News Release

Final Results
RNS Number : 8463Y
Jupiter Fund Management PLC
28 February 2013
 

 

Jupiter Fund Management plc

 

RESULTS FOR THE YEAR 31 DECEMBER 2012

 

 

28 February 2013

 

2012 was another positive year for Jupiter as we continued to position the business for growth.

 

 




Year ended

31 December 2012

Year ended

31 December 2011


 

Assets under management (£bn)

 

26.3

22.8

 

 

Net inflows (£bn)

 

1.0

0.7

 

 

EBITDA1 2 (£m)

 

124.2

134.9

 

 

EBITDA margin2 (per cent.)

 

51

54

 

 

Profit before tax (£m)

 

73.6

70.3

 

 

Underlying earnings per share2 (p)

 

19.0

19.1

 

 

Total dividend per share (p)

 

8.8

7.8

 

 

1 Earnings before interest, tax, depreciation and amortisation ("EBITDA") is a non-GAAP measure which the Group uses to assess its performance. It is defined as operating earnings excluding the effect of depreciation and the charge for options over pre-Listing shares.

 

2 non-GAAP

 

 

 

Edward Bonham Carter, Chief Executive, commented:

 

"Our strong investment performance, brand and distribution capabilities have helped Jupiter steer a steady course through another challenging year for financial markets. This, combined with our increasingly robust balance sheet and confidence in our growth prospects, has led the Board to recommend increasing our total dividend by 13 per cent. to 8.8p."

 

 

 

Analyst presentation

 

There will be an analyst presentation at 8.45am on 28 February 2013.

 

The presentation will be held at FTI Consulting, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB.  The presentation will be accessible via a conference call for those unable to attend in person.  To attend the presentation or dial in to the conference call, please contact Laura Ewart at FTI Consulting on +44 (0)20 7269 7243 or at laura.ewart@fticonsulting.com. Alternatively, sign up online using the following link: http://mediazone.brighttalk.com/event/Jupiter/3501672ebc-7113-intro.

 

The Results Announcement will be available at www.jupiteronline.com and copies may also be obtained from the registered office of the Company at 1 Grosvenor Place, London SW1X 7JJ. The Annual Report will be published in March 2013 and will be available at www.jupiteronline.com.

 

 

 

 

For further information please contact:




Investors

Media




Jupiter

Philip Johnson

+44 (0)20 7314 4807

Alicia Wyllie

+44 (0)20 7314 5573


 

 

FTI Consulting

Ed Gascoigne-Pees

+44 (0)20 7269 7132

Andrew Walton

+44 (0)20 7269 7204

 

 

 

 

Forward-looking statements

 

This announcement contains forward-looking statements with respect to the financial condition, results of operations and businesses of the Group. Such statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by forward-looking statements and forecasts. Forward-looking statements and forecasts are based on the Directors' current view and information known to them at the date of this announcement. The Directors do not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast

 

 

Chief Executive's review

 

 

Introduction

 

During 2012, we have continued to deliver value to clients and shareholders, via the successful execution of our business model through investment outperformance, effective distribution and efficient operations.

 

Investment outperformance

 

While equity markets posted positive gains for the year, this performance masked significant underlying volatility, particularly during the first half of the year, as investors grappled with continued turmoil in the Eurozone.

 

Our focus on investing in quality companies which we believe are able to deliver strong results throughout the market cycle typically results in stronger performance in challenging market conditions. The majority of our funds outperformed over the three year period typically used by financial advisers, as well as over one year. Over the three years to 31 December 2012, 79 per cent. of mutual fund AUM was above median with 56 per cent. above median over one year. Furthermore, our institutional clients saw excellent returns last year with all mandates beating their benchmarks.

 

Our managers continue to be recognised for their investment skills, and in October, Jupiter won S&P Capital IQ's Diversified Group of the Year 2012. We also continue to have a high number of funds recommended by independent analysts and financial advisers. Financial Express, for example, awarded 'Alpha' manager status to 12 Jupiter managers in 2012 - more than any other asset manager in the UK.

 

Effective distribution

 

While the overall environment for savings remained below historic levels and flow patterns were unfavourable in our core UK and European markets, 2012 was another good year for net inflows into Jupiter products. The Group recorded net inflows of £1.0bn in 2012, up from £0.7m in 2011 which, combined with market movements, led to record assets under management of £26.3bn at year end. Mutual fund net inflows in the year were particularly strong at £1.6bn, driven by our strong investment performance, recognised brand, increasingly diverse product set and international distribution reach. This is shown by AUM in fixed income and convertible bond products totalling £2.6bn at 31 December 2012, and our SICAV range, sold predominantly to international clients, having AUM of £1.9bn. Our overall flows were, however, held back by the withdrawal of a single large segregated mandate of £0.6bn.

 

In September 2012, Maarten Slendebroek joined Jupiter in the newly created role of Distribution and Strategy Director. He has many years' experience of building asset management operations and will play a key role in building further on our increasingly diversified distribution capabilities in the UK and abroad.

 

Efficient operations

 

Our scalable operating platform allowed us to deliver steady results in 2012. EBITDA margins remained above 50 per cent. and underlying EPS was down one per cent. at 19.0p after reinvesting the savings from deleveraging our balance sheet in our people, platform and distribution reach. Continued cash generation has seen us reduce our gross debt to £78m and we have an increasingly robust balance sheet with a net cash position of £69m at year end. This has allowed us to raise the total dividend by 13 per cent. to 8.8p, reflecting the Board's confidence in the Group's growth prospects.

 

Outlook

 

It is possible the current rally in financial markets will be sustained, assuming the ECB continues to support weaker economies and the US recovery is not derailed. However, in reality, not much has changed from a year ago and markets are still facing several long term challenges.

 

While savers across Europe remain squeezed in the short term due to low wage growth and increases in the cost of living, the structural growth drivers for the savings market remain intact. Jupiter is renowned for its brand strength and ability to deliver outperformance over the long term and we are looking forward to capitalising on the growth opportunities available to us, both in the UK and internationally, in order to deliver strong returns for clients and shareholders.

