrealised
mark-to-market loss on the portfolio was £19.8 million, meaning that the
market value of the Group's seed capital investments increased to £291.5
million (30 June 2022: £272.0 million).
Subscriptions in the period were focused on developing new funds in the
external debt, local currency and equities themes, including providing access
to the Group's local asset management capabilities.
The ability to redeem seed capital was facilitated by successful realisations
by funds in the alternatives theme, particularly in respect of
infrastructure-related investments in Latin America, and matching client flows
into equity funds managed locally in Saudi Arabia.
The mark-to-market reduction in value was due to changes in asset valuations
in alternatives funds, predominantly in the first half of the year, with
positive returns delivered by funds in the fixed income and equities themes.
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.
Ashmore has integrated the consideration of ESG factors into its 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
and may contribute to Ashmore's involvement in industry initiatives such as
Climate Action 100+, NZAMI and UN PRI.
Seed capital market value by currency
30 June 30 June
2023
2022
£m
£m
US dollar 240.1 222.4
Colombian peso 19.7 19.0
Other 31.7 30.6
Total market value 291.5 272.0
As at 30 June 2023, two-thirds of the Group's seed capital is held in funds
with at least monthly dealing frequency, such as SICAV or US 40-Act mutual
funds. Ashmore has also made seed capital commitments to funds of £8.9
million that were undrawn at the period end, giving a total value for the
Group's seed capital programme of approximately £300 million.
Goodwill and intangible assets
At 30 June 2023, goodwill and intangible assets on the Group's balance sheet
totalled £86.9 million (30 June 2022: £90.9 million). The movement in the
period is primarily the result of an FX revaluation loss in reserves of £3.9
million (FY2022: £10.5 million gain).
Shares held by EBT
The EBT purchased £15.6 million of ordinary shares during the period in
anticipation of the vesting of employee share awards. Consequently, at 30 June
2023, the EBT owned 50,834,683 ordinary shares (30 June 2022: 55,512,301
ordinary shares), representing 7.1% of the Group's issued share capital
(30 June 2022: 7.8%).
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 OCI.
Movements in the GBP:US$ and other exchange rates over the period increased
net management fees by 7%, increased operating costs by 3%, and resulted in a
translation gain in net revenue of £1.0 million on the Group's foreign
currency assets and liabilities and a £1.3 million mark-to-market gain on the
Group's seed capital investments.
Included in OCI is an unrealised FX translation loss on non-Sterling assets
and liabilities of £26.2 million (FY2022: £80.2 million gain), which, in
addition to the goodwill movement described above, mainly comprises £11.5
million on the value of seed capital investments and £7.6 million on the
Group's cash balances.
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 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, the positive near-term
outlook as described in the CEO review and the substantial medium-term growth
opportunities available to Ashmore, it has recommended a final dividend of
12.1 pence per share.
If approved by shareholders, the dividend will be paid on 8 December 2023 to
all shareholders on the register on 3 November 2023.
Tom Shippey
Group Finance Director
5 September 2023
RISK MANAGEMENT
In accordance with the Code, the Board is ultimately responsible for the
Group's risk management and internal control systems and for reviewing their
effectiveness. Such systems and their review are designed to manage, rather
than eliminate, the risk of failure to achieve business objectives, and can
provide only reasonable and not absolute assurance against material
misstatement or loss.
Principal and emerging risks, controls and mitigants
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:
- the impact of inflation;
- 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 the impact of ESG
factors on investors' decisions to invest in Emerging Markets.
Principal risks and associated controls and mitigants
Description of principal risks Examples of associated controls and mitigants
Strategic and business risks (Responsibility: Board of Directors)
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 specialised 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 on product preferences and scoring of all issuers for E, S and G factors
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 FX hedging policy and FX and Liquidity Management Committee
Investment risks (Responsibility: Group ICs)
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
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
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 Steering 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 RCC and on a semi-annual basis
by the Board
- ESGC has oversight of regulatory and reporting requirements
- Compliance function manages sanctions restrictions
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
Inappropriate oversight of market, liquidity, credit, counterparty and - Group risk management policies, reviewed regularly
operational risks
- Monthly reviews of market and liquidity risk
- Quarterly reviews of principal risks, counterparties and credit risk
Consolidated statement of comprehensive income
For the year ended 30 June 2023
Notes 2023 2022
£m
£m
Management fees 185.4 247.0
Performance fees 5.1 4.5
Other revenue 2.7 2.9
Total revenue 193.2 254.4
Distribution costs (2.2) (3.5)
Foreign exchange 7 5.4 11.6
Net revenue 196.4 262.5
Losses on investment securities 20 (44.3) (61.3)
Change in third-party interests in consolidated funds 20 19.3 16.5
Personnel expenses 9 (66.2) (73.4)
Other expenses 11 (27.8) (25.1)
Operating profit 77.4 119.2
Finance income/(expense) 8 33.9 (2.1)
Share of profit from associates 26 0.5 1.3
Profit before tax 111.8 118.4
Tax expense 12 (25.3) (26.5)
Profit for the year 86.5 91.9
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 (26.2) 80.2
Cash flow hedge intrinsic value gains/(losses) 4.9 (6.0)
Other comprehensive income/(loss), net of tax (21.3) 74.2
Total comprehensive income for the year 65.2 166.1
Profit attributable to:
Equity holders of the parent 83.3 88.5
Non-controlling interests 3.2 3.4
Profit for the year 86.5 91.9
Total comprehensive income attributable to:
Equity holders of the parent 62.7 161.9
Non-controlling interests 2.5 4.2
Total comprehensive income for the year 65.2 166.1
Earnings per share
Basic 13 12.43p 13.42p
Diluted 13 12.15p 12.61p
Consolidated balance sheet
As at 30 June 2023
Notes 2023 2022
£m
£m
Assets
Non-current assets
Goodwill and intangible assets 15 86.9 90.9
Property, plant and equipment 16 6.5 9.1
Investment in associates 26 2.3 2.1
Non-current financial assets measured at fair value 19, 20 54.1 39.3
Deferred acquisition costs 0.3 0.4
Deferred tax assets 18 23.9 32.7
174.0 174.5
Current assets
Investment securities 19, 20 229.9 265.1
Financial assets measured at fair value 19, 20 55.8 32.3
Trade and other receivables 17 70.4 74.3
Cash and cash equivalents 478.6 552.0
834.7 923.7
Total assets 1,008.7 1,098.2
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 875.4 901.0
Foreign exchange reserve 7.7 33.2
