LUMX GROUP LIMITED Gottex Fund Management Holdings Limited (Gottex), an independent global asset management group, announces its annual results for the year ended 31 December 2014.
Highlights:
Synergies from merger with EIM Group (EIM) now expected to exceed USD 20 million and to be fully implemented by June 2015.
The Group is targeting to be operationally profitable by Q4 2015.
Late completion of merger due to regulatory delays held up implementation of substantial synergies which together with lower average fee rates contributed to an adjusted operating loss2 of USD 12.3 million for 2014 compared to USD 3.7 million in
2013.
Strong product performance during the first 2 months of 2015 with, in particular, multi- asset, Asia and diversified hedge fund solutions posting strong results.
Good progress achieved over the last 6 months in developing a Dynamic Alternative Risk Premia product seeking to provide investors cost efficient access to liquid hedge fund-like- returns.
Group client assets of USD 8.2 billion as at 31 December 2014 compared with combined client assets1 of USD 8.1 billion one year earlier. New assets raised since the start of the year 2015 amount to USD 400 million.
Gottex Yellow Mountain UCITS Fund (providing access to China A-Shares), Multi- Asset Growth and Alternative Risk Premia UCITS products to be launched in Q2 2015.
Commenting, Joachim Gottschalk, Chief Executive Officer, stated:
"We are very pleased that we completed the merger between Gottex and EIM at the end of September 2014 and also with the progress we have achieved in terms of integrating people, processes and systems. We are repositioning the company to counter the challenging headwinds in the hedge fund of fund space, which is being affected by moderate average returns and fee pressures. We are very disappointed with the financial loss for the year to which the delay of the implementation of our synergies contributed, but with USD 20 million of identified synergies expected to be in place by Q2 2015, we are seeing a substantial reduction in the group's cost base and are aiming to be operationally profitable by the end of 2015."
For Additional Information
Gottex Fund Management Holdings Citigate Dewe Rogerson
Andre Keijsers Michael Berkeley/Caroline Merrell
Tel: +44 20 7494 5148 Tel: +44 20 7638 9571
1) At 31 Dec 2013 EIM merger still subject to regulatory & shareholder approval and completion.
2) Prior to acquisition-related and incidental charges; operating loss of USD 19.3 mln.
Gottex Fund Management Holdings Ltd. Assets
The client assets of Gottex group as at 31 December 2014 were USD 8.2 billion, up 1.7% when compared with the combined total of USD 8.1 billion at 31 December 2013. This total consisted of USD 7.75 billion in GFM assets, up 9.2%, and LUMA/LUMX assets of USD 0.45 billion. New business won since the beginning of the year 2015 amounts to USD 400 million.
The breakdown of assets across products and services during 2014 is as follows:
Gottex Assets GFMH Dec 2014i
(USD billion)
GFMH Dec 2013iii
(USD billion)
% change
Alternative Solutions BU 6.55 6.09 +7.6% Asian BU 0.75 0.35 +115% Multi-Asset BU 0.44 0.66 -33% Total GFM assets 7.75 7.20 +9.2%
LUMA/LUMX assets 0.45 0.97 -53%
Total assetsii) 8.20 8.07 +1.7%i) Of which advisory mandates represented USD 1.27 billion as at Dec 2013 and USD 3.67 billion as at Dec 2014. ii) Client assets represented in both GFM and LUMA/LUMX amounted to USD 450 million.
iii) Combined assets in Dec 2013 were then subject to regulatory and shareholder approval and completion. Note: percentage changes are actual, the amounts are rounded.
Strategy and Plans2014 was a challenging but transformational year for the company and having identified USD 20 million of synergies, asset growth will be the main focus of the Group. The Board and management are focused on creating a stable platform for the Group from which selected growth initiatives will be driven to counter the headwinds experienced in our hedge fund of fund business. Several developments merit highlighting:
Dynamic Alternative Risk Premia (DARP) - these are cost efficient liquid alternatives, where we plan to offer our investors transparent access to hedge fund
like returns through DARP products. We believe the ongoing focus of institutional investors on overall fee levels across alternative investments will continue and drive interest in these DARP products.