 

 

 

Edward Bonham Carter

Chief Executive

 

 

 

 

 

 

Business review

 

Operational review

 

Net inflows/(outflows) by product

2012

£m


2011

£m





Mutual funds

1,550


528

Segregated mandates

(568)


96

Private clients

(16)


122

Total

966


746

 

We realised net inflows in the year within mutual funds of £1.6bn (2011: £0.5bn). These flows were concentrated into funds at the cautious end of the risk spectrum, although we saw increased demand for equity products as client risk appetite increased towards the end of the year. Looking at the wider product range, this was partially offset in the first half of the year by a single segregated outflow of £0.6bn, leading to our achieving overall net sales of £1.0bn (2011: £0.7bn). Flows in Private Clients were held back by the withdrawal of a single large client portfolio.

 

 

Assets under management by product

31 December 2012

£bn


31 December 2011

£bn





Mutual funds

20.6


17.2

Segregated mandates

3.2


3.4

Private clients

1.9


1.7

Investment trusts

0.6


0.5





Total

26.3


22.8

 

Assets under management increased to a record £26.3bn at 31 December 2012 (31 December 2011: £22.8bn) due to net inflows and market appreciation across the year. The majority of those assets continue to be in mutual funds, at 79 per cent. (31 December 2011: 75 per cent.).

 

 

Investment performance

 

In the key three year investment period, at 31 December 2012, 33 mutual funds representing approximately 79 per cent. of mutual

funds, by AUM, had delivered above median investment performance (31 December 2011: 26 mutual funds representing approximately 74 per cent. of mutual fund AUM). Looking across the shorter term period of 2012 only, in a period of continued market instability, our funds continued to perform well with 28 mutual funds above median over one year, representing 56 per cent. of mutual fund AUM as at the year end (31 December 2011: 26 funds representing 82 per cent. of AUM).

 

 

 

 

 

Financial review

 

RESULTS FOR THE YEAR

 

The financial performance of the Group is discussed below.

 

Net revenue

 


2012

£m


2011

£m





Net management fees

225.7


226.0

Net initial charges

14.3


17.2

Net performance fees

4.5


5.3

Total

244.5


248.5

 

 

Net revenues for the year were £244.5m (2011: £248.5m), two per cent. behind 2011. While net management fees remained flat, broadly in line with average market levels (the FTSE 100 averaged 5,742 compared to 5,680 in 2011), net revenues fell due to lower initial charges and performance fees. The reduction in initial charges was due to a less favourable pattern of sales versus redemption activity across individual funds and the expected reduction in net amortised front end fees.

 

 

 

2012


2011

Net management fees (£m)

225.7


226.0

Average AUM (£bn)

24.2


23.8

Net management fee margin (bps)

93


95

 

Net management fees continue to contribute the majority of our net revenues (2012: 92 per cent., 2011: 91 per cent.). The net management fee margin for the year was 93 basis points, slightly below the 2011 margin of 95 basis points, but in-line with our expectations and previous market guidance. We continue to expect net management fee margins to decline slowly over time, although the rate and angle of any such decline continues to be uncertain.

 

 

 

Administrative expenses

 


2012

£m


2011

£m





Fixed staff costs

39.5


38.7

Other expenses

41.5


38.7

Total fixed costs

81.0


77.4

Variable staff costs

40.1


36.8

Charge for options over pre-Listing shares

7.3


9.6

Administrative expenses

128.4


123.8

 

Administrative expenses of £128.4m (2011: £123.8m) rose by four per cent. Total fixed costs of £81.0m (2011: £77.4m) were five per cent. above the prior year as we reinvested the savings from deleveraging our balance sheet in our people, platform and distribution reach. Throughout the uncertain external environment during the last 18 months, we have continued to exercise careful cost discipline, mindful of both prevailing market conditions and our desire to grow the business over time.

 

Fixed staff costs of £39.5m (2011: £38.7m) increased due to investment in our distribution and operating platforms during the year. We also continued to seek further efficiencies in our operating platform, closing the Bermuda office and signing a contract to outsource the administration of our private client accounts. This will enhance the services proposition to our private client investors and establish a more efficient and scalable platform for future growth once complete in 2013.

 


2012

£m


2011

£m





Cash bonus

30.0


30.9

Deferred bonus

5.4


3.4

LTIP and SAYE

4.5


1.5

Pre-IPO deferral scheme

0.2


1.0

Total

40.1


36.8

Variable compensation ratio

25%


22%

 

Variable staff costs of £40.1m (2011: £36.8m) increased by nine per cent. due to the continuing roll out of the post-Listing compensation structure. The primary drivers of this were a further year of awards under the LTIP scheme and the third full year of the accounting charge for the Deferred Bonus Plan. This was partially offset by a reduction in the cash bonus charge in line with reduced earnings and lower performance fees, and the run off of the pre-IPO deferral scheme during the year. Variable compensation as a proportion of pre-variable compensation operating earnings was 25 per cent. (2011: 22 per cent.). This excludes a £7.3m charge (2011: £9.6m) in respect of options granted prior to the Listing over the remaining shares in the pool established for employees at the time of the MBO in June 2007. We expect the variable compensation ratio to remain in the mid to high twenty per cents range over the medium-term as the incentive schemes put in place as part of our Listing build to maturity.

 

 

EBITDA

 

EBITDA was £124.2m for the year (2011: £134.9m), an eight per cent. decrease on the prior year, primarily as a result of the reduction in amortised front end fees and the anticipated increase in variable costs. Despite this, the Group's EBITDA margin remained above 50 per cent.

 

 

Amortisation of intangible assets

 

Amortisation of £39.7m (2011: £39.9m) included £38.7m (2011: £38.7m) relating to intangible assets acquired as part of the MBO on 19 June 2007 at a value of £276.7m. These assets relate to investment management contracts (acquired for £258.0m) and the Jupiter brand name (acquired for £18.7m), amortised on a straight line basis through to June 2014 and June 2017 respectively. The remaining £1.0m relates to the amortisation of acquired computer software.

 

 

Exceptional income

 

During 2012, the Group recognised an exceptional gain of £5.0m in relation to a refund received from the Financial Services Compensation Scheme (FSCS) for a levy that was recognised as an exceptional cost in 2010.

 

 

Finance expense

 

Finance expenses of £7.4m (2011: £14.3m) decreased by 48 per cent., primarily due to a decrease in interest payable on the bank loan from £9.5m in 2011 to £5.6m in 2012. This was due to the outstanding bank loan being paid down from £283.0m at the start of 2011 to £78.0m at the end of 2012. The positive effect of the loan repayments was partially offset by an acceleration in the recognition of the debt issuance costs of £0.5m (2011: £1.6m). Finance expenses were further reduced due to a £0.3m reduction in the fair value of the swap in 2012, compared to a £1.6m reduction in 2011.

