Media Release 26 April 2017 LUMX GROUP LIMITED ANNOUNCES 2016 ANNUAL RESULTS

Transcription

1 Media Release 26 April 2017 LUMX GROUP LIMITED ANNOUNCES 2016 ANNUAL RESULTS LumX Group Limited (ticker: LUMX) ( LumX, the Group, the Company, we or us ), an alternative investment specialist focused on providing leading investment and risk management solutions, announces its annual results for the year ended 31 December Highlights - Improved financial position, with increased cash levels, and a reduction of outstanding debt by 63% at the end of 2016, with further payments anticipated by the end of April 2017, reaching a total amount of 79% paid down since December Continued repositioning of the Group to focus on liquid and transparent alternative investment solutions and risk management services - Reduced operating costs of approximately USD 16 million representing a 41% reduction in overheads over the twelve-month period - Loss before taxation and exceptional items of USD 6.9 million in 2016 (decrease in total loss from USD 17.9 million in 2015 to USD 7.9 million in 2016 when accounting for tax, exceptional items and non-recurrent events) - Gross revenues of USD 17.8 million in Total fee-earning assets of USD 6.2 billion as of 31 December Growth of LumRisk subsidiary with significant contract for risk reporting services signed in Q and additional mandates anticipated in Commenting, Arpad Busson, Executive Chairman stated: 2016 marked a turning point for the Group, with progress achieved in dealing with legacy issues, implementing our corporate restructuring, and repositioning our business to respond to the evolving needs of our investors. We remain attentive to the various challenges as we continue our path towards implementing our strategy and achieving our growth potential. I wish to thank the Board, management, and staff for their determined efforts during the last 12 months, and shareholders for their continued patience and commitment. For Additional Information LumX Group Limited Maitland Andrew Crawford Neil Bennett / Seda Ambartsumian Tel: Tel:

2 Assets The fee-earning assets of the Group as at 31 December 2016 were USD 6.21 billion, down 16% when compared with the figure of USD 7.36 billion at 31 December Assets in our Alternative Investment Solutions business² of USD 4.29 billion (of which USD 2.55 billion are assets in respect of which we perform advisory mandates) decreased by 30% over the year, due to a mix of the disposal of non-core businesses such as the Company s stake in Frontier Investment Management and ERG Asset Management LLC, client redemptions, and reduction of advisory mandates. July saw the launch of an Alternative Risk Premia (ARP) UCITS fund where a LumX entity was appointed as the investment manager saw the rise of LumRisk, a risk aggregation and advisory business and Group subsidiary, achieving an increase of USD 1.32 billion in the value of client portfolios it provides risk reporting services on due to a major contract signed in Q3. We expect LumRisk to continue to be a driver of growth in 2017 as it advances negotiations with several interested clients. The assets of our Asian and Multi-Asset businesses, which are now displayed under other activities, fell as predicted following our decision to refocus attention on our core competences. The breakdown of assets across business lines during 2016 is as follows: Fee-Earning Assets Dec 2016 (USD billion) Dec 2015 (USD billion) % change Alternative Investment Solutions¹, ² % LumRisk³ % Other activities % Total fee-earning assets % ¹ Of which assets in respect of which we perform advisory mandates represented USD 2.55 billion as at December 2016 and USD 3.23 billion as at December ² Of which managed account platform assets represented USD 0.26 billion as at December 2016 and USD 0.43 billion as at December ³This figure represents the fee-earning value of client mandates. When taking account of the notional value of the underlying instruments that some investors have in place directly with their banks, it represents gross exposure of approximately USD 5.1 billion of assets. LumRisk fee-earning assets displayed above exclude LumX-managed assets where risk reporting services are provided. 4 Of which assets in respect of which we performance advisory mandates represented USD 0.07 billion as at December 2016 and USD 0.62 billion as at December Note: percentage changes and amounts are rounded. Strategy and Plans 2016 marked an inflection point in the Company s history following two years of major restructuring, which included merging the activities of two leading alternative investment firms, spinning off non-core businesses, streamlining our cost structure, and dealing with serious legacy issues at the Gottex Group such as a settled arbitration case that had been in progress since Thanks to the resolve and hard work of our board of directors ( Board ), management, and staff, most of these complex issues 2

