Invesco Plc (IVZ)

IVZ 
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Invesco (IVZ)

Q4 2011 Earnings Call

January 26, 2012 9:00 am ET

Executives

Loren M. Starr - Chief Financial Officer and Senior Managing Director

Aaron Uhde - Director of Investor Relations and Assistant Treasurer

Martin L. Flanagan - Chief Executive Officer, President and Executive Director

Analysts

Craig Siegenthaler - Crédit Suisse AG, Research Division

Michael Carrier - Deutsche Bank AG, Research Division

Jonathan E. Casteleyn - Susquehanna Financial Group, LLLP, Research Division

William R. Katz - Citigroup Inc, Research Division

Glenn Schorr - Nomura Securities Co. Ltd., Research Division

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

Greggory Warren - Morningstar Inc., Research Division

Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

J. Jeffrey Hopson - Stifel, Nicolaus & Co., Inc., Research Division

Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division

Roger A. Freeman - Barclays Capital, Research Division

Alex Kramm - UBS Investment Bank, Research Division

Presentation

Aaron Uhde

This presentation and comments made in the associated conference call today may include forward-looking statements. Forward-looking statements include information concerning future results for 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 SEC. You may obtain these reports from the SEC 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 Invesco's First (sic) [Fourth] Quarter Results Conference Call. [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, to Mr. Martin L. Flanagan, President and CEO of Invesco; and Mr. Loren Starr, Chief Financial Officer. Mr. Flanagan, you may begin.

Martin L. Flanagan

Thank you very much, and thank you, everybody, for joining us. First of all, there's a presentation that's on the website if you're so inclined to follow it. As is our common practice, I'll go through the business results for the fourth quarter. We'll hit some highlights of 2011, since it is the end of our year. And Loren will go into the detail of the financials and then we'll open it up to Q&A.

So those that are following the presentation, I'm now on Slide 3. So taking a look at the fourth quarter and some of the overview points. Long-term investment performance remained very strong across Invesco for the fourth quarter with, again, some areas of exceptional performance. Our strong investment performance contributed to the trend of positive long-term flows in spite of what continued to be a very volatile market. During the quarter, we saw long-term net inflows across all distribution channels.

Also during the quarter, we reduced long-term debt by $105 million, further strengthening our balance sheet. Reflecting the continued confidence in the fundamentals of our business, we purchased $436 million worth of Invesco shares during 2011. And looking ahead, we plan to take advantage of the many strengths of Invesco, continuing to invest in the business and further enhancing our relative position in the marketplace. We also remained focused on providing our clients with solutions to help meet their needs and the financial objectives regardless of the market environment.

We believe that important parts of the global economy are on the road to recovery over the long term, but expect that the road will remain bumpy in the near term. And consequently, we will continue to be very disciplined in our approach to our business in the markets while investing for the long term. The steps we've taken to enhance our business in 2011 positions us very solidly as we look into 2012. We expect solid results, but again, as markets improve, our results in 2012 could improve on the back of those markets.

Taking a look at 2011 on Page 4 now. If you take a look at the accomplishments over the past year, it really provides some insight into the long-range plans of the organization. First and foremost, we remained absolutely focused and committed on delivering strong, long-term investment performance to our clients, which will continue to drive growth in the core business. And in spite of the volatile markets, we further enhanced our business in key areas. As you all know, we've had a focus on Continental Europe. We advanced that business there. Fixed income continues to be an area where we have great strengths, but further strengths our areas of focus of the organization. And again, our very, very strong real estate team continued to see success, and we continued to expand that business in parts of Asia during 2011. We'll continue to invest in capabilities we see where we see strong client demand or future opportunities by continuing to develop the talent or where necessary, higher world-class talents, create technology platforms, launch new products or provide the necessary resources. Bottom line, we'll continue to do whatever is necessary to continue to improve our competitive position for the benefit of our clients.

And also during 2011, we increased the number of PowerShares products available to clients in Canada. That continues to be a nice growing part of the business there. It continued to expand our industry-leading balanced risk allocation capability in different parts of the business around the world, different channels, as that continues to be something that is very much desired by clients. And really, the ability to leverage capabilities such as balanced risk or real estate capabilities around the world are different investment management teams. So we have is a key differentiator for us as an organization. We expect that to continue to develop over 2012 and in the years to come.

Taking a look at the fourth quarter results on Page 5. We ended the quarter with $625 billion in assets under management versus $598 billion at the end of the third quarter. Invesco continued to generate strong long-term investment performance for our clients during the quarter, which contributed to the net long-term inflows of $5.6 billion. This further extended the positive trends we've demonstrated over the past several quarters of net inflows. Reflecting the challenges, the volatile market, adjusted operating income for the fourth quarter was $250 million -- $256 million, consistent with the third quarter. And earnings per share was $0.42 during the quarter, also consistent with the prior quarter. And as I've mentioned, Loren will go into greater detail in just a minute.

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