Invesco Plc (IVZ)

IVZ 
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Invesco Ltd. (IVZ)

Q2 2010 Earnings Call Transcript

July 27, 2010 9:00 am ET

Executives

Martin Flanagan – President and CEO

Loren Starr – CFO

Analysts

Ken Worthington – JPMC

Michael Kim – Sandler O’Neill

Roger Freeman – Barclays Capital

Michael Carrier – Deutsche Bank

Craig Siegenthaler – Credit Suisse

Bill Katz – Citigroup

Cynthia Mayer – Bank of America/Merrill Lynch

Daniel Fannon – Jefferies

Robert Lee – KBW

Marc Irizarry – Goldman Sachs

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, 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 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 Web site 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 Invesco’s second quarter results conference call. All participants will be in a listen-only mode until the question-and-answer session. (Operator instructions) Today’s conference is being recorded, if you 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. Mr. Flanagan, you may begin.

Martin Flanagan

Thank you very much, and thank you everybody for joining us today. We’ll be speaking to the presentation that’s available on our Web site, if you’re still inclined to follow.

Also as you know, we scheduled an Investor Day presentation later this afternoon, where we’ll go into much greater detail regarding the impact of recent acquisition, but for this call we’ll provide a review of the business results, a brief update on the combination with Morgan Stanley’s retail business, then Loren will go into financial detail, and then as always we’ll go into Q&A.

So those that are so inclined to follow, I’m on slide #3 right now. In spite, of continued volatility in the markets, Invesco’s commitment to investment excellence continued to yield strong long-term investment performance for our clients.

Investment performance across the enterprise remained very strong in the second quarter with some areas with just exceptional performance. Our strong investment performance supported a continued trend of positive long-term net flows for the firm.

As you know, on June 1, the acquisition of Morgan Stanley’s retail asset management business, which included Van Kampen Investments. This marked a key milestone for our long-term success as a company.

One month after the close, we’re seeing strong momentum in the combined business, and as we announced last quarter based on more detailed analysis and understanding of the business, the synergies will be meaningfully stronger than our initial expectations. We’ll provide an update on the benefits we’re seeing from the acquisition later in this discussion this morning.

So moving out to the second quarter results; assets under management ended the quarter at $557 billion under management, and this reflects the combined organization.

Adjusted operating income for the second quarter was $188.7 million. That was a 3.1% increase as compared to the first quarter, and long-term net flows for the quarter were $13.9 billion continuing the positive trend we’ve demonstrated over the past several quarters.

And during the quarter, there’ll be a second quarter dividend of $0.11 per share. This is consistent with the first quarter dividend and represents a 7.3% increase over the dividend from the fourth quarter of 2009. And again as I mentioned, Loren is going to go into much greater detail of the financial results in just a minute.

If you take a look at the quarterly flows starting on slide #5, what you’ll note is strength in the second quarter gross sales particularly in the passive channel which led to continued momentum of our long-term flows. And as I mentioned earlier, our long-term net flows for the quarter were $13.9 billion. This represents the sixth consecutive quarter of positive flows for Invesco.

And on slide #6, you’ll note the strong gross sales across the institutional channel contributed to the positive flows for Invesco overall during the quarter. We also saw positive flows in our private wealth management business, which has experienced consistent aspect growth in each quarter over the past three years.

And if you take a look at the investment performance, it’s one of the key reasons for the enhanced ability of our flows. It’s again as always driven by consistent good long-term performance. If you look at the firm as a whole, 75% of the assets under management were ahead of peers on a three-year basis at the end of this quarter. This is a significant improvement from 69% of assets ahead of peers on a three-year basis at the end of last year.

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