Forex-stricken Ashmore Group’s profits take 34% plunge

Ashmore Group’s pre-tax profits sunk 34 per cent to £170.3m in the year to 30 June causing its share price to slump in morning trading.

The emerging market-focused asset manager was hit hard by the rise in sterling during the year, its annual results show. With the currency effect stripped out, profit fell by 16 per cent.

Ashmore’s share price had sunk 6.78 per cent to 322p at 11.35am.

Its assets under management fell slightly to $75bn, down from $77.4bn a year earlier.

Ashmore Group chief executive Mark Coombs says the results show the damage wrought by the soaring sterling, as well as the effects of market volatility.

Operational performance was “sound”, he says, with costs cut by more than a quarter.

“Emerging nations are generally in good health; aggregate GDP growth in emerging markets was 4.5 per cent in 2013 and is expected to be higher still in 2014, inflation is at acceptable levels, and FX reserves remain strong,” he explains.

That is an important context for investment as the global economy changes, he says. Developed markets continue to move toward weaning themselves from unprecedented “monetary policy experiments”.

“[Mean]while emerging markets need to decide how to manage substantial FX reserves in the face of potential foreign currency weakness,” he adds.

“This will lead to greater balance and rising emerging markets relevance in investment portfolios.”

He believes that should put Ashmore at an advantage.

Ashmore chairman Michael Benson says the currency moves wiped £46m off the company’s profits. The remaining £30.1m was due to lower fees following the emerging market sell off in May and June last year, as well as the ructions early this year.

The remaining £94.2m in lesser profits was due to a 10 per cent drop in management fees.