Ashmore profits halve as investors flee emerging markets

Profits at Ashmore dropped by more than half in the year to June as Russia’s war in Ukraine, slower growth in the Chinese economy and mounting global inflationary pressures led to investors withdrawing money from the specialist emerging markets fund manager.

The company on Friday reported pre-tax profit of £118.4mn for the financial year ending June 30, down 58 per cent on the previous 12-month period after net revenues fell 10 per cent to £262.5mn.

Ashmore said a large part of the decline in profits was explained by an unrealised mark-to-market loss of £49.9mn on seed capital investments in new equity and fixed income strategies.

Earnings per share on an adjusted basis — the company’s preferred measurement — shrank by a fifth to 18.7p, narrowly beating the consensus forecast by City analysts.

Despite the drop in profits, Ashmore maintained its final dividend to give a full-year payout of 16.9p per share.

The company said geopolitical tensions related to the Ukraine conflict, rising inflationary pressures and moves by central banks to tighten monetary policy had all had a negative impact on investors’ appetite for risk.

Chief executive Mark Coombs said that “exceptionally attractive valuations” were now available following the declines in EM equities.

Coombs offered a bullish outlook, predicting that “risk appetite will improve as some of the recent macro headwinds abate, supporting a recovery in emerging markets asset prices and higher investor allocations”.

Ashmore had already disclosed that its assets under management had declined by 32 per cent over the year to $64.0bn because of the combination of its negative investment performance and hefty net client outflows of $13.5bn.

Weakness in equity and bond markets across many EMs has weighed heavily on the performance of Ashmore’s strategies.

Just over a quarter (28 per cent) of Ashmore’s assets have outperformed their benchmarks over three years and less than half (48 per cent) over five years.

David McCann, an analyst at the broker Numis Securities in London, said Ashmore’s investment performance “remains poor” and that any investor buying the stock today would have to be prepared for more share price volatility.

“The shares might be cheap today but it is plausible that they could get [even] cheaper and for a prolonged period before a recovery commences,” said McCann.

Ashmore’s shares moved 5 per cent higher during morning trading in London on Friday, reducing the stock’s decline so far this year to 31.3 per cent.