Cash flow hedging reserve - (4.9)
898.8 945.0
Non-controlling interests 31 14.2 21.8
Total equity 913.0 966.8
Liabilities
Non-current liabilities
Lease liabilities 16 3.7 5.8
Deferred tax liabilities 18 9.3 8.8
13.0 14.6
Current liabilities
Lease liabilities 16 2.1 2.2
Derivative financial instruments 19, 21 0.2 5.2
Third-party interests in consolidated funds 19, 20 56.2 73.0
Trade and other payables 24 24.2 36.4
82.7 116.8
Total liabilities 95.7 131.4
Total equity and liabilities 1,008.7 1,098.2
Approved by the Board on 5 September 2023 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 2023
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 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
Profit for the year - - 83.3 - - 83.3 3.2 86.5
Other comprehensive income/(loss):
Foreign currency translation differences arising on foreign operations - - - (25.5) - (25.5) (0.7) (26.2)
Cash flow hedge intrinsic value gains - - - - 4.9 4.9 - 4.9
Total comprehensive income/(loss) - - 83.3 (25.5) 4.9 62.7 2.5 65.2
Transactions with owners:
Purchase of own shares - - (15.6) - - (15.6) - (15.6)
Share-based payments - - 18.5 - - 18.5 - 18.5
Movements in non-controlling interests - - 6.6 - - 6.6 (6.8) (0.2)
Dividends to equity holders - - (118.4) - - (118.4) - (118.4)
Dividends to non-controlling interests - - - - - - (3.3) (3.3)
Total contributions and distributions - - (108.9) - - (108.9) (10.1) (119.0)
Balance at 30 June 2023 0.1 15.6 875.4 7.7 - 898.8 14.2 913.0
Consolidated cash flow statement
For the year ended 30 June 2023
2023 2022
£m
£m
Operating activities
Profit for the year 86.5 91.9
Adjustments for non-cash items:
Depreciation and amortisation 3.2 3.1
Share-based payments 18.9 24.3
Foreign exchange gains (5.4) (11.6)
Net losses on investment securities 25.0 44.8
Finance (income)/expense (33.9) 2.1
Tax expense 25.3 26.5
Share of profits from associates (0.5) (1.3)
Cash generated from operations before working capital changes 119.1 179.8
Changes in working capital:
Decrease in trade and other receivables 9.7 4.9
Decrease/(increase) in derivative financial instruments (5.0) 6.5
Decrease in trade and other payables (12.2) (9.1)
Cash generated from operations 111.6 182.1
Taxes paid (7.1) (24.7)
Net cash generated from operating activities 104.5 157.4
Investing activities
Interest and investment income received 31.2 8.1
Purchase of non-current financial assets measured at fair value (19.5) (1.9)
Purchase of financial assets measured at fair value (23.0) (5.5)
Sale of investment securities 3.2 24.2
Sale of non-current financial assets measured at fair value 5.0 1.5
Sale of financial assets held for sale - 0.1
Sale of financial assets measured at fair value - 44.0
Net cash on initial consolidation of seed capital investments (1.7) 0.3
Purchase of property, plant and equipment (0.4) (0.5)
Net cash generated from/(used in) investing activities (5.2) 70.3
Financing activities
Dividends paid to equity holders (118.4) (118.5)
Dividends paid to non-controlling interests (3.3) (3.0)
Third-party subscriptions into consolidated funds 2.8 0.5
Third-party redemptions from consolidated funds (29.1) (4.2)
Distributions paid by consolidated funds (4.2) (10.7)
Decrease in non-controlling interests (0.4) (0.5)
Payment of lease liabilities (2.2) (2.0)
Interest paid (0.3) (0.4)
Purchase of own shares (15.6) (34.5)
Net cash used in financing activities (170.7) (173.3)
Net increase/(decrease) in cash and cash equivalents (71.4) 54.4
Cash and cash equivalents at beginning of year 552.0 456.1
Effect of exchange rate changes on cash and cash equivalents (2.0) 41.5
Cash and cash equivalents at end of year 478.6 552.0
Cash and cash equivalents at end of year comprise:
Cash at bank and in hand 40.9 57.4
Daily dealing liquidity funds 56.8 225.7
Deposits 380.9 268.9
478.6 552.0
Company balance sheet
As at 30 June 2023
Notes 2023 2022
£m
£m
Assets
Non-current assets
Goodwill 15 4.1 4.1
Property, plant and equipment 16 4.1 5.5
Investment in subsidiaries 25 19.9 19.9
Deferred acquisition costs 0.3 0.4
Trade and other receivables 17 167.8 132.0
Deferred tax assets 18 11.6 18.2
207.8 180.1
Current assets
Trade and other receivables 17 116.6 324.9
Derivative financial instruments 21 0.2 -
Cash and cash equivalents 327.7 159.7
444.5 484.6
Total assets 652.3 664.7
Equity and liabilities
Capital and reserves
Issued capital 22 0.1 0.1
Share premium 15.6 15.6
Retained earnings 605.2 600.6
Cash flow hedging reserve - (4.9)
Total equity attributable to equity holders of the Company 620.9 611.4
Liabilities
Non-current liabilities
Lease liability 16 2.2 3.3
Current liabilities
Lease liability 16 1.2 1.3
Derivative financial instruments 21 - 5.2
Trade and other payables 24 28.0 43.5
29.2 50.0
Total liabilities 31.4 53.3
Total equity and liabilities 652.3 664.7
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 2023 was £120.1 million (30 June
2022: £188.6 million).
The financial statements of Ashmore Group plc (registered number 03675683)
were approved by the Board on 5 September 2023 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 2023
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 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
Profit for the year - - 120.1 - 120.1
Cash flow hedge intrinsic value gains - - - 4.9 4.9
Purchase of own shares - - (15.6) - (15.6)
Share-based payments - - 18.5 - 18.5
Dividends to equity holders - - (118.4) - (118.4)
Balance at 30 June 2023 0.1 15.6 605.2 - 620.9
Company cash flow statement
For the year ended 30 June 2023
2023 2022
£m
£m
Operating activities
Profit for the year 120.1 188.6
Adjustments for:
Depreciation and amortisation 1.8 1.8
Share-based payments 13.7 19.3
Foreign exchange losses/(gains) 9.6 (58.4)
Finance income (10.0) (0.4)
Tax expense 9.8 26.0
Dividends received from subsidiaries (145.2) (174.0)
Cash generated from/(used in) operations before working capital changes (0.2) 2.9
Changes in working capital:
Decrease/(increase) in trade and other receivables 57.8 (73.8)
Decrease/(increase) in derivative financial instruments (5.4) 6.5
Decrease in trade and other payables (15.5) (59.0)
Cash generated from/(used in) operations 36.7 (123.4)
Taxes paid (6.3) (12.1)
Net cash generated from/(used in) operating activities 30.4 (135.5)
Investing activities
Interest received 8.9 0.2
Loans advanced to subsidiaries (27.3) (0.2)
Loans repaid by subsidiaries 137.8 184.0
Dividends received from subsidiaries 145.2 174.0
Purchase of property, plant and equipment (0.3) (0.4)
Net cash generated from investing activities 264.3 357.6
Financing activities
Dividends paid (118.4) (118.5)
Payment of lease liability (1.2) (1.1)
Interest paid (0.1) (0.2)
Purchase of own shares (15.6) (34.1)
Net cash used in financing activities (135.3) (153.9)
Net increase in cash and cash equivalents 159.4 68.2
Cash and cash equivalents at beginning of year 159.7 86.1
Effect of exchange rate changes on cash and cash equivalents 8.6 5.4
Cash and cash equivalents at end of year 327.7 159.7
Cash and cash equivalents at end of year comprise:
Cash at bank and in hand 2.9 6.3
Daily dealing liquidity funds 0.8 1.9
Deposits 324.0 151.5
327.7 159.7
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 2023 were authorised for issue
by the Board of Directors on 5 September 2023. 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 2023
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.
