Invesco Plc (IVZ)

IVZ 
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Invesco Ltd. (IVZ)

Q1 2010 Earnings Call Transcript

April 28, 2010 9:00 am ET

Executives

Martin Flanagan – President & CEO

Loren Starr – CFO

Analysts

Dan Fannon – Jefferies

Bill Katz – Citigroup

Michael Kim – Sandler O'Neill

Mike Carrier – Deutsche Bank

Craig Siegenthaler – Credit Suisse

Roger Freeman – Barclays Capital

Ken Worthington – J.P. Morgan

Robert Lee – KBW

Presentation

Unidentified Participant

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, acquisition, 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 first quarter results conference call. All participants will be on 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 your speakers for today, Mr. Martin L. Flanagan, President and CEO of Invesco; and Mr. Loren Starr, Chief Financial Officer. Mr. Flanagan, you may begin.

Martin Flanagan

Great, thank you very much. This is Marty Flanagan and I'm here with Loren and we will be speaking to the presentation that's available on the website if you are so inclined to follow. We'll do a review of the business, give an update on the Morgan Stanley/Van Kampen combination, Loren will go into the financial results, and then we will open up to Q&A.

So just to start with, if you take a quick overview look at the quarter, it was a strong quarter, continued strength in investment results, further improvement in net flows, it was the strongest quarter of net flows we've had since the fourth quarter of the year 2000. So quite a period. Strong operating results, offset by foreign exchange and also in industry trends away from money market funds, and the high level update of Van Kampen, we expect – Van Kampen and Morgan Stanley, we expect to close on June 1st, and we will get into some details of revised synergies, which are meaningful – meaningfully better than our initial thoughts.

So with that, if you take a look, I'd like to do a quick summary of the results. We ended March 31st with $419 billion in assets under management. That was down from $423 billion in the prior quarter. What that resulted in, obviously, was a slight decrease in operating income first quarter versus fourth quarter, down 2.6%. The – during the quarter, we were very disciplined on the expense side of the business; with the decrease in revenue, what we were able to do was have a margin of 33.6% versus 33.2% in the fourth quarter last year. Also during the first quarter, the dividend will be $0.11 per share, which is a 7.3% increase versus the fourth quarter of last year.

So if we take a look at flows on the next page, you can see gross flows were $21 billion and you can see that just the increase in gross flows is really what's leading the improvement in net flows. Our long-term net flows are $3.7 billion. This represents the fifth consecutive quarter of positive flows for Invesco. And as I mentioned, it's the best quarter of net flows in the fourth quarter of year 2010.

And what we are seeing across the industry in the money fund business is that low yield and people seeking yield and greater returns continue to have outflows and money funds moving, still tends to be right now into fixed income products. That said, our money funds team continues to just do a very, very good job, high quality team.


Taking a look at flows, by the different channels what you will see is largely from this quarter, it was gross sales in the institutional channel that was a real contributor to positive overall flows for Invesco. During the quarter, IVR, which is the mortgage capital closed-end fund that has been in the market for over a year now, they had a capital raise in January, raising $171 million in this year – a press release just went up this morning, they just raised another $185 million just as of last night, just got prices last night.

Also on Tuesday, we announced the final close of the mortgage recovery fund. This is the fund that's part of the U.S. Treasury's PPIP program. We closed the fund with $1.46 billion of equity commitments. It's – and it's performing very, very well. So that's all good news for us.

The retail business continues to perform well. As I said, it's the fifth quarter of the flows. We saw strong net flows in U.K., Europe, and United States, and also the private wealth management had its 12th quarter of net inflows also.

Taking a look at high level performance, what you will see again is a – on a three-year basis, very strong with 73% of the assets under management beating peers, five years 78%. The one-year number was weaker than three and five years, largely what happened in that March to March period when there was that rally.

Read the rest of this transcript for free on seekingalpha.com