 

 

Profit before tax ("PBT")

 

PBT for the year was £73.6m (2011: £70.3m).This increase of five per cent. was driven by the reduction in finance expense and the recognition of exceptional income in 2012, partially offset by reduced operating earnings.

 

 

Tax expense

 

The effective tax rate for 2012 is 24 per cent. (2011: 27 per cent.). This is lower than the standard rate of corporation tax of 24.5 per cent. mainly due to capital gains in the year being offset by prior year capital losses and the effect of adjusting the opening deferred tax balances in light of the forthcoming changes to the standard rate of corporation tax.

 

 

Underlying profits and underlying earnings per share ("EPS")

 

Underlying profit before tax and underlying EPS are non-GAAP measures which the Board believes provide a more useful representation of the Group's trading performance than the statutory presentation. The Group's basic and diluted EPS measures were 14.9p and 14.2p respectively in 2012, compared to 15.6p and 15.0p in 2011.

 

 

Underlying EPS

2012

 


2011

 

Profit before tax (£m)

73.6


70.3

Adjustments:




Amortisation of acquired investment management contracts and trade name (£m)

38.7


38.7

Charge for options over pre-Listing shares (£m)

7.3


9.6

Loss taken to the income statement on available for sale investments (£m)

0.7


-

FSCS Levy exceptional income (£m)

(5.0)


-


41.7


48.3

Underlying profit before tax (£m)

115.3


118.6





Tax at statutory rate of 24.5 per cent (2011: 26.5 per cent.) (£m)

(28.2)


(31.4)





Underlying profit after tax (£m)

87.1


87.2





Actual shares on post vesting basis (m)

457.7


457.7





Underlying EPS

19.0p


19.1p

 

 

The 2012 underlying EPS was 19.0p (2011: 19.1p). This one per cent. fall came as lower operating earnings were mostly offset by reduced finance expenses and the lower statutory tax rate.

 

 

CASH FLOW

 

The Group has a high conversion rate of operating earnings to cash, generating positive operating cashflows after tax in 2012 of £110.6m (2011: 107.1m). This cash was primarily used for payments of £33.9m in respect of the interim and final dividends to shareholders and repayments of £65.0m of bank debt, thereby reducing future interest charges. In addition, a net £6.8m was invested in seed capital investments during the year, returning this balance to its targeted level of around £50m. As a result of these movements, overall cash held decreased slightly by £3.4m to £147.0m (2011: £150.4m), though this position is flattered by £11m of client settlement balances shown on the balance sheet at the year end.

 

 

ASSETS AND LIABILITIES

 

Balance sheet

 

Helped by reduced financing costs from the deleveraging of the balance sheet during 2010 and 2011 alongside the generation of significant cash amounts through trading, the Group strengthened its net cash position at 31 December 2012 to £69.0m (2011: net cash of £7.4m). This balance was flattered by £11m of cash from unsettled client trades, in the absence of which net cash would have been £58.0m.

 

The bank facility contains no financial covenants and is not due for repayment until June 2015. Despite this horizon, we expect to pay down the debt in tranches ahead of 2015 as there are no penalties for early repayment. Accordingly repayments were made in June, October and December 2012 of £33.0m, £18.0m and £14.0m respectively. There is no specific timetable for any further repayments and the Board will continue to monitor the level of debt in combination with the level of cash generated.

 

Seed capital investments

 

We deploy seed capital into funds to assist us in building a track record from launch or to give small but strongly performing funds sufficient scale to attract external money. As at 31 December 2012, we had a total investment of £53.8m in our own funds (2011: £39.1m) as seed capital returned to targeted levels. These investments are shown on the Group's balance sheet under the appropriate heading for the relevant level of ownership in each fund. The Group only invests into liquid funds and chooses to hedge market and currency risk on the majority of its holdings of seed capital investments, with 99 per cent. of seed capital either hedged or invested in absolute return products. As a result, the value of these investments is stable and available to improve the Group's cash balances and liquidity if required.

 

 

EQUITY AND CAPITAL MANAGEMENT

 

Shareholders' equity

 

Total shareholders' equity increased by £34.4m to £459.0m as a result of the Group's continued profitability, partially offset by the final and interim dividends.

 

In February 2012, the Group was granted a new investment firm consolidation waiver. This will run for the three years from June 2012 to June 2015. The FSA's policy is not to grant waivers in respect of periods where projections do not support the requirement. However, the FSA have confirmed that should market or other conditions change prior to June 2015 such that a consolidation waiver may be required, a new application would be considered in the usual way.

 

Dividend

 

The Board has implemented a progressive dividend policy, with dividends determined by taking into account historic and anticipated profits, cash flow and balance sheet position, with the split between the interim and final dividend weighted towards the final dividend. Due to the Group's increasingly robust balance sheet and the Board's confidence in Jupiter's growth prospects, the Board is recommending an increased final dividend for the year of 6.3p (2011: 5.3p) per share to ordinary shareholders, making a total payment for the year of 8.8p. (2011: 7.8p). This payment is subject to shareholders' approval at the Annual General meeting and, if approved, will be paid on 23 April 2013 to shareholders on the register on 8 March 2013.

 

 

 

 

 

Financial statements (audited)

 

1.     RESULTS FOR THE YEAR

 

CONSOLIDATED INCOME STATEMENT

 

For the year ended 31 December 2012




 

 

Notes


 

 

2012

 


 

 

2011

 

 

 





£m


 £m


Revenue


 1.1


346.4


346.9 


Fee and commission expenses


 1.1


(101.9)


(98.4) 










Net revenue


1.1,1.2


244.5


248.5 










Administrative expenses


1.3


(128.4)


(123.8) 










Operating earnings




116.1


124.7 










Other losses

 




(0.9)


(1.2) 


Amortisation of intangible assets

 




(39.7)


(39.9) 










Operating profit before exceptional items




75.5


83.6 










Exceptional income


1.4


5.0


-










Operating profit




80.5


83.6 










Finance income

 




0.5


1.0 


Finance expense


1.5


(7.4)


(14.3) 










Profit before taxation




73.6


70.3 










Income tax expense


1.6


(17.4)


(18.9) 










Profit for the year attributable to owners of the parent




56.2


51.4 










Earnings per share








Basic


1.7


14.9p


15.6p 


Diluted


1.7


14.2p


15.0p 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

For the year ended 31 December 2012




Notes

 

2012


 

