February 21, 2013 8:56 am

Ashmore profits slip amid growth concerns

Ashmore, the fund manager focused on emerging market debt, suffered a slip in profits yesterday amid worries about the changing dynamics of the market that threatens the company’s future growth.

The FTSE 250 listed group has been a top performer over the last decade. However, the so-called great rotation out of bonds into equities and worries that last year’s emerging market rally has come to an end have unsettled investors.


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Graeme Dell, the group’s finance director, defended the company, saying the group was well-placed to grow further because of its past record on performance and determination to keep costs lower.

“The emerging market rally is not necessarily over,” he said. “Investors also want to switch out of cash and higher yielding assets, which works in our favour. We are still seeing inflows and, in terms of revenue margin, we are totally happy.”

Mr Dell pointed out that the fall in profits before tax to £120.2m at the end of the six months to December 31 from £129.8m previously was in line with expectations and added that the company had increased assets under management.

Assets under management rose to $71bn at the end of December, a 4.1 per cent rise that was reported in a trading update in January. There were also net inflows of $1.6bn.

Analysts agreed that the company was keeping costs down and had maintained its impressive earnings margin. An earnings before interest, tax, depreciation and amortisation margin of 70 per cent of revenue is extremely high.

However, worries centre on lower management and performance fees. Performance fees dipped to £15.3m, from £23m a year earlier, driven by falling fees from the group’s external and local currency debt funds. Net management fees dropped to £148.2m compared with £151.4m previously.

One strategist at a European bank said: “You have to ask yourself how Ashmore are going to grow further. I am not sure.”

Emerging market shares rallied more than 15 per cent last year – including more than 5 per cent in the last quarter – amid signs China’s economy would not slow too quickly while an easing of the European debt crisis supported prices.

Emerging debt yield spreads have also narrowed against US Treasuries, with some strategists wondering how much further they can tighten.

The company’s shares fell 1.24 per cent to close at 359.8p, underlining the view of investors that the results had not significantly changed the outlook for the company.

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