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 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.
Principal 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. The estimates and judgements used in
preparing the financial statements are periodically evaluated and are based on
historical experience and other factors, including expectations of future
events 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.
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
(note 15), the calculation of lease assets and liabilities (note 16) and
consolidation of seed capital investments (note 20).
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 2023.
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 to 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 lease arrangements in accordance with IFRS 16 Leases.
Leases
The Group's lease arrangements primarily consist of leases relating to office
space. Obligations and rights under 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.
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 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 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 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) Current financial assets measured at fair value
The Group classifies readily realisable interests in seeded funds as current
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 at FVTPL and financial liabilities at amortised cost.
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.
The Group applies the simplified approach to calculate expected credit losses
for financial assets measured at amortised cost. Under this approach, 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 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
the parent Company. The parent Company recognises 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 £106.2 million for the year as reconciled in the Business
review (FY2022: adjusted EBITDA of £164.3 million was derived by adjusting
operating profit by £3.1 million of depreciation and amortisation expense,
£46.2 million of loss related to seed capital and £4.2 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
2023 2022
£m
£m
United Kingdom and Ireland 24.3 26.5
United States 69.8 73.5
Other 1.9 2.5
Total non-current assets 96.0 102.5
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 (FY2022: 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
2023 2022
£m
£m
United Kingdom and Ireland 142.3 193.6
United States 13.7 22.0
Other 37.2 38.8
Total revenue 193.2 254.4
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
2023
2022
30 June
30 June
2023
2022
US dollar 1.2714 1.2145 1.2079 1.3289
Euro 1.1653 1.1617 1.1523 1.1785
Indonesian rupiah 19,061 18,092 18,259 19,146
Colombian peso 5,309 5,053 5,519 5,164
Foreign exchange gains are shown below.
2023 2022
£m
£m
Net realised and unrealised hedging gains 4.4 6.3
Translation gains on non-Sterling denominated monetary assets and liabilities 1.0 5.3
Total foreign exchange gains 5.4 11.6
8) Finance income/(expense)
2023 2022
£m
£m
Interest and investment income 27.2 7.7
Net realised gains on seed capital investments measured at fair value 2.4 0.1
Net unrealised gains/(losses) on seed capital investments measured at fair 4.6 (9.5)
value
Interest expense on lease liabilities (note 16) (0.3) (0.4)
Total finance income/(expense) 33.9 (2.1)
Included within interest and investment income is interest earned on cash
deposits of £16.2 million (FY2022: £2.0 million) and investment income of
£11.0 million (FY2022: £5.7 million) on consolidated funds (note 20c).
Included within net realised and unrealised gains on seed capital investments
totalling £7.0 million (FY2022: £9.4 million losses) are £2.6 million gains
(FY2022: £12.5 million losses) on financial assets measured at FVTPL (note
20a), £1.4 million gains (FY2022: £4.2 million gains) on non-current
financial assets measured at fair value (note 20b) and £3.0m realised gains
on consolidated funds (FY2022: £1.1 million losses on financial assets held
for sale).
9) Personnel expenses
Personnel expenses during the year comprised the following:
2023 2022
£m
£m
Wages and salaries 24.0 22.1
Performance-related cash bonuses 17.3 20.7
Share-based payments (note 10) 17.5 24.9
Social security costs 2.4 1.9
Pension costs 2.1 1.8
Other costs 2.9 2.0
Total personnel expenses 66.2 73.4
Number of employees
At 30 June 2023, 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 2023
30 June 2022
ended
ended
Number
Number
30 June 2023
30 June 2022
Number
Number
Total investment management employees 309 305 310 309
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 (FY2022: 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 2023 2022
£m
£m
Omnibus Plan 17.4 25.1
Phantom Bonus Plan 0.1 (0.2)
Total share-based payments expense 17.5 24.9
The total expense recognised for the year in respect of equity-settled
share-based payment awards was £18.5 million (FY2022: £24.5 million), of
which £0.4 million (FY2022: £0.2 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 2023 2022
Year of grant
£m
£m
2017 - 3.2
2018 3.0 2.9
2019 3.7 3.5
2020 3.5 3.5
2021 3.9 5.5
2022 3.3 5.7
2023 1.2 -
Total Omnibus share-based payments expense reported in comprehensive income 18.6 24.3
Awards outstanding under the Omnibus Plan were as follows:
i) Equity-settled awards
Group and Company 2023 2023 2022 2022
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 19,311,495 £3.65 19,997,393 £3.58
Granted 5,553,128 £2.14 4,423,544 £3.71
Vested (4,671,286) £3.25 (3,874,613) £3.44
Forfeited (1,160,520) £2.17 (1,234,829) £3.44
Awards outstanding at year end 19,032,817 £3.32 19,311,495 £3.65
Bonus share awards
At the beginning of the year 10,997,593 £3.64 10,617,648 £3.58
Granted 3,014,720 £2.14 2,285,034 £3.75
Vested (3,686,132) £2.87 (1,905,089) £3.44
Forfeited (179,660) £3.67 - -
Awards outstanding at year end 10,146,521 £3.31 10,997,593 £3.64
Matching share awards
At the beginning of the year 10,379,745 £3.65 10,687,135 £3.58
Granted 3,031,105 £2.14 2,297,585 £3.75
Vested (2,547,699) £3.28 (1,881,231) £3.44
Forfeited (652,622) £2.18 (723,744) £3.42
Awards outstanding at year end 10,210,529 £3.31 10,379,745 £3.65
Total 39,389,867 £3.32 40,688,833 £3.65
ii) Cash-settled awards
Group and Company 2023 2023 2022 2022
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 110,280 £3.60 122,239 £3.53
Granted 47,785 £2.14 15,741 £3.75
Vested (45,003) £3.24 (27,700) £3.40
Forfeited - - - -
Awards outstanding at year end 113,062 £3.13 110,280 £3.60
Bonus share awards
At the beginning of the year 80,511 £3.60 80,765 £3.55
Granted 34,982 £2.14 11,276 £3.75
Vested (33,753) £3.24 (11,530) £3.40
Forfeited - - - -
Awards outstanding at year end 81,740 £3.12 80,511 £3.60
Matching share awards
At the beginning of the year 80,511 £3.60 80,765 £3.55
Granted 34,982 £2.14 11,276 £3.75
Vested (33,753) £3.24 (11,530) £3.40
Forfeited - - - -
Awards outstanding at year end 81,740 £3.12 80,511 £3.60
Total 276,542 £3.13 271,302 £3.60
iii) Total awards
Group and Company 2023 2023 2022 2022
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 19,421,775 £3.65 20,119,632 £3.58
Granted 5,600,913 £2.14 4,439,285 £3.71
Vested (4,716,289) £3.25 (3,902,313) £3.44
Forfeited (1,160,520) £2.17 (1,234,829) £3.44
Awards outstanding at year end 19,145,879 £3.32 19,421,775 £3.65
Bonus share awards
At the beginning of the year 11,078,104 £3.64 10,698,413 £3.58
Granted 3,049,702 £2.14 2,296,310 £3.75
Vested (3,719,885) £2.87 (1,916,619) £3.44
Forfeited (179,660) £3.67 - -
Awards outstanding at year end 10,228,261 £3.31 11,078,104 £3.64
Matching share awards
At the beginning of the year 10,460,256 £3.65 10,767,900 £3.58
Granted 3,066,087 £2.14 2,308,861 £3.75
Vested (2,581,452) £3.28 (1,892,761) £3.44
Forfeited (652,622) £2.18 (723,744) £3.42
Awards outstanding at year end 10,292,269 £3.31 10,460,256 £3.65
Total 39,666,409 £3.32 40,960,135 £3.65
The weighted average fair value of awards granted to employees under the
Omnibus Plan during the year was £2.14 (FY2022: £3.73), 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 £0.3 million (30 June 2022: £0.4 million) of
which £nil (30 June 2022: £nil) relates to vested awards.