2011





£m


£m









Profit for the year



56.2


51.4









Other comprehensive (expense)/ income







Exchange movements on translation of subsidiary undertakings


4.2

(0.3)


(0.1)


Changes in the fair value of available for sale assets


4.2

 (5.5)


1.1


Reclassified to the consolidated income statement


4.2

0.7


-









Other comprehensive (expense)/income for the year net of tax



(5.1)


1.0









Total comprehensive income for the year net of tax



51.1

  

52.4

 

 

NOTES TO THE FINANCIAL STATEMENTS - INCOME STATEMENT

 

1.1 NET REVENUE

 

The Group's primary source of revenue is management fees. Management fees are based on an agreed percentage of the assets under management. Performance fees are earned from some funds when agreed performance conditions are met. Other revenue items include initial charges, which are based on a set percentage of inflows to our funds, and commissions earned on box profits and private client dealing charges. Net revenue is stated after fee and commission expenses to intermediaries for ongoing services under distribution agreements.



2012

£m


2011

£m







Management fees

320.4


316.8


Initial charges

21.5


24.8


Performance fees

4.5


5.3


Fee and commission expenses

(101.9)


(98.4)


Total net revenue

244.5

   

248.5

 

 

 

1.2 SEGMENTAL REPORTING

 

The Group offers a range of products and services through different distribution channels. All financial, business and strategic decisions are made centrally by the Board of Directors (the "Board"), which determines the key performance indicators of the Group. Information is reported to the chief operating decision maker, the Board, on a single segment basis. While the Group has the ability to analyse its underlying information in different ways, this information is not used by the Board to make decisions on an aggregated basis. The information used to allocate resources and assess performance is reviewed for the Group as a whole. On this basis, the Group considers itself to be a single-segment investment management business.

 

Management monitors operating earnings, a non-GAAP measure, for the purpose of making decisions about resource allocation and performance assessment.

 

Geographical information

 



2012

£m


2011

£m


Net revenue by location of clients





UK

225.0


223.6


Continental Europe

14.7


18.3


Rest of the world

4.4


1.0


Bermuda

0.4


5.6


Total net revenue by location

244.5


 248.5

 

 

 

1.3 ADMINISTRATIVE EXPENSES

 

Administrative expenses of £128.4m (2011: £123.8m) include staff costs of £86.9m (2011: £85.1m). Staff costs consist of:

 



2012

£m


2011

£m







Wages and salaries

58.6


59.3


Share-based payments

13.7


12.7


Social security costs

10.6


8.8


Pension costs

3.7


3.6


Redundancy costs

0.3


0.7



86.9


 85.1

 

 

 

1.4 EXCEPTIONAL INCOME

 

During 2010, a charge of £5.2m was recognised in relation to the contribution made to the Financial Services Compensation Scheme (FSCS) second interim levy for 2010/11. In 2012, £5.0m of this levy was refunded and recognised as exceptional income.

 

There was no income arising in 2011 which the Group considers to be exceptional.

 

 

 

1.5 FINANCE EXPENSE



2012

£m


2011

£m







Interest payable on bank borrowings

5.6


9.5


Amortisation of senior debt issue costs (Note 3.6)

0.9


2.5


Fair value movement on interest rate swaps

0.3


1.6


Interest payable on interest rate swaps

0.4


0.4


Other finance costs

0.2


0.3


Total finance expense

7.4


14.3






 

 

 

1.5 FINANCE EXPENSE (continued)

 

During the year, £65.0m (2011: £140.0m) of the senior bank debt was repaid.  This resulted in an acceleration of £0.5m (2011: £1.6m) in the amortisation of the debt issue costs.

 

Interest rate swaps

 

In November 2010, the Group entered into two interest rate swaps, both with a notional value of £35.0m with interest settling quarterly. One is for a period of three years paying a fixed interest rate of 1.33 per cent., the other is for a period of four years paying a fixed interest rate of 1.6175 per cent.

 

 

 

1.6 INCOME TAX EXPENSE

 

Analysis of charge in the year:

 

 

2012

£m


2011

£m

Current taxation - UK corporation tax




Tax on profits for the year

30.1


 33.3

Adjustment in respect of prior years

 (0.1)


-


30.0


 33.3

Deferred taxation




Origination and reversal of temporary differences

(12.5)


   (13.9)

Impact of changes in corporation tax rate

(0.1)


   (1.7)

Adjustment in respect of prior years

-


1.2       


(12.6)


(14.4)

Total tax expense

17.4


18.9   

 

The weighted average UK corporation tax rate for the year ended 31 December 2012 was 24.5 per cent. (2011: 26.5 per cent.). The tax charge in the year is lower (2011: higher) than the standard rate of corporation tax in the UK and the differences are explained below:

 

 

Factors affecting tax expense for the year

2012

£m


2011

£m





Profit before taxation

73.6


 70.3





Taxation at the standard corporation tax rate (2012: 24.5 per cent.; 2011: 26.5 per cent.)

18.0


18.6

Non-taxable income

(1.3)


(0.5)

Disallowable expenses

1.0


0.8

Other permanent differences

(0.1)


0.5

Adjustment to current tax charge in respect of prior years

(0.1)


-

Adjustment to deferred tax charge in respect of prior years

-


1.2

Impact of tax rate change on deferred tax balances

(0.1)


(1.7)       

Total tax expense

17.4


18.9

 

 

 

 

1.7 EARNINGS PER SHARE

 

Basic earnings per share ("EPS") is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year, less the weighted average number of own shares held.

 

Diluted EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during that year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

 

For the purposes of calculating EPS, the share capital of the parent is calculated as the weighted average number of ordinary shares in issue over the years reported. The weighted average number of ordinary shares during the year used for the purposes of calculating EPS is as follows:

 

 

 

1.7 EARNINGS PER SHARE (continued)

 

 

 

 

 

 

Weighted average numbers of shares

2012

Number

m


2011

 Number

m







Issued share capital

457.7


457.7


Less own shares held

(80.0)


(129.1)







Weighted average number of ordinary shares for the purpose of basic EPS

377.7


328.6







Add back weighted average number of dilutive shares

18.1


 13.2







Weighted average number of ordinary shares for the purpose of diluted EPS

395.8


 341.8

 

The weighted average number of own shares is deducted from the weighted average number of ordinary shares. Own shares are shares held in an Employee Benefit Trust ("EBT") for the benefit of employees under the vesting, lock-in and other incentive arrangements in place.