3 are behind us. We are also thankful for the commitment and confidence of long-term and strategic investors, including members of senior management, who participated in the Group s financial recapitalisation that took place in July and November, raising CHF 13.2 million of fresh equity capital and converting CHF 5.6 million of liabilities into equity. Important challenges remain, notably the ability to attract and retain assets in our asset management business given the reduced appetite for hedge funds and multi-manager products in the market. Investors have been disappointed by the perceived general underperformance of the industry, and while the Group is repositioning itself in response to client demands for more liquid, transparent, and cost-effective solutions to their investment needs, we have not been immune to the general fee pressures and AuM shrinkage experienced by the industry. While significant headwinds, both macroeconomic and industry-specific, remain in place, we have established a path for future growth focused on our core competences and evolving investor needs. We believe that we are now better positioned to deliver long-term growth for all our stakeholders, thanks to the strategy initiated in the second half of 2015 and implemented throughout We are continuing to invest in our alternative risk premia initiative, which benefits from the transfer of skills and expertise built up over 25 years of analysing the underlying factors driving hedge fund performance, our proprietary risk management approach, and rigorous investment processes. We are excited by the potential of LumRisk, a risk aggregation and advisory business and Group subsidiary, which has already been selected by some of the largest and best-known pension funds, asset managers, and investment banks to provide cuttingedge risk aggregation, analysis and reporting services. Revenues from LumRisk differ from our traditional multi-manager portfolio business, as margins represent a lower percentage relative to the size of client assets, albeit for typically larger mandates. Recent investments in LumRisk s advanced technology infrastructure allow it to scale up its capacity to deliver highly complex analyses on massive data sets with excellent response times to multiple clients simultaneously via its interactive web-based user interface. In line with our plans for growth, we have made significant upgrades to improve our technology platform, enhance our research capabilities, and upgrade our disaster recovery capabilities, supporting our new infrastructure which is increasingly taking advantage of cloud-based technology, advanced quantitative investment tools, and artificial intelligence. In addition, several key hires were made to complement our core talent. As part of our commitment to upholding a high standard of corporate governance, we have reinforced our Board with the appointment of Mr. Edgar Brandt, joining as a Non- Executive Director and Chairman of the Audit Committee, replacing Mr. David Staples, who stepped down at the end of 2016 after many years of service. We are also nominating Mr. Philippe Jacquemoud to the Board as another Non-Executive Director, replacing Mr. Michael Garrett who will be leaving at the upcoming AGM. Mr. Jacquemoud has a strong legal background and brings a wealth of experience in corporate finance and restructuring. Mr. Eric Bissonnier has also announced his retirement from the Board at the next AGM in order to dedicate his time and efforts to the role of Chief Investment Officer, and the continuing development of various business initiatives such as alternative risk premia. 3

4 Our main priority in 2017 will be to follow through on our strategy to develop our asset management and risk services initiatives as follows: - Continue to invest in and enhance our research infrastructure and quantitative investment tools to respond to new trends and evolutions in the asset management industry. - Grow dedicated and hybrid ARP mandates, where we are seeing continued investor interest. We will also reinforce our multi-asset business, where we have seen over USD 100 million of fresh assets raised since January Support the continued expansion of LumRisk, which is expected to be a significant driver of growth and profitability for the Group going forward. - Expanding our platform of segregated managed accounts to enable investment by external investors who wish to benefit from our existing infrastructure and expertise, and improved governance and transparency on their underlying investments. The platform will be redomiciled in Dublin. Financials Group gross revenues for 2016 were USD 17.8 million compared to USD 32.4 million in 2015, reflecting our decision to dispose of non-core businesses while repositioning the Company to take advantage of future growth opportunities in alternative risk premia and risk services. Management fees were USD 16.4 million (USD 27.0 million in 2015) whilst 2016 generated performance fees of USD 0.3 million (2015: USD 4.3 million). Referral fee expenses amounted to USD 1.8 million (2015: USD 1.3 million). This resulted in net revenues of USD 16.0 million, a decrease of 49% compared to 2015 (USD 31.1 million). Total operating costs declined by 42% in 2016, to USD 23.0 million, down from USD 38.9 million in Personnel expenses totaling USD 12.1 million (2015: USD 23.0 million) were in line with expectations. A significant portion of overall cost reductions resulted from a reduction in full time equivalent staff, from 95 at 2015 year-end to 58 at 2016 year-end. The Group made a loss before taxation of USD 7.4 million in 2016 (2015: USD 17.9 million including non-recurrent events). The net loss for 2016 was USD 7.9 million in Excluding exceptional, one-off expenses such as legal and professional fees of approximately USD 0.5 million relating to the restructuring and recapitalisation, the Group generated an adjusted loss before taxation of USD 6.9 million (2015: USD 7.0 million before accounting for non-recurrent events). The Company s improving financial position is reflected in the 63% reduction of outstanding debt from USD 14.5 million at 2015 year-end to USD 5.4 million at December By April 25, 2017, our outstanding debt was decreased further to 79% since January 1, 2016, representing another major milestone for the Company. There was also an increase in cash and short term financial assets to USD 4.9 million (2015: USD 2.4 million) The Board proposes no dividend for the financial year