11) Other expenses
Other expenses consist of the following:
2023 2022
£m
£m
Travel 2.1 0.9
Professional fees 5.5 4.7
Information technology and communications 7.8 7.3
Amortisation of intangible assets (note 15) 0.2 0.2
Lease expenses 0.4 0.4
Depreciation of property, plant and equipment (note 16) 3.0 2.9
Premises-related costs 1.3 1.3
Insurance 1.0 1.0
Research costs 0.4 0.4
Auditor's remuneration (see below) 0.9 0.9
Consolidated funds 1.1 1.2
Other expenses 4.1 3.9
27.8 25.1
Lease expenses 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
2023 2022
£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 0.5
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 0.9
12) Taxation
Analysis of tax charge for the year:
2023 2022
£m
£m
Current tax
UK corporation tax on profits for the year 5.6 11.1
Overseas corporation tax charge 10.5 14.9
Adjustments in respect of prior years 0.1 (0.5)
16.2 25.5
Deferred tax
Origination and reversal of temporary differences (note 18) 9.1 1.0
Tax expense 25.3 26.5
Factors affecting tax charge for the year
2023 2022
£m
£m
Profit before tax 111.8 118.4
Profit on ordinary activities multiplied by the blended UK tax rate of 20.5% 22.9 22.5
(FY2022: UK tax rate of 19%)
Effects of:
Permanent differences including non-taxable income and non-deductible expenses 7.4 4.7
Different rate of taxes on overseas profits (3.2) (3.3)
Non-deductible/(non-taxable) investment returns(1) (1.9) 3.2
Adjustments in respect of prior years 0.1 (0.6)
Tax expense 25.3 26.5
1. Non-taxable investment returns comprise seed capital investment
gains/losses in certain jurisdictions in which the Group operates for which
there are local tax exemptions.
The tax charge/(credit) recognised in reserves within other comprehensive
income is as follows:
2023 2022
£m
£m
Current tax expense/(credit) on foreign exchange gains/(losses) (0.6) 2.9
Tax expense/(credit) recognised in reserves (0.6) 2.9
13) Earnings per share
Basic earnings per share at 30 June 2023 of 12.43 pence (30 June 2022: 13.42
pence) is calculated by dividing the profit after tax for the financial year
attributable to equity holders of the parent of £83.3 million (FY2022:
£88.5 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 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.
The weighted average number of shares used in calculating basic and diluted
earnings per share are shown below.
2023 2022
Number of ordinary
Number of ordinary
shares
shares
Weighted average number of ordinary shares used in the calculation of basic 670,224,113 659,466,487
earnings per share
Weighted average number of ordinary shares used in the calculation of diluted 685,760,649 702,124,339
earnings per share
14) Dividends
Dividends paid in the year
Company 2023 2022
£m
£m
Final dividend for FY2022 - 12.10p (FY2021: 12.10p) 84.8 85.0
Interim dividend FY2023 - 4.80p (FY2022: 4.80p) 33.6 33.5
118.4 118.5
In addition, the Group paid £3.3 million (FY2022: £3.0 million) of dividends
to non-controlling interests.
Dividends declared/proposed in respect of the year
Company 2023 2022
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 5 September 2023, the Board proposed a final dividend of 12.10 pence per
share for the year ended 30 June 2023. 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 £85.1
million.
15) Goodwill and intangible assets
Group Goodwill Fund management intangible assets Total
£m
£m
£m
Cost (at original exchange rate)
At 30 June 2023 and 2022 70.4 0.9 71.3
Accumulated amortisation and impairment
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)
Amortisation charge for the year - (0.1) (0.1)
At 30 June 2023 - (0.7) (0.7)
Net book value
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
Accumulated amortisation for the year - (0.1) (0.1)
Foreign exchange revaluation through reserves* (3.8) (0.1) (3.9)
At 30 June 2023 86.7 0.2 86.9
* 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 2023 and 2022 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 2023, 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 2023 using a market share price of
£2.08, 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 2023 comprise fund management contracts
recognised by the Group on the acquisition of Ashmore Avenida Investments
(Real Estate) LLP in July 2018.
16) Property, plant and equipment
The Group's property, plant and equipment include right-of-use assets
recognised on lease arrangements as follows:
Group Company
£m
£m
Property, plant and equipment owned by the Group 1.2 0.9
Right-of-use assets 5.3 3.2
Net book value at 30 June 2023 6.5 4.1
The movement in property, plant and equipment is provided below:
Group 2023 2022
Property, plant and equipment
Property, plant and equipment
£m
£m
Cost
At the beginning of the year 23.0 21.9
Additions 0.6 0.5
Foreign exchange revaluation (0.6) 0.6
At the end of the year 23.0 23.0
Accumulated depreciation
At the beginning of the year 13.9 10.7
Depreciation charge for the year 3.0 2.9
Foreign exchange revaluation (0.4) 0.3
At the end of the year 16.5 13.9
Net book value at 30 June 6.5 9.1
Company 2023 2022
Property, plant and equipment
Property, plant and equipment
£m
£m
Cost
At the beginning of the year 13.9 13.5
Additions 0.3 0.4
At the end of the year 14.2 13.9
Accumulated depreciation
At the beginning of the year 8.4 6.8
Depreciation charge for year 1.7 1.6
At the end of the year 10.1 8.4
Net book value at 30 June 4.1 5.5
Lease arrangements
The Group leases office space in various countries and enters into lease
agreements on office premises with remaining lease periods of one 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 4.9% (FY2022: 4.6%).