 


 

Earnings per share

        2012

              p


         2011

              p







Basic

        14.9


         15.6


Diluted

        14.2


         15.0

 

 

 

 

 

2.     CONSOLIDATED STATEMENT OF CASH FLOWS

 

For the year ended 31 December 2012


Notes


 

 

 

2012


 

 

 

2011





£m


£m









Cash flows from operating activities














Cash generated from operations

2.1


141.2


133.5


Income tax paid



(30.6)


(26.4)


Net cash inflows from operating activities



110.6


107.1









Cash flows from investing activities







Purchase of property, plant and equipment

3.3


(0.8)


(1.1)


Purchase of intangible assets

   


(0.7)


(1.0)


Purchase of financial assets at FVTPL



(26.6)


    -


Proceeds from disposal of financial assets at FVTPL



19.8


8.3


Purchase of available for sale investments



-


(3.3)


Finance income received



0.5


1.0


Net cash (outflows)/inflows from investing activities



(7.8)


3.9









Cash flow from financing activities







Dividends paid

4.3


(33.9)


(31.7)


Finance expense paid



(7.3)


(9.2)


Repayment of bank loans



(65.0)


(140.0)


Net cash outflows from financing activities



(106.2)


(180.9)









Net decrease  in cash and cash equivalents



(3.4)


(69.9)









Cash and cash equivalents at beginning of the year



150.4


220.3


Cash and cash equivalents at end of year

3.5


147.0


150.4








 








 

 

 

NOTES TO THE FINANCIAL STATEMENTS - STATEMENT OF CASH FLOWS

 

 

 

2.1   CASH GENERATED FROM OPERATIONS

 

 


 

 

Cash generated from operations

 

2012

£m


 

2011

£m







Operating profit

80.5


83.6







Adjustments for:





Amortisation of intangible assets

39.7


39.9


Depreciation of property, plant and equipment

0.8


0.6


Other non-cash (gains)/losses

(4.8)


4.3


Share-based payments

13.7


12.7


(Increase)/decrease in trade and other receivables

(8.7)


25.9


Increase/(decrease) in trade and other payables

20.0


 (31.5)


Decrease in provisions

-


(2.0)


Cash generated from operations

141.2


 133.5

 

 

 

 

3.     CONSOLIDATED BALANCE SHEET

 

As at 31 December 2012




 

 

 

 

Notes


 

 

 

 

2012


 

 

 

 

2011





£m 


£m 


ASSETS






 

 


NON-CURRENT ASSETS








Goodwill


3.1


341.2


341.2 


Intangible assets


3.2


64.5


103.5 


Property, plant and equipment


3.4


1.6


1.6 


Available for sale investments


3.4


19.1


24.6 


Deferred tax assets




15.3


11.3 


Trade and other receivables


3.4


13.9


17.3 


Total non-current assets




455.6


499.5 










CURRENT ASSETS








Investment in associates


3.4


19.2


13.6 


Financial assets at fair value through profit and loss


3.4


34.2


25.5 


Trade and other receivables


3.4


90.6


78.6 


Cash and cash equivalents


3.4


147.0


151.3 


Total current assets




291.0


269.0 


TOTAL ASSETS




746.6


768.5 









EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT








Share capital


4.1


9.2


9.2 


Own share reserve


4.2


(1.3)


(2.1) 


Other reserve


4.2


8.0


8.0 


Available for sale reserve


4.2


6.6


11.4 


Foreign currency translation reserve


4.2


7.1


7.4 


Retained earnings


4.2


429.4


390.7 


TOTAL EQUITY




459.0


424.6 










LIABILITIES








NON-CURRENT LIABILITES

 

 

 

 


 

 



 

 


Loans and borrowings


3.6


77.3


141.4 


Trade and other payables


3.4


22.3


27.5 


Deferred tax liabilities




14.5


25.8 


Total non-current liabilities




114.1


194.7 










CURRENT LIABILITIES







Financial liabilities at fair value through profit or loss


3.4


3.1


0.6 


Trade and other payables


3.4


154.8


132.4 


Current income tax liabilities




15.6


16.2 


Total current liabilities




173.5


149.2 










TOTAL LIABILITIES




287.6


343.9 










TOTAL EQUITY AND LIABILITIES




746.6


768.5 









 

 

 

NOTES TO THE FINANCIAL STATEMENTS - BALANCE SHEET

 

3.1 GOODWILL

 

On 19 June 2007, the Group acquired the entire share capital of Knightsbridge Asset Management Limited which gave rise to a goodwill asset being recognised.

 

 



2012

£m


2011

£m







Goodwill

 341.2


341.2



 341.2


341.2

 

No additional goodwill was recognised in the year (2011: £nil). The Group has determined that it has a single cash generating unit (CGU) for the purpose of assessing the carrying value of goodwill. The recoverable amount for the acquired share capital was based on a fair value less costs to sell calculation using the Company's year end share price. No impairment was implied.

 

 

3.2  INTANGIBLE ASSETS

 

In 2007, the Group acquired the entire share capital of Knightsbridge Asset Management Limited. This acquisition gave rise to the recognition of intangible assets relating to investment management contracts and trade name of the Group. The other intangible assets relate to computer software. The Directors have reviewed the intangible assets as at 31 December 2012 and have concluded there are no indicators of impairment.

 

 


2012

£m


2011

£m





Investment management contracts            

54.1


90.9

Trade name

8.3


10.2

Computer software

2.1


2.4

                                                                   

64.5


103.5

 

The amortisation charge for the year was £39.7m (2011: £39.9m). No additional investment management contracts were acquired in the year (2011: £nil).

 

3.3  PROPERTY, PLANT AND EQUIPMENT

 

The net book value of property, plant and equipment at 31 December 2012 was £1.6m (2011: £1.6m). During the year, the Group acquired property, plant and equipment with a value of £0.8m (2010: £1.1m).

 

 

3.4 FINANCIAL INSTRUMENTS

 

Financial instruments by category

The carrying value of the financial instruments of the Group at 31 December is shown below.

