Interim Results

3rd Sep 2008 07:00



3 September 2008

Charlemagne Capital Limited

Unaudited Results for the six months ended 30 June 2008

Charlemagne Capital Limited ("Charlemagne", or the "Group"), the specialist emerging markets equity investment manager, today announces unaudited interim results for the six months ended 30 June 2008.

Financial Highlights

	6 months to 30 June 2008	% change	6 months to 30 June 2007
Net Management Fees	US$25.1m	+32%	US$19.0m
Net Performance Fees	US$3.3m	-80%	US$16.4m
Other Income	US$1.8m	-64%	US$5.0m
Operating profit	US$13.2m	-29%	US$18.7m
Basic and diluted earnings per share	3.94c	-31%	5.58c
Ordinary interim dividend per share	2.50c	+14%	2.20c
Special interim dividend per share	Nil	-	1.65c

Net management fees of US$25.1 million, up 32% versus June 2007, reflecting the higher average Assets under Management ("AuM") in the first half of 2008.

Ordinary interim dividend per share increased by 14% to 2.5 US cents.

Special interim dividend per share omitted at half year stage reflecting lower net performance fees crystallised in the period.

Operational Highlights

Group AuM of US$5.7 billion as at 30 June 2008, down 11.6% since 1 January 2008 reflecting adverse market conditions but up 12.6% since 30 June 2007 (US$5.1 billion).

Net subscriptions up in the first half.

During the first half of 2008, the Group successfully attracted seven major new institutional investors with combined new subscriptions of around US$357 million.

Within the Specialist funds category, the BRIC property programme launched with an initial capital raising of US$21 million.

Charlemagne is continuing to raise monies into the second half of the year.

Launched Magna Middle East & North Africa Fund in June 2008.

The average management fee margin has remained consistent at 82 basis points per dollar throughout the period despite the changing mix of business.

Commenting on the results, Jayne Sutcliffe, Chief Executive said:

"In a difficult period for the asset management industry Charlemagne has increased net management fee revenues year on year and we continue to strengthen and build the business. We are confident that our sustainable core profitability, our lean operation and our willingness to embrace innovative products and ideas should result in us being well placed to take maximum advantage of the opportunities which will undoubtedly emerge."

  

Enquiries:

 

Charlemagne Capital	Tel. 020 7518 2100
Jayne Sutcliffe, Chief Executive
David Curl, Finance Director

 

Smithfield Consultants	Tel. 020 7360 4900
John Kiely / George Hudson / Gemma Froggatt

There is a presentation for analysts and investors at 9.30am today at the offices of Smithfield Consultants,  10 Aldersgate St., London EC1A 4HJ.

Notes to Editors:

Charlemagne Capital is a specialist emerging markets equity investment management group. Charlemagne Capital Limited was admitted to the AIM market of the London Stock Exchange on 4 April 2006.

Charlemagne's product range comprises mutual funds, hedge funds and institutional and specialist fund products primarily covering GEMs, Eastern Europe, Latin America and Asia. Charlemagne Capital employs a range of investment strategies including: long only, long/short, structured products and private equity. Charlemagne Capital's funds aim to exploit the inefficiencies in the market via a strict bottom up approach and focused stock selection.

Through the strong long-term investment performance track record of its principal funds, Charlemagne Capital has established itself as a market leader in emerging markets investment management. Its performance has been recognised through numerous awards and top rankings for its funds, including the 2005 Standard and Poor's 5-year best performing fund award in Austria, the 2006 Swiss Lipper Leaders 5-year award winner for Emerging Markets Europe and an AAA-rating by Standard & Poor's for its Magna Eastern European Fund (a sub-fund of Magna Umbrella Fund Plc).

  Chief Executive's Report

The table below sets out the Group's AuM as at 1 July 2008 and the movements experienced in each product range in the period since 1 January 2008.

	1 January 2008	Net subscriptions		Reorganisation		Net performance		1 July 2008	Movement in period
	AuM (US$m)	(US$m)	(%)	(US$m)	(%)	(US$m)	(%)	AuM (US$m)	(%)
Magna	1,650	(44)	(2.7)	(48)	(2.9)	(264)	(16.5)	1,294	(21.6)
OCCO	473	(61)	(12.9)	-	-	1	0.2	413	(12.7)
Institutional Advisory	2,663	(127)	(4.8)	-	-	(249)	(9.6)	2,287	(14.1)
Institutional Mandate	1,149	357	31.1	48	4.2	(207)	(15.3)	1,347	17.2
Specialist	563	5	0.9	(90)	(16.0)	(76)	(14.6)	402	(28.6)
Total	6,498	130	2.0	(90)	(1.4)	(795)	(12.2)	5,743	(11.6)

Note: Closing AuM is stated as including all subscription and redemption orders received for the relevant funds as at the close of the period but not processed until the first dealing date of the following period.