Multi-asset income and growth funds - general demand for multi-asset products was healthy in 2014. We expect this to continue going forward as investors value the benefits of real diversification accessible through liquid products. We are looking to capitalise on this by launching dynamic multi-asset UCITS products, focusing on growth in the coming 3 months.
Gottex Yellow Mountain UCITS product range - these products will offer investors direct access to mainland China securities, starting with a long only equity product investing in liquid Shanghai listed A-Shares followed by Chinese RMB- denominated fixed income products. These will be managed in co-operation with our local Shanghai-based partner VStone Asset Management.
Our main focus in 2015 will be:
The final integration of Gottex and EIM, including full realisation of the identified synergies.
To manage our cost base to become operationally profitable in Q4 2015.
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Gottex Fund Management Holdings Ltd. To generate strong performance across our entire product line.
To develop our liquid dynamic alternative risk premia offerings.
To capitalise on the existing demand for liquid multi-asset growth and income products for retail and institutional clients.
To offer global investors direct access to Chinese A-Shares and RMB- denominated fixed income markets in co-operation with our local partner VStone Asset Management.
To expand our private wealth management services leveraging the expertise of our wealth management affiliate 2PM.
In terms of organisational structure, Mr Bruno Pfister, a non-executive director of the Company, will step down as a Board member at the coming AGM of the Company after tenure of more than 7 years. At the same time, our board will be strengthened by the appointment of Mr Tiberto Brandolini, who is also a member of the board of directors of Fiat SpA and Fiat Chrysler. Mr Michael Garrett, who also has served the Company for the last 7 years, has expressed his intention to retire as a non-executive director of the Company during 2015, once the Company has identified an appropriate replacement. Mr André Keijsers, in charge of Corporate Strategy, will be leaving the Executive Committee at the end of April 2015.
Financials
The Group's financials include those of EIM Group as from the day of completion, 30
September 2014. Group gross revenues for the 12 month period were USD 33.3 million compared to USD 46.4 million in 2013. Management fees were USD 27.9 million (USD
33.4 million in 2013) whilst 2014 generated performance fees of USD 4.5 million (2013: USD 11.9 million). Referral fee expenses amounted to USD 3.9 million (2013: USD 7.1 million), which as a percentage of management and performance fees meant a decrease
from 15.6% in 2013 to 12.0% in 2014. This resulted in net revenues of USD 29.4 million
(2013: USD 39.4 million).
The combined group had total operational cost (excluding acquisition related charges) of over USD 60 million on an annual run rate basis as at Q4 2013. By Q4 2014, this had been reduced to USD 50 million and by Q2 2015 will have fallen below USD 35 million, partly as a result of over USD 20 million in merger synergies. The operational result prior to acquisition related cost and incidental charges/goodwill impairment was USD -12.3 million (2013: USD -3.7 million).
Acquisition related cost and restructuring charges of USD 4.1 million, incidental charges of USD 1.7 million and USD 1.2 million goodwill impairment affected the operating results by a total charge of USD 7.0 million.
The number of Gottex employees on a full time equivalent basis in December 2014 was
133, whilst the current number of staff is 127 employees. Personnel expenses (excluding share award and acquisition related charges) reduced from USD 31.5 million in 2013 to USD 29.5 million in 2014, even though they included EIM staff expenses for the last
quarter.
General and administrative costs (excluding acquisition related and restructuring charges)
increased to USD 10.9 million due to inclusion of EIM's G&A cost from 30 September
2014 onwards, but we expect this to reduce to USD 8 million by Q2 2015 as annual contracts relating to 2014 will cease. Marketing and representation cost reduced 14% to
USD 1.6 million.