 

 

 

As at 31 December 2012

Available for sale

Financial assets designated at FVTPL

Loans and receivables

Financial liabilities at FVTPL

Other financial liabilities

Total financial instruments

Non-

financial instruments

Total 

 


£m

£m

£m

£m

£m

£m

£m

£m 

 










 

Goodwill

-

-

-

-

-

-

341.2

341.2 

 

Intangible assets

-

-

-

-

-

-

64.5

64.5 

 

Property, plant and equipment

-

-

-

-

-

-

1.6

1.6 

 

Available for sale investments

19.1

-

-

-

-

19.1

-

19.1 

 

Deferred tax assets

-

-

-

-

-

-

15.3

15.3 

 

Non-current trade and other receivables

-

-

-

-

-

-

13.9

13.9 

 

Investments in associates

-

19.2

-

-

-

19.2

 -

19.2 

 

Financial assets at fair value through profit or loss ("FVTPL")

-

34.2

-

-

-

34.2

-

34.2 

 

Current trade and other receivables

-

-

80.8

-

-

80.8

9.8

90.6 

 

Cash and cash equivalents

-

-

147.0

-

-

147.0

-

147.0 

 

Loans and borrowings

-

-

-

-

(78.0)

(78.0)

0.7

(77.3) 

 

Non-current trade and other payables

-

-

-

-

(0.8)

(0.8)

(21.5)

(22.3) 

 

Deferred tax liabilities

-

-

-

-

-

-

(14.5)

(14.5) 

 

Current trade and other payables

-

-

-

-

(132.6)

(132.6)

(22.2)

(154.8) 

 

Current income tax liability

-

-

-

-

-

-

(15.6)

(15.6) 

 

Financial liabilities at FVTPL

-

-

-

(3.1)

-

(3.1)

-

(3.1) 

 

Total

19.1

53.4

227.8

(3.1)

(211.4)

85.8

373.2

459.0 

 










 

 

 

3.4 FINANCIAL INSTRUMENTS (continued)

 

 

 

As at 31 December 2011

Available for sale

Financial assets designated at FVTPL

Loans and receivables

Financial liabilities at FVTPL

Other financial liabilities

Total

financial instruments

Non-

financial instruments

Total


£m

£m

£m

£m

£m

£m

£m

£m










Goodwill

-

-

-

-

-

-

341.2

341.2

Intangible assets

-

-

-

-

-

-

103.5

103.5

Property, plant and equipment

-

-

-

-

-

-

1.6

1.6

Available for sale investments

24.6

-

-

-

-

24.6

-

24.6

Deferred tax assets

-

-

-

-

-

-

11.3

11.3

Non-current trade and other receivables

-

-

-

-

-

-

17.3

17.3

Investments in associates

-

13.6

-

-

-

13.6

-

13.6

Financial assets at fair value through profit or loss ("FVTPL")

-

25.5

-

-

-

25.5

-

25.5

Current trade and other receivables

-

-

57.4

-

-

57.4

21.2

78.6

Cash and cash equivalents

-

-

151.3

-

-

151.3

-

151.3

Loans and borrowings

-

-

-

-

(143.0)

(143.0)

1.6

(141.4)

Non-current trade and other payables

-

-

-

-

(0.9)

(0.9)

(26.6)

(27.5)

Deferred tax liabilities

-

-

-

-

-

-

(25.8)

(25.8)

Current trade and other payables

-

-

-

-

(119.9)

(119.9)

(12.5)

(132.4)

Current income tax liability

-

-

-

-

-

-

(16.2)

(16.2)

Financial liabilities at FVTPL

-

-

-

(0.6)

-

(0.6)

-

(0.6)

Total

24.6

39.1

208.7

(0.6)

(263.8)

8.0

416.6

424.6

 

 

3.5  CASH AND CASH EQUIVALENTS


 

 

 

 

2012

£m


 

2011

£m







Cash at bank and in hand

35.2


17.2


Short-term deposits

108.5


132.5


Cash held by EBT and seed capital subsidiaries

3.3


1.6


Cash and cash equivalents per the balance sheet

147.0


151.3


Overdraft (included within trade and other payables)

-


(0.9)


Cash and cash equivalents for purposes of statement of cash flows

147.0


150.4

 

Cash at bank earns interest based at the current prevailing daily bank rates. Short-term deposits are made for varying periods of between one day and three months, depending on the forecast cash requirements of the Group, and earn interest at the respective short-term deposit rates. The overdraft in 2011 arose during the ordinary course of business and relates to a settlement timing difference over the year end.

 

 

3.6   LOANS AND BORROWINGS

 



2012

£m


2011

£m







Bank loan

77.3


141.4


Total borrowings

77.3


141.4

 

The Group has a syndicated loan which is repayable on or before 19 June 2015. The loan is secured by a charge over the assets of a subsidiary company, Jupiter Asset Management Group Limited. The restrictions which arise under the terms of the loan facility prevent intercompany loans between certain subsidiaries and prohibit assets being sold, leased or disposed of other than in the ordinary course of business.

 

As shown below, the carrying value of the loan is disclosed net of unamortised debt issue costs which were capitalised on issue.

 



2012

£m


2011

£m







Bank loan

78.0


143.0


Unamortised debt issue costs

(0.7)


(1.6)


Total carrying value of bank loan

77.3


141.4

 

 

 

 

 

3.6   LOANS AND BORROWINGS (continued)

 

The movement on the carrying value of the loan is shown below:

 



2012

£m


2011

£m







At 1 January

141.4


278.9


Voluntary prepayments made in the year

(65.0)


(140.0)


Amortisation of senior debt issue costs (Note 1.5)

0.9


2.5


Total carrying value of bank loan

77.3


141.4

 

Interest was payable at a rate per annum of three month LIBOR plus a margin of 3.75 per cent. The Group has two interest rate swaps in place to hedge its floating rate exposure. Details on these are given in Note 1.5 Finance expense.