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 Right-of-use assets Lease
£m
liabilities
£m
liabilities
£m
£m
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
Additions 0.2 0.1 - -
Lease payments - (2.5) - (1.3)
Interest expense (note 8) - 0.3 - 0.1
Depreciation charge (2.4) - (1.2) -
Foreign exchange revaluation through reserves (0.1) (0.1) - -
At 30 June 2023 5.3 5.8 3.2 3.4
The contractual maturities on the minimum lease payments under lease
liabilities are provided below:
Group Company
Maturity analysis - contractual undiscounted cash flows 30 June 30 June 30 June 30 June
2023
2022
2023
2022
£m
£m
£m
£m
Within 1 year 2.4 2.6 1.3 1.3
Between 1 and 5 years 3.9 6.0 2.3 3.7
Later than 5 years - 0.2 - -
Total undiscounted lease liabilities 6.3 8.8 3.6 5.0
Lease liabilities are presented in the balance sheet as follows:
Current 2.1 2.2 1.2 1.3
Non-current 3.7 5.8 2.2 3.3
Total lease liabilities 5.8 8.0 3.4 4.6
Amounts recognised under financing activities in the cash flow statement:
Payment of lease liabilities 2.2 2.0 1.2 1.1
Interest paid 0.3 0.4 0.1 0.2
Total cash outflow for leases 2.5 2.4 1.3 1.3
17) Trade and other receivables
Group Company
2023 2022 2023 2022
£m
£m
£m
£m
Trade debtors 60.7 66.1 2.1 1.0
Prepayments 4.4 3.5 1.9 2.1
Amounts due from subsidiaries - - 10.4 73.8
Loans due from subsidiaries - - 266.4 376.9
Other receivables 5.3 4.7 3.6 3.1
Total trade and other receivables 70.4 74.3 284.4 456.9
Group trade debtors include accrued management and performance fees in respect
of investment management services provided up to 30 June 2023. 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 £1.3 million as at 30 June 2023 (30 June 2022:
£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 2023, 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 2022: £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. Loans
due from subsidiaries included within non-current assets amounted to £167.8
million as at 30 June 2023 (30 June 2022: £132.0 million included within
non-current assets). The intercompany loan is repayable on demand and the
amount classified as current is 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 2022: £nil).
18) Deferred taxation
Deferred tax assets and liabilities recognised by the Group and Company at
year end are attributable to the following:
2023 2022
Group Other temporary differences Share-based payments Total Other Share-based payments Total
£m
£m
£m
temporary differences
£m
£m
£m
Deferred tax assets 11.0 12.9 23.9 12.5 20.2 32.7
Deferred tax liabilities (9.3) - (9.3) (8.8) - (8.8)
1.7 12.9 14.6 3.7 20.2 23.9
2023 2022
Company Other temporary differences Share-based payments Total Other temporary differences Share-based payments Total
£m
£m
£m
£m
£m
£m
Deferred tax assets - 11.6 11.6 - 18.2 18.2
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.
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 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
Charged to the consolidated statement of comprehensive income (1.8) (7.3) (9.1)
Foreign exchange revaluation (0.2) - (0.2)
At 30 June 2023 1.7 12.9 14.6
Company Other Share-based payments Total
temporary differences
£m
£m
£m
At 30 June 2021 - 25.1 25.1
Charged to the statement of comprehensive income - (6.9) (6.9)
At 30 June 2022 - 18.2 18.2
Charged to the statement of comprehensive income - (6.6) (6.6)
At 30 June 2023 - 11.6 11.6
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:
2023 2022
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 112.3 88.8 28.8 229.9 158.8 82.7 23.6 265.1
Financial assets measured at FVTPL - 55.8 - 55.8 - 32.3 - 32.3
Non-current financial assets at fair value - 14.9 39.2 54.1 - - 39.3 39.3
112.3 159.5 68.0 339.8 158.8 115.0 62.9 336.7
Financial liabilities
Third-party interests in consolidated funds 36.0 9.6 10.6 56.2 58.4 6.3 8.3 73.0
Derivative financial instruments - 0.2 - 0.2 - 5.2 - 5.2
36.0 9.8 10.6 56.4 58.4 11.5 8.3 78.2
Transfers between levels
The Group recognises transfers into and transfers out of fair value hierarchy
levels at each reporting period based on assessments of price inputs used in
the valuation of financial assets. There were no transfers between level 1,
level 2 and level 3 of the fair value hierarchy during the year.
Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 items for the years ended
30 June 2023 and 2022:
Investment Non-current Third-party
securities
financial assets at
interests in consolidated
£m
fair value
funds
£m
£m
At 30 June 2021 42.4 34.0 16.9
Additions - 1.9 -
Disposals (25.5) (1.5) (10.7)
Transfers out (1.5) - -
Unrealised gains recognised in finance income 4.4 3.5 2.1
Unrealised gains recognised in reserves 3.8 1.4 -
At 30 June 2022 23.6 39.3 8.3
Additions 2.5 2.9 1.2
Disposals (9.1) (5.0) (3.8)
Unrealised gains recognised in finance income 12.0 2.0 4.9
Unrealised losses recognised in reserves (0.2) - -
At 30 June 2023 28.8 39.2 10.6
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 2023 and 2022, and the associated sensitivity to changes in
unobservable inputs to a reasonable alternative.
Asset class and valuation technique 2023 Significant Range of estimates Sensitivity Change in
Fair value
unobservable inputs
factor
fair value
£m £m
Unquoted securities
Market multiple and discount 6.4 EBITDA multiple 15x +/- 1x +/- 0.6
Marketability adjustment 30% +/- 5% -/+ 0.7
Discounted cash flow 32.3 Discount rate 10%-17% +/- 1% -/+ 3.0
Marketability adjustment 10%-54% +/- 5% -/+ 2.8
Unquoted funds
Net assets approach 29.3 NAV(1) 1x +/- 5% +/- 1.5
Total level 3 investments 68.0
Asset class and valuation technique 2022 Significant Range of Sensitivity Change in
Fair value
unobservable inputs
estimates
factor
fair value
£m
£m
Unquoted securities
Market multiple and discount 6.2 EBITDA multiple 14x +/- 1x +/- 0.5
Marketability adjustment 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
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 2023 and 2022.
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 2021 42.4 41.0 318.1 9.6 (105.7) 31.4 336.8
Reclassification:
Financial assets held for sale 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
Additions - 23.0 22.8 - (1.4) 19.5 63.9
Disposals - - (23.3) - 3.7 (5.0) (24.6)
Fair value movement - 0.5 (34.7) (0.5) 14.5 0.4 (19.8)
Carrying amount at 30 June 2023 - 55.8 229.9 10.6 (56.2) 51.4 291.5
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(c).
3. Excludes £2.7 million of other non-current financial assets measured
at fair value that are not classified as seed capital.
a) Financial assets measured at fair value through profit or loss
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 recognised as financial assets and measured at
FVTPL.
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 a financial
asset, 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.
Investments cease to be classified as consolidated funds 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. No such fund was
transferred to the FVTPL category during the year (FY2022: three funds with an
aggregate value of £39.1 million were transferred to the FVTPL category).
FVTPL investments at 30 June 2023 comprise shares held in debt and equity
funds as follows:
2023 2022
£m
£m
Equity funds 29.6 15.5
Debt funds 26.2 16.8
Financial assets measured at fair value 55.8 32.3
Included within finance income are gains of £2.6 million (FY2022: losses of
£12.5 million) on the Group's financial assets measured at FVTPL.
b) 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.
2023 2022
£m
£m
Real estate funds 0.9 1.5
Infrastructure funds 22.0 24.1
Other funds 28.5 10.9
Non-current financial assets measured at fair value(1) 51.4 36.5
1. Excludes £2.7 million (30 June 2022: £2.8 million) of other non-current
financial assets measured at fair value that are not classified as seed
capital.