The first half of 2008 saw a significant correction across emerging markets, following six years of strong performance. This was against a backdrop of turbulence in developed markets which reacted to concerns of a global credit crisis, fears of worldwide recession and the increased threat of inflation. It has been a difficult period for the asset management industry, but Charlemagne has increased net management fee revenues year on year, continues to generate significant operating profit and is declaring an ordinary dividend up 14% on the prior year, which reflects the increased level of sustainable earnings.

Total revenue for the first half of the year was US$30.3m (2007: US$40.4m), of which US$25.1m (2007: US$19.0m) was from net management fees. Market conditions have clearly impacted performance fee revenues which were US$3.3m for the first half (2007: US$16.4m) with accruing performance fees at US$0.7m compared with US$34.0m as at the same date in 2007. It is unlikely that performance fees will make a significant contribution to overall profitability for 2008. Despite the current negative sentiment in many emerging markets, fundamentals remain compelling and the Group's ability to generate significant revenues from performance fees in the future remains intact.

Despite the adverse market sentiment, the Group has been very successful in continuing to build its institutional mandate business, with new subscriptions of US$357 million being awarded during the period. This helped the Group record positive subscriptions during the period of US$40m even after scheduled returns of capital from the private equity business. The pipeline of further business for the remainder of the year is encouraging. The Group's own label funds (Magna, OCCO and Specialist) saw net redemptions over the first six months of 2008, as did the white label contracts, as investors sought to reduce equity exposure in the light of market volatility, a trend which has continued into the second half. Investment performance over the period has been disappointing. Charlemagne has an active, bottom-up process which looks to take advantage of market inefficiencies by identifying mispriced assets with embedded catalysts that will bring the mispricing to the attention of the broader market. We do not take views on top-down developments and do not attempt to time the direction of markets. Active, bottom up managers will, in certain market conditions, produce investment returns which are out of line with the benchmark, but long term performance has been strong across our funds and we are confident that our investment approach will continue to generate long term performance for our investors.

Although this was not an easy environment in which to launch new products, we were able to launch a new private equity vehicle focusing on property in the BRIC economies, which is well positioned to take advantage of the likely demand once market conditions become less turbulent. With this in mind, we are developing a pipeline of new, largely property based, product initiatives.

Changes in the balance of Group products inevitably impacts the average levels of fee revenue but the margins earned throughout the period have remained consistent throughout the year to date, and in line with the previous year, at 82 basis points.

The Group will continue to pursue its policy of paying dividends reflecting the long-term earnings and cash flow potential of the Group. For the first half of 2008, the Group is declaring an ordinary interim dividend of US 2.5 cents (2007: US 2.2 cents). A special interim dividend is not being declared on this occasion (2007: US 1.65 cents) but any available funds at the year end will be distributed in the declaration for the full year. The Group will also continue its policy of buying back its shares in the marketplace from time to time. During the first half of the year, the Group bought back and cancelled 0.44% of the issued share capital as at 31 December 2007.

Against a difficult market backdrop, we are continuing to strengthen and build the business. We are confident that our sustainable core profitability, our lean operation and our willingness to embrace innovative products and ideas should result in us being well placed to take maximum advantage of the opportunities which will undoubtedly emerge. We also remain confident that the long-term investment case for high growth emerging markets remains valid and we continue to believe in the Group's ability to generate significant revenues in the future.

Jayne Sutcliffe

Chief Executive

3 September 2008

  Consolidated Income Statement

Expressed in United States Dollars	Notes	Unaudited	Unaudited	Audited
		Six months to	Six months to	Year to
		30 June 2008	30 June 2007	31 December 2007
		US$'000	US$'000	US$'000
Revenue	2	30,259	40,398	133,902
Expenses
Personnel expenses	8	(13,858)	(18,690)	(56,069)
Other costs		(3,232)	(2,959)	(7,232)
Operating Profit		13,169	18,749	70,601
Share of profit of jointly controlled entity		-	-	195
Profit before tax		13,169	18,749	70,796
Taxation	3	(2,085)	(2,644)	(11,933)
Profit after tax		11,084	16,105	58,863
Minority Interest		-	-	(104)
Profit after tax and Minority Interest		11,084	16,105	58,759
Dividends	4	(35,777)	(13,371)	(24,362)
Retained (deficit)/earnings for the period		(24,693)	2,734	34,397
		US$	US$	US$
Earnings per share
Basic and diluted	9	0.039439	0.055778	0.205279