 

 

 

 

 

4      CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

For the year ended 31 December 2012

 


 

 

Share 

capital 

 

 

Share 

 premium 

 

Capital 

redemption 

reserve 

 

 

Other 

reserve 

 

Available  for sale 

 reserve 

Foreign 

currency 

translation 

reserve 

 

 

Retained  earnings 

 

 

 

Total 


£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

Balance at 1 January 2011

9.2 

 255.7 

54.1

(2.9)

8.0 

10.3 

7.5 

48.8 

390.7 











Profit for the year

-

51.4 

51.4 

Other comprehensive income/(expense)

1.1 

(0.1)

1.0  

Total comprehensive income/(expense)

 - 

 - 

 - 

 - 

 - 

1.1 

(0.1)

51.4 

52.4 

Cancellation of share premium and capital redemption reserve

 - 

 (255.7) 

(54.1)

 - 

 - 

309.8 

Vesting of ordinary shares

 - 

 - 

 - 

 0.8 

 - 

0.8 

Dividends paid

 - 

 - 

 - 

 - 

 - 


(31.7) 

(31.7) 

Share-based payments

12.7 

12.7 

Deferred tax on share-based payments

(0.3) 

(0.3) 

Total transactions with owners

             -

(255.7)

(54.1)

0.8

-

-

-

290.5

(18.5)

Balance at 31 December 2011

9.2 

 - 

-

(2.1)

8.0 

11.4 

7.4 

390.7 

424.6 











Profit for the year

-

-

-

-

-

-

-

56.2

56.2

Other comprehensive expense

-

-

-

-

-

(4.8)

(0.3)

-

(5.1)

Total comprehensive income/(expense)

-

-

-

-

-

(4.8)

(0.3)

56.2

51.1

Vesting of ordinary shares

-

-

-

0.8

-

-

-

-

          0.8

Dividends paid

-

-

-

-

-

-

-

(33.9)

(33.9)

Share-based payments

-

-

-

-

-

-

-

13.7

13.7

Deferred tax on share-based payments

-

-

-

-

-

-

-

2.7

2.7

Total transactions with owners

-

-

-

0.8

-

-

-

(17.5)

(16.7)

Balance at 31 December 2012

9.2

-

-

(1.3)

8.0

6.6

7.1

429.4

459.0

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS - STATEMENT OF CHANGES IN EQUITY

 

4.1   SHARE CAPITAL

 



2012

£m


2011

£m







457.7m ordinary shares of 2p each

9.2


9.2








9.2


9.2

 

4.2   RESERVES

 

  (i) Share premium

The share premium account represented amounts received on the issue of share capital in excess of nominal value and was not a distributable reserve. On 9 June 2011, the Company's share premium reserve was, with the sanction of the Court, cancelled and an amount of £255.7m was transferred to a distributable reserve.

 

(ii) Capital redemption reserve

On 9 June 2011, the Company's capital redemption reserve of £54.1m was, with the sanction of the Court, cancelled and an amount of £54.1m was transferred to a distributable reserve. Thus the balance on the Company's capital redemption reserve at 31 December 2012 and 2011 was £nil.

 

(iii) Own share reserve

At 31 December 2012, 42.5m (2011: 82.5m) ordinary shares beneficially owned by senior employees were subject to restrictions which, in some circumstances, require the Group to repurchase the shares at their nominal value, and this liability is shown within current trade and other payables. These restrictions are released over the next three years with the majority being released in 2013. The shares are held within the Group's EBT and, together with a further 20.9m (2011: 20.9m) shares held for the purpose of satisfying share option obligations to employees, are treated as own shares with a cost of £1.3m (2011: £2.1m).

 

(iv) Other reserve

The other reserve of £8.0m (2011: £8.0m) relates to the conversion of Tier 2 preference shares in 2010.

 

(v) Available for sale reserve

The available for sale reserve of £6.6m (2011: £11.4m) relates to the uplift in the fair value of the Group's holdings in investments classified as available for sale.

 

(vi) Foreign currency translation reserve

The foreign currency translation reserve of £7.1m (2011: 7.4m) is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

 

(vii) Retained earnings              

Retained earnings of £429.8m (2011: £390.7m) are the amount of earnings that is retained within the Company after dividend payments and other transactions with owners.

 

 

4.3   DIVIDENDS

 



2012

£m


2011

£m







Final dividend 2011 (5.3p per ordinary share) (2010: 4.7p per ordinary share)

24.3


 21.5


Interim dividend 2012 (2.5p per ordinary share) (2011: 2.5p per ordinary share)

11.4


 11.4



35.7


32.9

 

Dividends of £1.8m (2011: £1.2m) were paid on shares held in the EBT, beneficially owned by the Company. Net dividends paid were therefore £33.9m (2011: £31.7m).

 

A final dividend for 2012 of 6.3p per share (2011: 5.3p) amounting to £28.8m will be proposed at the Annual General Meeting on 18 April 2013 and will be accounted for in 2013.

 

 

 

 

5.    OTHER NOTES

 

 

5.1.  BASIS OF PREPARATION

 

The financial information set out does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011, but is derived from those accounts. The Auditors have reported on the 2012 and 2011 accounts; their report was unqualified, unmodified and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006.  Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered in due course.

 

The presentation of the financial statements has been reformatted in 2012 to enable greater understanding of the financial results and position of the Group. Where appropriate, the comparative information has also been reformatted for better comparison.

 

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and IFRIC Interpretations ("IFRS as adopted by the EU") and with the provisions of the Companies Act 2006 applicable to companies reporting under IFRS.

 

 

5.2.  RELATED PARTIES

 

The Group manages, through its subsidiaries, a number of investment trusts, unit trusts and overseas funds. The subsidiary companies receive management fees from these entities for managing the assets, and in some instances, receive performance fees. The precise fee arrangements for the different entities are disclosed within the financial statements of each entity or within other information which is publicly available.

 

The Group manages a number of collective investment vehicles and, by virtue of the investment management agreements in place between the Group and these vehicles, they may be considered to be related parties.

 

The Group acts as manager for 38 (2011: 36) authorised unit trusts. Each unit trust is jointly administered with the trustees, National Westminster Bank plc. The aggregate total value of transactions for the year was £2,831.2m (2011: £2,572.8m) for unit trust creations and £1,819.4m (2011: £1,855.0m) for unit trust redemptions. The actual aggregate amount due to the trustees at the end of the accounting year in respect of transactions awaiting settlement was £11.5m (2011: £1.4m). The amount received in respect of gross management and registration charges was £301.3m (2011: £294.3m). At the end of the year, there was £8.4m (2011: £6.7m) outstanding for annual management fees and £1.3m (2011: £1.0m) in respect of registration fees.

 

Investment management and performance fees are disclosed in Note 1.1.

 

Included within the financial instruments note are seed capital investments in funds managed by the Group. At 31 December 2012, the Group had a total net investment in collective investment vehicles of £53.8m (2011: £39.1m) and received distributions of £0.1m (2011: £0.2m). During 2012, it invested £29.1m (2011: £nil) in seed capital investments and received £19.8m (2011: £8.3m) on disposal of them.

 

TA Associates, L.P. is also considered a related party of the Group. There were no transactions with TA Associates, L.P. in the year.