Included within finance income are gains of £1.4 million (FY2022: gains of
£4.2 million) on the Group's non-current financial assets measured at fair
value.
c) Consolidated funds
The Group has consolidated 17 investment funds as at 30 June 2023 (30 June
2022: 18 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.
2023 2022
£m
£m
Investment securities1 229.9 265.1
Cash and cash equivalents 10.3 10.0
Other2 0.3 1.1
Third-party interests in consolidated funds (56.2) (73.0)
Consolidated seed capital investments 184.3 203.2
1. Investment securities represent trading securities held by consolidated
investment funds and are measured at FVTPL. Note 25 provides a list of the
consolidated funds by asset class, and further detailed information at the
security level is available in the individual fund financial statements.
2. Other includes trade receivables, trade payables and accruals.
The maximum exposure to loss is the carrying amount of the assets held. The
Group has not provided financial support or otherwise agreed
to be responsible for supporting any consolidated or unconsolidated funds
financially.
Included within the consolidated statement of comprehensive income are net
losses of £15.3 million (FY2022: net losses of £40.5 million) relating to
the Group's share of the results of the individual statements of comprehensive
income for each of the consolidated funds, as follows:
2023 2022
£m
£m
Investment income 11.0 5.7
Fair value losses on investment securities (44.3) (61.3)
Change in third-party interests in consolidated funds 19.3 16.5
Audit fees (0.2) (0.2)
Other expenses (1.1) (1.2)
Net losses on consolidated funds (15.3) (40.5)
Included in the Group's cash generated from operations is £0.1 million cash
utilised in operations (FY2022: £2.8 million cash utilised in operations)
relating to consolidated funds.
As of 30 June 2023, 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 measured at 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.
Ashmore has been reporting under IFPR since 1 January 2022 and applies the
ICARA approach to the calculation of the capital and liquidity requirement for
its UK regulated entity, AIML.
The Board has determined that the capital required to support the Group's
activities, including its regulatory requirements, is £80.6 million. The
equivalent figure as at 30 June 2022, calculated under the previous ICAAP
approach, was £125.2 million.
Ashmore holds total capital resources of £704.8 million as at 30 June 2023,
providing an excess of £624.2 million over the Group capital requirement
(30 June 2022: £788.7 million, 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, excluding prepayments. The table below lists financial assets
subject to credit risk.
Notes 2023 2022
£m
£m
Trade and other receivables 17 66.0 70.8
Cash and cash equivalents 478.6 552.0
Total 544.6 622.8
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 2023 (30 June 2022: A to
AAAm). As at 30 June 2023, the Group held £56.8 million (30 June 2022:
£225.7 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.
Group
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 2023 and 30 June 2022 based on contractual undiscounted
payments:
At 30 June 2023
Within 1 year 1-5 years More than Total
£m
£m
5 years
£m
£m
Current trade and other payables 24.2 - - 24.2
Lease liabilities 2.4 3.9 - 6.3
Total 26.6 3.9 - 30.5
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
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 (including liquidity funds) 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:
2023 2022
%
%
Deposits with banks and liquidity funds 3.22 0.41
At 30 June 2023, 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 (FY2022: £2.5 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.
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.
2023 2022
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 2.5 0.4 3.9
Colombian peso +/- 1% - 0.2 0.1 0.2
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 2023, a 5% movement in the fair value of these investments would
have a £14.6 million (FY2022: £13.6 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$55.9 billion and applying the year's
average net management fee rate of 38bps, a 5% movement in AuM would have a
US$10.6 million impact, equivalent to £8.3 million using a year end exchange
rate of 1.2714, on management fee revenues (FY2022: 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$12.5 million impact, equivalent to £10.3 million using a
year end exchange rate of 1.2145, on management fee revenues).
Hedging activities
The Group uses forward and option contracts to hedge its exposure to foreign
currency risk. These hedges, which have been assessed as effective cash flow
hedges as at 30 June 2023, protect a proportion of the Group's revenue cash
flows from foreign exchange movements. The cumulative fair value of the
outstanding foreign exchange hedges asset at 30 June 2023 was £0.2 million
and is included within the Group's derivative financial instruments (30 June
2022: £5.2 million foreign exchange hedges liability included in derivative
financial instruments).
Group
The notional and fair values of foreign exchange hedging instruments were as
follows:
2023 2022
Notional Fair value Notional Fair value
amount
assets/
amount
assets/
US$m
(liabilities)
US$m
(liabilities)
£m
£m
Cash flow hedges
Foreign exchange nil-cost option collars 40.0 0.2 100.0 (5.2)
40.0 0.2 100.0 (5.2)
The maturity profile of the Group's outstanding hedges is shown below.
Notional amount of option collars maturing: 2023 2022
US$m
US$m
Within 6 months 30.0 40.0
Between 6 and 12 months 10.0 40.0
Later than 12 months - 20.0
40.0 100.0
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 gain of £4.9 million (FY2022: £6.0 million loss) on the
Group's hedges has been recognised through other comprehensive income and a
£0.5 million intrinsic value gain (FY2022: £0.5 million intrinsic value
loss) was reclassified from equity to the statement of comprehensive income in
the year.
Included within the net realised and unrealised hedging gain of £4.4 million
(note 7) recognised at 30 June 2023 (30 June 2022: £6.3 million gain) are:
- a £0.5 million gain in respect of foreign exchange hedges covering net
management fee income for the financial year ending 30 June 2023 (FY2022:
£0.5 million loss); and
- a £3.9 million gain in respect of crystallised foreign exchange
contracts (FY2022: £6.8 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 measured at amortised cost, excluding
prepayments. The table below lists financial assets subject to credit risk.
Notes 2023 2022
£m
£m
Cash and cash equivalents 327.7 159.7
Trade and other receivables 17 282.5 454.8
Total 610.2 614.5
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 2023 (30 June 2022: A to AAAm).
All trade and other receivables are considered to be fully recoverable and
none were overdue at year end (30 June 2022: 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 (including liquidity funds) 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:
2023 2022
%
%
Deposits with banks and liquidity funds 4.17 0.46
At 30 June 2023, 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 £1.2 million higher/lower (FY2022: £0.6 million
higher/lower), mainly as a result of higher/lower interest on cash balances.
An assumption that the fair value of assets and liabilities will not be
affected by a change in interest rates was used in the model to calculate the
effect on post-tax profits.
Foreign exchange risk
The Company is exposed primarily to foreign exchange risk in respect of US
dollar cash balances and US dollar-denominated intercompany balances. However,
such risk is not hedged by the Company.
At 30 June 2023, 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 £2.4 million (FY2022:
increased/decreased by £3.6 million).
22) Share capital
Authorised share capital
Group and Company 2023 2023 2022 2022
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 2023 2023 2022 2022
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 2023, there were equity-settled share awards issued under the
Omnibus Plan totalling 39,389,867 (30 June 2022: 40,688,833) shares that have
release dates ranging from July 2023 to September 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 2023, the EBT owned 50,834,683 (30 June 2022:
55,512,301) ordinary shares of 0.01p with a nominal value of £5,083 (30 June
2022: £5,551) and shareholders' funds are reduced by £164.2 million (30 June
2022: £187.6 million) in this respect. The EBT is periodically funded by
the Company for these purposes.