  Consolidated Statement of Recognised Income and Expense

Expressed in United States Dollars	Notes	Unaudited	Unaudited	Audited
		Six months to	Six months to	Year to
		30 June 2008	30 June 2007	31 December 2007
		US$'000	US$'000	US$'000
Movements in exchange differences on the translationof the financial statements of entities not accounted forin United States Dollars		647	(22)	1,310
Net income/(expense) for the period recognised directly in equity		647	(22)	1,310
Net profit for the period		11,084	16,105	58,863
Total recognised income for the period		11,731	16,083	60,173

   

 Consolidated Balance Sheet

Expressed in United States Dollars	Notes	Unaudited	Audited
		As at	As at
		30 June  2008	31 December 2007
		US$'000	US$'000
Non-current assets
Property and equipment		1,179	1,282
Interest in jointly controlled entity		220	220
Total non-current assets		1,399	1,502
Current assets
Current investments		8,236	8,975
Receivables	5	13,425	81,429
Cash and cash equivalents		32,980	33,168
Total current assets		54,641	123,572
Total assets		56,040	125,074
Issued share capital	10	2,840	2,853
Reserves		29,419	54,624
Shareholders' equity		32,259	57,477
Minority Interest		133	133
Total equity		32,392	57,610
Current liabilities
Accounts payable, accruals and other payables	6	21,451	57,752
Taxation	3	2,197	9,712
Total current liabilities		23,648	67,464
Total equity and liabilities		56,040	125,074

  Consolidated Cash Flow Statement

Expressed in United States Dollars		Unaudited	Unaudited	Audited
		Six months to	Six months to	Year to
		30 June 2008	30 June 2007	31 December 2007
		US$'000	US$'000	US$'000
Operating Profit		13,169	18,749	70,601
Adjustments for:
Depreciation		243	196	406
Exchange loss on property and equipment		6	52	5
Provision for unrealised loss/(profit) on foreign exchange contracts and investments		1,304	(21)	(1,459)
(Profit) on disposal of investments		(559)	(95)	(745)
Share based option plan		291	327	599
Decrease in receivables		68,004	16,935	(38,224)
(Decrease)/Increase in accounts payable, accruals and other payables		(36,301)	(465)	29,909
Tax paid		(9,600)	(2,979)	(4,352)
Foreign currency transaction adjustment		647	(22)	1,310
Cash flows from operating activities		37,204	32,677	58,050
Investing activities
Purchase of investments		(2,925)	(2,819)	(4,766)
Proceeds from sale of investments		2,919	815	2,666
Purchase of property and equipment		(146)	(715)	(1,223)
Cash flows used in investing activities		(152)	(2,719)	(3,323)
Financing activities
Shares repurchased		(1,463)	(7,855)	(12,676)
Dividends paid		(35,777)	(13,371)	(24,362)
Cash flows used in financing activities		(37,240)	(21,226)	(37,038)
Net (decrease)/ increase in cash and cash equivalents		(188)	8,732	17,689
Cash and cash equivalents at the beginning of the period		33,168	15,479	15,479
Cash and cash equivalents at the end of the period		32,980	24,211	33,168

  Notes to the Consolidated Interim Financial Statements

 

1. Basis of Preparation

The consolidated interim financial statements have been prepared on a condensed basis, in accordance with the accounting policies applied to the most recent audited statutory accounts and in accordance with the requirements of International Accounting Standard 34 "Interim Financial Reporting".

The consolidated interim financial statements are prepared on the historical cost basis except that the following are stated at their fair value: financial instruments at fair value through profit or loss including derivative financial instruments. Recognised assets and liabilities that are hedged are stated at fair value in respect of the risk that is hedged.

2. Segment Reporting

Unaudited
Six months to 30 June 2008
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
	Magna	OCCO	Institutional	Institutional	Specialist	Other	Total
			Advisory	Mandates
Net Management Fees	7,542	2,864	6,342	4,284	4,043	-	25,075
Net Performance Fees	34	1,322	121	819	1,050	-	3,346
Return on Investment	-	-	-	-	-	14	14
Other Income	-	-	-	-	345	1,479	1,824
Segment Revenue	7,576	4,186	6,463	5,103	5,438	1,493	30,259
Segment Result	4,971	2,592	4,536	3,521	4,034	1,493	21,147
Unallocated Expenses							(7,978)
Results from Operating Activities							13,169

