Invesco Plc (IVZ)

IVZ 
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Invesco Ltd. (IVZ)

Q4 2009 Earnings Call

January 28, 2010 09:00 a.m. ET

Executives

Martin L. Flanagan - President and CEO

Loren Starr - CFO

Karen Dunn-kelly - Head of Invesco Fixed Income

Analysts

William Katz - Buckingham Research

Michael Kim - Sandler O'Neill

Robert Lee - KBW

Dan Fannon - Jefferies

Mike carrier - Deutsche Bank

Craig Siegenthaler - Credit Suisse

Ken Worthington - JPMorgan

Presentation

Unidentified Speaker

This presentation and comments made in the associated conference call today may include forward-looking statements Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, acquisitions, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions.

In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts, and future or conditional verbs, such as will, may, could, should, and would, as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.

Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements, and urge you to carefully consider the risks described in our most recent form 10-K and subsequent forms 10-Q filed with the Securities and Exchange Commission. You may obtain these reports from the SEC's website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

Operator

Welcome to the Invesco's fourth quarter results conference call. All participants will be on a listen-only mode until the question and answer session. (Operator instructions). Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Now I would like to turn the call over to the speakers for today, Mr. Martin L. Flanagan, President and CEO of Invesco and Mr. Loren Starr, Chief Financial Officer and Ms. Karen Dunn-kelly, Head of Invesco Fixed Income. Mr. Flanagan, you may begin.

Martin Flanagan

Thank you very much, and thank you everybody for joining us for the 2009 fourth quarter briefing. I want to point out we'll be speaking in the presentation that is available on the website if you're so inclined to follow through it. And as we have done in the past, I'll spend a few minutes to give a summary of the business results. We will give an update on where we are with the Morgan Stanley Van Kampen combination and specifically Karen is going to talk about some of the fixed income opportunities that we see there and Loren will get into review of the financials and we'll open up to questions as we have in the past.

So just for an overview for the fourth quarter, what you'll note is our consistent and good long-term performances benefiting the organization where we saw close net inflows during the quarter and again you'll see areas of exceptional performance during the quarter but all-in-all consistent good long-term performance. And although markets have improved considerably during the fourth quarter, we continue to take a very disciplined approach to our business. It helps when maintaining these net inflows that I just talk about in a strong operating margins and increasing results and operating income. And as we have been speaking of more recently that we're going to continue to look for areas to reinvest in the business as we become more optimistic looking forward that will result in identifying those areas that we think will make a difference and with that operating expenses would follow that once we make those decisions.

I would like to point out too since we announced the other combination with Morgan Stanley, Van Kampen Asset Management in October we've made very, very good progress in achieving our goal of close by in mid-2010. The integration work is very very much on track, the (inaudible) factor is really just getting the shareholder votes during that process but we'll speak more specifically about that in a few minutes.

If you take a look at the financial highlights then again I'll just hit on a few points, Loren will get into more detail. It was a real solid quarter, we ended the quarter with $423 billion in assets under management, operating income improved 6% to $161 million during the quarter, what you are beginning to see though is that we will highlight the impact of the expenses that we will be incurring as we work through the combination with Morgan Stanley/Van Kampen. Integration and on that basis, you can see that the operating margin was 31.4% during the quarter versus 29% in the prior quarter and 19% a year ago, and you can follow through on earnings per share, the same way, $0.27 this quarter, and $0.25 the prior quarter and $0.8 a year ago in that quarter. So a good result for the quarter.

If you take a look at the flows, again, I would highlight if you look quarter-by-quarter throughout 2009, we had positive flows, long-term flows in each of the quarters during that year, which we think recognized the environment and our asset mix was really quite an accomplishment.

For the full year, we had $9 billion in net long-term inflows, and if you compare that to the $21 billion in outflows a year ago, literally a $30 billion year-over-year-improvement when you compare the full year flows. The other element that I would point to is that we continue to see increasing gross sales, which we think is a good indicator of future flows. With regard to money funds, we saw $7.7 billion in outflows during the quarter not inconsistent with what we're seeing with the low yield environment. That said, we continue to do very well, and on a relative basis have done very well on the flow picture there.

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