24) Trade and other payables
Group Group Company Company
2023
2022
2023
2022
£m
£m
£m
£m
Current
Trade payables 13.3 15.8 3.0 2.4
Accruals and provisions 10.9 20.6 4.5 11.4
Amounts due to subsidiaries - - 20.5 29.7
Total trade and other payables 24.2 36.4 28.0 43.5
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 2023 2022
£m
£m
Cost
At 30 June 2023 and 2022 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 2023. 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 59.26
Ashmore CAF-AM Management Company SAS Colombia 53.09
Ashmore Avenida Investments (Real Estate) 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 17 investment funds as at 30 June 2023
(30 June 2022: 18 investment funds) 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 57.72
Ashmore SICAV Emerging Markets Corporate Debt ESG Fund Corporate debt Luxembourg 100.00
Ashmore SICAV Emerging Markets Equity ESG Fund Equity Luxembourg 99.36
Ashmore SICAV Emerging Markets Indonesian Equity Fund Equity Luxembourg 100.00
Ashmore SICAV Emerging Markets Global Small-Cap Equity Fund Equity Luxembourg 47.55
Ashmore SICAV Emerging Markets Middle East Equity Fund Equity Luxembourg 88.78
Ashmore SICAV Emerging Markets IG Total Return Fund Blended debt Luxembourg 100.00
Ashmore SICAV Emerging Markets Total Return ESG Fund Blended debt Luxembourg 99.77
Ashmore SICAV Emerging Markets Sovereign Debt ESG Fund External debt Luxembourg 100.00
Ashmore SICAV Emerging Markets China Bond Fund Local currency Luxembourg 100.00
Ashmore Saudi Equity Fund Equity Saudi Arabia 69.29
Ashmore Emerging Markets Active Equity Fund Equity USA 73.14
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 78.91
26) Investment in associates
The Group held an interest in the following associate as at 30 June 2023, over
which it continues to have significant influence:
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%
The movement in the carrying value of investments in associates for the year
is provided below:
Associates 2023 2022
£m
£m
At the beginning of the year 2.1 0.9
Reclassification - (0.2)
Gain on dilution - 1.3
Share of profit for the year 0.5 -
Foreign exchange revaluation (0.3) 0.1
At the end of the year 2.3 2.1
The summarised financial information for the associate is shown below.
Associates 2023 2022
£m
£m
Total assets 53.2 54.5
Total liabilities (10.0) (13.3)
Net assets 43.2 41.2
Group's share of net assets 2.3 2.1
Revenue for the year 23.6 23.5
Profit for the year 9.6 0.8
Group's share of profit for the year 0.5 -
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 2023. The Group had no undrawn
capital commitments (30 June 2022: £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 2022 64.0 0.3 63.7
30 June 2023 55.9 0.3 55.6
Included in the Group's consolidated management fees of £185.4 million
(FY2022: £247.0 million) are management fees amounting to £184.2 million
(FY2022: £246.0 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.
2023 2022
£m
£m
Management fees receivable 37.7 47.6
Trade and other receivables 1.3 0.8
Seed capital investments* 107.2 68.8
Total exposure 146.2 117.2
* Comprise 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:
2023 2022
£m
£m
Short-term benefits 0.8 0.8
Defined contribution pension costs - -
Share-based payment benefits (note 10) 0.4 0.2
1.2 1.0
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 (FY2022: none). Aggregate key management personnel
interests in consolidated funds at 30 June 2023 were £44.5 million (30 June
2022: £62.7 million).
Transactions with subsidiaries - Company
Details of transactions between the Company and its subsidiaries are shown
below:
2023 2022
£m
£m
Transactions during the year
Management fees 59.7 67.2
Net dividends 145.2 174.0
Loans repaid by subsidiaries 110.5 183.8
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 £64.0 million of gross management fees
and performance fees (FY2022: £96.2 million) from the 104 funds (FY2022: 99
funds) it manages and which are classified as related parties. As at 30 June
2023, the Group had receivables due from funds of £4.6 million (30 June 2022:
£5.8 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 2023,
the loan outstanding was £150.7 million (30 June 2022: £163.7 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 £0.5 million
to the Foundation during the year (FY2022: £0.6 million).
29) Commitments
The Group has undrawn investment commitments relating to seed capital
investments as follows:
Group 2023 2022
£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 5.7 6.6
Fondo Ashmore Andino III - FCP 3.0 -
Ashmore KCH HealthCare Fund II - 1.2
Ashmore KCH HealthCare LLC - 4.4
Total undrawn investment commitments 8.9 12.4
Company
The Company has undrawn loan commitments to other Group entities totalling
£482.5 million (30 June 2022: £394.1 million) to support their investment
activities but has no investment commitments of its own (30 June 2022: none).
30) Contingent assets and liabilities
The Company and its subsidiaries can be party to legal claims arising in the
normal course of business. The Directors do not anticipate that the outcome of
any such potential proceedings and claims will have a material adverse effect
on the Group's financial position and at present there are no such claims
where their financial impact can be reasonably estimated. There are no other
material contingent assets or liabilities.
31) Non-controlling interests
The Group's material NCI as at 30 June 2023 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
Ashmore Indonesia
Summarised balance sheet 2023 2022
£m
£m
Total assets 19.8 23.0
Total liabilities (4.4) (6.4)
Net assets 15.4 16.6
Non-controlling interests* 6.1 13.6
Summarised statement of comprehensive income
Net revenue 10.9 12.3
Profit for the period 5.1 5.9
Other comprehensive income/(loss) (0.9) 1.6
Total comprehensive income 4.2 7.5
Profit allocated to NCI 1.6 3.0
Dividends paid to NCI 2.3 2.3
Summarised cash flows
Cash flows from operating activities 4.6 6.5
Cash flows used in investing activities - (3.6)
Cash flows used in financing activities (6.3) (6.3)
Net decrease in cash and cash equivalents (1.7) (3.4)
* £6.8 million of historical NCI was reclassified to retained earnings in
the year.
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 2023, 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 Investments (UK) Limited(1) Subsidiary 100.00 61 Aldwych, London WC2B 4AE United Kingdom
Ashmore Investment Management Limited Subsidiary 100.00
Ashmore Investment Advisors Limited Subsidiary 100.00
Aldwych Administration Services Limited (dormant) Subsidiary 100.00
Ashmore Asset Management Limited (dormant) Subsidiary 100.00
Ashmore Avenida Investments (Real Estate) LLP Subsidiary 56.00
Ashmore Avenida Devco Holding Company Limited(2) 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 Management (US) Corporation Subsidiary 100.00 The Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801, 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 Subsidiary 100.00
1. Ashmore Investments (UK) Limited (registered number 3345198) is exempt
from the requirements relating to the audit of accounts under section 479A of
the UK Companies Act 2006.
2. Ashmore Avenida Devco Holding Company Limited is under an active proposal
to strike off.