 

Key management compensation

 

The Group also considers transactions with its key management personnel as related party transactions. Key management personnel is defined as the executive Directors together with other members of the Executive Committee. The aggregate compensation paid or payable to key management for employee services is shown below:

 

 


2012

£m


2011

£m





Short-term employee benefits

7.8


 6.1

Share-based payments

2.3


 1.8

Post employment benefits

0.1


0.1

Other long-term benefits

0.1


0.2


10.3


8.2

 

 

 

6      Directors' responsibility statement

 

The Directors are responsible for preparing the Annual Report and Accounts, the Directors' Remuneration report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the Group and parent Company financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. In preparing these financial statements, the Directors have also elected to comply with IFRSs, issued by the International Accounting Standards Board (IASB).

 

Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether applicable IFRSs, as adopted by the European Union and IFRSs issued by IASB, have been followed, subject to any material departures disclosed and explained in the financial statements; and

·      prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' Remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulations. They are also responsible for safeguarding the assets of the Company and the Group and, hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Each of the Directors, whose names and functions are listed in the Directors' profiles, confirms that, to the best of his or her knowledge:

 

·      the Group and Company financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the Group; and

·      the Directors' report contained in the Annual Report and Accounts includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

 

In accordance with Section 418, Directors' reports shall include a statement, in the case of each Director in office at the date the Directors' report is approved, that:

 

(a)   so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

 

(b)   he/she has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

 

On behalf of the Board

 

 

 

Philip Johnson

Chief Financial Officer

 

27 February 2013

 

 

 

 

7      Principal risks and mitigations

 

INVESTMENT OUTPERFORMANCE

 

 

Sustained underperformance

 

Risk

There is a risk that our clients' portfolios will not meet their investment objectives due to underperformance.

 

Impact

Poor investment performance may lead to our products being uncompetitive, resulting in a decline in Group AUM and revenues.

 

Mitigation/Controls

Our investment process seeks to meet investment targets within clearly stated risk parameters. We use tools and governance principles within our investment risk framework and we review performance that lies outside expectations. Fund performance is monitored as part of the investment performance risk management process and is formally overseen by a portfolio review committee which meets quarterly.

 

 

Failure to retain key staff

 

Risk

We are a human capital business and our staff are a significant component of successfully executing our strategy.

 

Impact

The departure of a high profile fund manager could lead to a significant level of redemptions from their funds, having a material impact on our levels of AUM and revenues.

 

Mitigation/Controls

We believe that high levels of employee engagement and equity ownership drive business outperformance and we strive to ensure we have an attractive working environment and a competitive remuneration structure. We also develop, monitor and maintain succession planning for all key roles.

 

 

Significant mandate breach

 

Risk

Our funds are managed in accordance with investment mandates and restrictions agreed with our clients. Failure to adhere to these mandates would reflect a poor level of client service and may jeopardise relationships with our clients.

 

Impact

If investments are made or managed in breach of an investment mandate, we may be required to unwind the relevant transactions and could be liable for any losses suffered by an affected party in doing so.

 

Mitigation/Controls

All Jupiter's portfolios are monitored on an ongoing basis by our Compliance and Portfolio Analytics departments, with functionality coded into the order management system to allow the pre and post trade checking of investment activity.  Portfolios are subject to peer reviews and periodic valuation checks, and undergo formal scrutiny at the Portfolio Risk Committee in addition to being subject to review by trustees and/or administrators. 

 

 

Regulatory non-compliance

 

Risk

A significant regulatory investigation or action against the firm could have a detrimental effect on our reputation and business.

 

Impact

Regulatory censure and the related adverse publicity may lead to a loss of confidence by our clients as well as having a negative impact on our ability to generate new business.

 

Mitigation/Controls

Our Compliance department conducts a robust programme of internal monitoring to ensure that regulatory controls are adhered to. Our risk governance structure and whistleblowing policy are designed to ensure that any regulatory issues can be escalated to senior management in an open and timely way, ensuring the maximum appropriate amount of regulatory protection for clients.

 

 

EFFECTIVE DISTRIBUTION

 

Changes in distribution and product trends

 

Risk

The risks reflect potential future changes in our fee structures, or in the appetite of clients to invest in our products.

 

Impact

Our ability to generate flows may be jeopardised by fundamental changes in distribution patterns or by a sustained market appetite for products Jupiter does not offer.

 

Mitigation/Controls

We undertake ongoing analysis of the markets in which we operate in order to ensure that we maintain a diverse suite of products that continue to appeal to our existing and potential future customers. A well-defined product development process enables us to deliver new products or enhancements to target client groups in a timely and efficient manner.

 

 

EFFICIENT OPERATIONS

 

Operational error or fraud

 

Risk

A material error in the execution of a key business process, or a fraud being successfully carried out against us or our clients.

 

Impact

A significant error or successful fraud may lead to negative financial impact on the Group due to the cost of redressing any issues.

 

Mitigation/Controls

We rely on efficient and well-controlled processes. The potential impact and likelihood of processes failing and operational risks (including fraud) materialising is assessed by each operational area on a regular basis. Where these likelihoods are felt to be outside our appetite for risk, management actions and/or control improvements are identified in order to bring each potential risk back to within acceptable levels.

 

 

Failure of third party supplier

 

Risk

The failure of a provider to which we have outsourced key business processing activities may lead to our not delivering the required level of service to our clients and shareholders or fulfilling our regulatory obligations.

 

Impact

Our relationships with key stakeholders may be jeopardised in the event of our providing an inadequate level of service, resulting in the loss of clients or regulatory/financial censure.

 

Mitigation/Controls

All third parties to whom we outsource material aspects of our business are subject to ongoing oversight, providing assurance that they are of the required standard.

 

 

Business continuity incident

 

Risk

Business operations, systems and processes are liable to disruption from fire, power loss, systems failure or external events.

 

Impact

Inability to carry out our business activities.

 

Mitigation/Controls

Continuity and business resumption planning is in place across our business in support of all of our key activities. Alternative premises, including a dedicated office suite equipped with all key portfolio management and support systems, should our normal business systems or premises become unavailable.

 

 

Counterparty failure

 

Risk

The failure of a trading or depository counterparty with which we have a relationship.

 

Impact

The loss of or inability to access material amounts of our or our clients' funds.

 

Mitigation/Controls

We seek to diversify our exposures across different counterparties and actively monitor their creditworthiness using a suite of key risk indicators including market data and credit agency ratings. Any deposits are placed according to agreed limits which may be amended in the context of any relevant changes.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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