Unaudited
Six months to 30 June 2007
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
	Magna	OCCO	Institutional	Institutional	Specialist	Other	Total
			Advisory	Mandates
Net Management Fees	5,891	2,436	6,094	1,660	2,953	-	19,034
Net Performance Fees	2,207	6,023	6,489	80	1,598	-	16,397
Return on Investment	-	-	-	-	-	1,445	1,445
Other Income	2	-	-	-	3,301	219	3,522
Segment Revenue	8,100	8,459	12,583	1,740	7,852	1,664	40,398
Segment Result	5,267	5,117	8,260	1,273	5,228	1,664	26,809
Unallocated Expenses							(8,060)
Results from Operating Activities							18,749

  

Notes to the Consolidated Interim Financial Statements (Continued)

3.  Taxation

Income tax expense is recognised in each interim period based on the best estimate of the weighted average annual income tax rate expected for the full financial year. Amounts accrued for income tax expense in one interim period may be adjusted in a subsequent period of that financial year if the estimate of the effective rate of income tax changes.

4. Dividends

	Unaudited	Unaudited
	Six months to	Six months to
	30 June 2008	30 June 2007
	US$'000	US$'000
Interim dividend of 12.75 US cents (2007: 4.6 US cents)	35,777	13,371

A second interim ordinary dividend of 2.4 US cents (GB 1.2179p) per ordinary share and a second interim special dividend of US 10.35 cents (GB 5.2522p) per ordinary share in respect of the year ended 31 December 2007 was paid on 4 April 2008 to those shareholders on the register on 7 March 2008 and was charged to the income statement in 2008.

A second interim ordinary dividend of 2.2 US cents (GB 1.1405p) per ordinary share and a second interim special dividend of US 2.4 cents (GB 1.2442p) per ordinary share in respect of the year ended 31 December 2006 was paid on 24 April 2007 to those shareholders on the register on 23 March 2007 and was charged to the income statement in 2007.

5. Receivables

	Unaudited	Audited
	Six months to	Year to
	30 June 2008	31 December 2007
	US$'000	US$'000
Trade receivables	10,690	77,517
Other receivables	2,097	3,230
Prepayments	638	682
	13,425	81,429

6. Accounts Payable, Accruals and Other Payables

	Unaudited	Audited
	Six months to	Year to
	30 June 2008	31 December 2007
	US$'000	US$'000
Provision for performance awards	14,030	34,851
Accruals and other payables	7,421	22,901
	21,451	57,752

 

Notes to the Consolidated Interim Financial Statements (Continued)

7. Related Party Transactions

Transactions with Directors and executive officers

As at 30 June 2008, Directors of the Company and their immediate interests controlled 39.0% (2007: 37.0%) of the voting shares of the Company.

Summary of transactions

8. Directors' Remuneration

Total salaries of US$0.7m (2007: US$0.6m) were paid to Directors during the period. An amount of US$7.1m (2007: US$10.1m) has been accrued within personnel expenses in respect of director and employee incentive payments. However, as at the date of issuance of these Financial Statements, no allocations have yet been made to any directors for bonus awards (2007: $0.4m) nor have any contributions to the Charlemagne 2005 Employee Benefit Trust (2007: $0.8m) or to approved pension plans (2007: $0.8m) been made in respect of Directors.  

9. Earnings per Share

The calculation of basic earnings per share of the Group is based on the net profit attributable to shareholders for the six months to 30 June 2008 of US$11.1m (2007: US$16.1m) and the weighted average number of shares of 281,041,548 (2007: 288,735,272) in issue during the period.

The calculation of diluted earnings per share of the Group is same as basic earnings per share as the share options outstanding have been issued contingent upon specified performance conditions being satisfied. As at 30 June 2008 these performance conditions had not been met. 

Shares issued during the year 2006 to Sanne Trust Company Limited have been excluded from the earnings per share calculation as such shares are currently accounted for as treasury shares.

  Notes to the Consolidated Interim Financial Statements (Continued)

10.  Issued Share Capital

Shares	Unaudited	Audited
	30 June	31 December
	2008	2007
	US$'000	US$'000
Authorised
2,000,000,000 ordinary shares of US$0.01 each	20,000	20,000
Issued and fully paid
At beginning of period; 285,274,173 (2007: 294,061,772)	2,853	2,941
ordinary shares of US$0.01 each
Shares repurchased; 1,250,000 (2007: 8,787,599)	(13)	(88)
At end of period; 284,024,173 (2007: 285,274,173) fully paid	2,840	2,853

During the six months ended 30 June 2008, the Company repurchased 1,250,000 of its own shares. During the six months ended 30 June 2007, the Company repurchased 5,156,900 of its own shares.

As at the date of issuing the financial statements there were 284,024,173 ordinary shares of US$0.01 each issued and fully paid.

Where necessary, comparatives figures have been adjusted to conform to changes in presentation for the current period.

ENDIR ILFSRASIFIIT

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Related Shares:

CCAP.L