Name Classification % voting interest Registered address and place of incorporation
Avenida REF Holding SA Subsidiary 100.00 Yamandu 1321, 11500
Montevideo
Uruguay
Avenida CREF II Manager SRL Subsidiary 99.99
Avenida CREF Partners SRL Subsidiary 99.99
Avenida CREF II GP SRL Subsidiary 85.09
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 (dormant) Subsidiary 100.00
KCH Cairo S.A.E. (dormant) Subsidiary 99.20 Zone (T) - Emaar, Up Town Cairo, Mokattam, Cairo, Egypt
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 Dana Pasar Uang Syariah Financial asset 100.00
Ashmore Dana USD Fixed Income Financial asset 39.42
Ashmore Management Company Colombia SAS Subsidiary 59.26 Carrera 7 No. 75-66,
Office 701 & 702
Bogotá, Colombia
Ashmore-CAF-AM Management Company SAS Subsidiary 53.09
Ashmore Holdings Colombia SAS Subsidiary 100.00
Ashmore Investment Advisors S.A. Sociedad Fiduciaria Subsidiary 100.00
Ashmore Backup Management Company SAS Subsidiary 100.00
Avenida Colombia Management Company SAS Subsidiary 100.00
Ashmore Avenida DP General Partner SAS Subsidiary 80.00
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/o 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 69.29
Ashmore AISA (Cayman) Limited Subsidiary 100.00 PO Box 309, Ugland House, Grand Cayman,
KY1-1104, Cayman Islands
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 Venezuela Recovery Fund 2 Ltd Financial asset 45.85
Ashmore Emerging Markets Debt and Currency Fund Limited Consolidated fund 57.72
Ashmore SICAV Emerging Markets Middle East Equity Fund Consolidated fund 88.78 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 100.00
Ashmore SICAV Emerging Markets Global Small-Cap Equity Fund Consolidated fund 47.55
Ashmore SICAV Emerging Markets IG Total Return Fund Consolidated fund 100.00
Ashmore SICAV Emerging Markets Total Return ESG Fund Consolidated fund 99.77
Ashmore SICAV Emerging Markets Indonesian Equity Fund Consolidated fund 100.00
Ashmore SICAV Emerging Markets Equity ESG Fund Consolidated fund 99.36
Ashmore SICAV Emerging Markets Local Currency Bond Fund 2 Consolidated fund 100.00
Ashmore SICAV Emerging Markets Shariah Active Equity Fund Financial asset 100.00
Ashmore SICAV Emerging Markets IG Short Duration Fund Financial asset 30.01
Ashmore SICAV Emerging Markets Multi-Asset Fund Financial asset 28.46
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 Active Equity Fund Consolidated fund 73.14
Ashmore Emerging Markets Local Currency Bond Fund Consolidated fund 78.91
Ashmore Emerging Markets Equity ESG Fund Consolidated fund 100.00
Ashmore Emerging Markets Short Duration Select Fund Consolidated fund 100.00
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 2023 or 30 June 2022.
Statutory accounts for 2022 have been delivered to the registrar of companies,
and those for 2023 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 2022 or 2023.
Alternative Performance Measures
Ashmore discloses APMs in order to assist shareholders' understanding of the
Group's operational performance 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
2022. 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 FY2023 FY2022
£m
£m
Total revenue CSCI 193.2 254.4
Less:
Distribution costs CSCI (2.2) (3.5)
Add:
Foreign exchange CSCI 5.4 11.6
Net revenue 196.4 262.5
Net management fees
The principal component of the Group's revenues is management fees, net of
associated distribution costs, earned on AuM.
Reference FY2023 FY2022
£m
£m
Management fees CSCI 185.4 247.0
Less:
Distribution costs CSCI (2.2) (3.5)
Net management fees 183.2 243.5
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 dollars
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 or joint
ventures. The margin is a principal measure of the firm's revenue generating
capability and is a commonly used industry performance measure.
FY2023 FY2022
Net management fee income (US$m) 220.6 323.4
Average AuM (US$bn) 57.7 82.8
Net management fee margin (bps) 38 39
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 FY2023 FY2022
£m
£m
Operating profit CSCI 77.4 119.2
Less:
Seed capital-related items CSCI, Note 20c 26.3 46.2
Add:
Variable remuneration Note 9 34.8 45.6
Charitable donations 0.5 0.6
EBVCIT 139.0 211.6
VC ratio 25.0% 21.5%
EBITDA
EBITDA provides a view of the operating performance of the business before
certain non-cash items, financing income and charges, and taxation.
Reference FY2023 FY2022
£m
£m
Operating profit CSCI 77.4 119.2
Add:
Depreciation and amortisation Note 11 3.2 3.1
EBITDA 80.6 122.3
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 FY2023 FY2022
£m
£m
Net revenue CSCI 196.4 262.5
Less:
FX translation Note 7 (1.0) (5.3)
Adjusted net revenue 195.4 257.2
Reference FY2023 FY2022
£m
£m
Personnel expenses CSCI (66.2) (73.4)
Other expenses CSCI (27.8) (25.1)
Less:
Other expenses in consolidated funds Note 20c 1.3 1.4
Add:
VC % on FX translation Note 7 0.3 1.1
Adjusted operating costs (92.4) (96.0)
Reference FY2023 FY2022
£m
£m
EBITDA 80.6 122.3
Less:
FX translation Note 7 (1.0) (5.3)
VC % on FX translation Note 7 0.3 1.1
Seed capital-related items CSCI, Note 20c 26.3 46.2
Adjusted EBITDA 106.2 164.3
Adjusted EBITDA margin
The ratio of adjusted EBITDA to adjusted net revenue. 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 FY2023 FY2022
pence
pence
Diluted EPS CSCI 12.2 12.6
Less:
FX translation Note 7 (0.1) (0.6)
Tax on FX translation - 0.1
Seed capital-related items CSCI, Note 8, Note 20c 1.2 7.1
Tax on seed capital-related items (0.6) (0.5)
Adjusted diluted EPS 12.7 18.7
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 FY2023 FY2022
£m
£m
Cash generated from operations Consolidated cash flow statement 111.6 182.1
Less:
Cash flows relating to consolidated funds Note 20c 0.1 2.8
Operating cash flow 111.7 184.9
Adjusted EBITDA 106.2 164.3
Conversion of operating profits to cash 105% 113%
Capital resources
Ashmore has calculated its capital resources in a manner consistent with the
IFPR. Note that goodwill and intangible assets include associated deferred tax
liabilities and deferred acquisition costs, and foreseeable dividends relate
to the proposed final dividend of 12.1 pence per share. Other adjustments
relate to the cash flow hedging reserve.
Reference 30 June 2023 30 June 2022
£m
£m
Total equity Balance sheet 898.8 945.0
Less:
Goodwill and intangibles n/a (80.0) (84.4)
Deferred tax assets Balance sheet (23.9) (32.7)
Foreseeable dividends Note 14 (85.1) (84.7)
Investments in financial sector entities n/a (5.0) (4.9)
Other adjustments Consolidated statement of changes in equity - 4.9
Capital resources 704.8 743.2
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