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Gottex Fund Management Holdings Ltd.Consolidated Income Statement (USD mln) 2014 2013 Change
(%)
G
Total referral fee expense (3.9) (7.1) -45% Gross profit 29.4 39.4 -25%
Share from core JVs (0.0) (0.0) -21%
Personnel expenses (29.3) (31.0) -6% Personnel-related non-cash IFRS charges (1.5) (1.3) 12% General and administrative cost (9.3) (8.9) 3% Marketing and representation cost (1.6) (1.9) -14% Operating cost (pre acquis. & incidental charges) (41.7) (43.1) -2%
Operating result (pre acquis. & incidental charges) (12.3) (3.7) 229%
Incidental charges (1.7) 0.0 0% Acquisition related & restructuring cost (4.1) (6.1) -34% Impairment of goodwill (1.2) 0.0 0%
Operating result (19.3) (9.8) 96%
Finance income/(cost) 0.8 (0.3) -392% Changes in financial assets (0.1) (1.4) -96% Impairment charges (0.4) 0.5 -171% Associates/joint ventures (0.1) 0.2 -135%
Profit before tax (18.9) (10.9) 74%
Income tax (expense)/credit (0.3) 0.3 -180% Net profit (19.2) (10.6) 82%
Minorities 0.3 1.0 -76% Profit attributable to shareholders (18.9) (9.5) 99%
Weighted average number of shares for diluted
EPS calculation (millions) 33.4 29.3 14% Diluted EPS (USD)1) (0.57) (0.33) 74%
Proposed dividend per share (USD) 0.00 0.00 0%
Note: numbers are rounded, percentages are actual, percentage change sign on accounting basis.
With positive financial items of USD 0.7 million and income tax and minorities offsetting each other, the net attributable loss amounted to USD 18.9 million. During the first 9 months of the year there were 34.5 million shares outstanding which increased to 48.5 million on 30 September 2014 upon completion of the merger. The number of average shares used in calculating the Group's earnings per share is lower due to the impact of Treasury shares. The Board proposes no dividend for this financial year.
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Gottex Fund Management Holdings Ltd.Statement of Financial Position (USD
mln)
2014 2013 Change (%)Financial Investments | 2.4 | 14.0 | -83% |
Goodwill | 30.0 | 10.4 | 189% |
Investments in associates/JVs | 2.7 | 0.3 | 800% |
Other tangible non-current assets | 12.0 | 6.7 | 79% |
Total non-current assets | 47.1 | 31.3 | 51% |
Trade debtors & other receivables | 16.4 | 21.5 | -24% |
Cash and short term financial investments Current assets | 10.0 26.3 | 9.2 30.7 | 8% -14% |
Total assets | 73.5 | 62.0 | 18% |
Total equity | 35.6 | 28.6 | 24% |
Non-current liabilities | 11.7 | 6.5 | 80% |
Trade creditors | 5.8 | 6.3 | -8% |
Other payables | 20.1 | 20.5 | -2% |
Current tax liabilities and provisions | 0.3 | 0.0 | 0% |
Current liabilities | 26.2 | 26.8 | -2% |
Total equity and liabilities | 73.5 | 62.0 | 18% |
Note: numbers are rounded, percentages are actual.
Outlook
Our general outlook remains positive, but we operate in a challenging environment which includes global political uncertainty, potential deflationary forces, tension among EU countries and governments using foreign exchange devaluations as instruments to get back to become competitive again. We see a great opportunity for liquid alternatives using DARP products, as well as liquid multi-asset solutions and Asian focused products. We believe the post-merger platform will allow the combined firm to expand its reach for tailor- made alternative solutions designed for sophisticated institutional clients.
Please visit www.gottexholdings.com/Presentations.aspxto view the presentation accompanying this release and www.gottexholdings.com/FinancialReports.aspxto view a copy of the 2014 annual report. Gottex will hold its Annual General Meeting on 24 April
2015 and announce its Q1 2015 trading update on the same day.
Incorporated in Guernsey, Gottex is the holding company of a leading independent global investment management group (Gottex Group), whose core business is providing predominantly alternative multi-manager and multi-asset solutions and related advisory and risk management services. In this capacity, the Gottex Group provides liquid and regulated multi-asset investment products, multi-manager alternative solutions (including market-independent comingled portfolios) and sector-specific single investor vehicles, as well as a selection of Asian and China focused funds to a global and diversified institutional and retail clientele.
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Gottex Fund Management Holdings Ltd.With offices in Guernsey, Geneva (Nyon), London, Hong Kong, New York, Boston, Luxembourg, Monaco, and affiliates in Shanghai and Melbourne, the Gottex Group is present on four continents with over 45 dedicated investment professionals on the ground. As at 31 December 2014, Gottex Group had USD 8.2 billion of total client assets.
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