Jupiter Annual Report 2010 - Jupiter Asset Management

Business review | Directors’ report
Net revenue
Figure 7
Underlying fixed costs up 6%
2010
£m
2009
£m
Net management fees 204.7 158.4
Net initial charge 20.1 18.5
Net performance fees 5.7 5.2
TOTAL 230.5 182.1
Figure 6
Net management fees up 29%
2009
£m
2010
158.4
204.7
Net revenue for the period was £230.5m (2009: £182.1m), 27 per
cent. ahead of 2009. This was mainly due to an increase of 29 per
cent. in net management fees, reflecting 20 per cent. higher average
FTSE 100 levels at 5,465 (2009: 4,541) and the contribution from net
inflows over the last two years. The net management fee margin for
the year was 98 basis points, slightly above the full year 2009 margin.
This was due to the increased proportion of mutual funds as a
percentage of average AUM (76 per cent. versus 74 per cent.
in 2009), as these assets typically tend to have a higher margin.
However, we expect net management fee margins to decline slowly
over time, as distributors take an increasing share of fees and the
Retail Distribution Review alters industry pricing structures, although
the rate and angle of decline is uncertain.
Net management fee margin 2010 2009
Average FTSE 5,465 4,541
Average AUM £bn 21.1 16.3
Net management fee margin bps 98 97
Net initial charges and commissions increased by £1.6m to
£20.1m (2009: £18.5m), reflecting higher levels of gross sales and
redemptions versus 2009, driving higher box profits. Performance
fees of £5.7m (2009: £5.2m) are in line with the previous year.
Approximately £3.2bn of our AUM attracts a performance fee,
the majority of which has a calculation period ending in the second
half of the financial year.
2009
£m
2010
Fixed staff costs
Non-staff costs
38.4
39.1
Figure 8
Variable staff costs increased while the
variable compensation ratio remained stable
32.5
30.5 68.9
33.7 72.8
Administrative expenses
2010
£m
2009
£m
Fixed staff costs 39.1 38.4
Other expenses 35.7 28.1
Total fixed costs 74.8 66.5
Variable staff costs 32.5 25.8
Charge for options over
pre-Listing shares
7.8 –
Administrative expenses 115.1 92.3
Figure 9
EBITDA up 37%
2009
£m
2009
2010
25.8
Variable staff costs (£m)
2010
21.0 21.0
Compensation ratio (per cent.)
91.2
124.6
Administrative expenses of £115.1m were £22.8m higher than 2009
as a result of increased variable compensation costs arising from
improved profitability in 2010 and charges for options over pre-Listing
shares. Fixed staff costs of £39.1m remained stable (2009: £38.4m),
with headcount reduced by 75 in August as a result of the outsourcing
of UTA operations to IFDS. This has improved operational scalability
within the business and moved our fixed cost base to being more
aligned with our activity levels. Occupancy costs were increased
by £2.0m for a provision for the closure of our West Malling office
after the UTA outsource in 2010 but were also reduced in 2009
by a non-recurring lease provision release of £2.4m which relates
to 4 Grosvenor Place. Excluding these two items, underlying fixed
costs of £72.8m (2009: £68.9m) were 6 per cent. up on the prior year.
Variable staff costs increased in line with the higher profitability
of the business in 2010. Variable compensation as a proportion
of pre-variable compensation operating earnings was 21 per cent.
(2009: 21 per cent.). This excludes a £7.8m charge for 2010 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 outlined
above to rise to the high twenty per cents over the medium-term
as the incentive schemes put in place as part of our Listing build
to maturity.
Annual Report & Accounts 2010 21 Jupiter Fund Management plc