5 Consolidated Income Statement (USD mln) Change (%) Management fees % Performance fees % Advisory fees % Other fees % LumRisk fees Gross revenues % Total referral fee expense¹ (1.8) (1.3) 39% Net revenues % Personnel expenses (12.1) (23.0) -47% Personnel-related non-cash IFRS charges 0.0 (0.8) - General and administrative cost (10.3) (14.9) -31% Marketing and representation cost (0.6) (1.1) -48% Operating cost (pre acquis. & incidental charges) (23.0) (38.9) -41% Operating result (pre acquis. & incidental charges) Share of post-tax losses of JV (7.1) (7.9) -11% 0.0 (0.2) - Acquisition related & restructuring cost 0.0 (0.2) - Impairment of goodwill 0.0 (3.5) - Arbitration settlement 0.0 (5.1) - Misappropriation of assets 0.0 (0.6) - Loss on disposal of a business (0.2) (4.3) -96% Operating result (7.3) (21.5) -66% Finance income/(cost) % Changes in financial assets (0.3) (0.2) 11% Gain on recognition of investment at fair value Associates/joint ventures % Profit before tax (7.4) (18.0) -59% Income tax (expense)/credit (0.6) % Net profit (7.9) (17.9) -56% Minorities (0.1) (0.8) -85% Profit attributable to shareholders (7.8) (17.1) -54% Weighted average number of shares for diluted EPS calculation (millions) % Basic and diluted EPS (USD) (0.12) (0.38) -132% Proposed dividend per share (USD) Note: numbers are rounded, percentages are actual, percentage change sign on accounting basis. ¹ Referral fee expenses comprise third party commissions for client introductions and on-going client service, and some specific rebates to clients of the underlying LumX funds. 5

6 Statement of Financial Position (USD mln) Change (%) Financial Investments % Goodwill % Investments in associates/jvs % Intangible assets % Property, plant and equipment % Other receivables % Deferred tax assets % Total non-current assets % Assets held for sale Trade debtors & other receivables % Cash and short term financial investments % Current assets % Total assets Total equity Non-current liabilities % % % Liabilities held for sale Trade creditors % Other payables % Current tax liabilities and provisions Current liabilities % % Total equity and liabilities Note: numbers are rounded, percentages are actual, percentage change sign on accounting basis. Please visit to view a copy of the 2016 annual results. Outlook The current market environment reflects continued global macroeconomic and political risks, with the case for portfolio diversification through alternative investments stronger than it has been for many years as we begin to see a decorrelation of risk assets, coupled with low volatility and a cycle of rising rates. We are confident that our efforts to restructure our organisation and reposition the Group as a leading provider of innovative investment solutions and risk management services encompassing hedge funds, multi-asset solutions, and alternative risk premia will bear fruit in About LumX Group Limited Incorporated in Guernsey and listed on the SIX Swiss Exchange, LumX Group Limited (ticker: LUMX) is the holding company of an alternative investment specialist focused on bringing leading investment and risk management solutions to a primarily institutional client base. The LumX Group has offices in Guernsey, Geneva (Nyon), London, New York, Luxembourg, and an affiliate office in Melbourne. 6