TIDMREC
RNS Number : 9365T
Record PLC
16 June 2009
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Record plc
PRESS RELEASE
16 June 2009
FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2009
Record plc, the specialist currency investment manager, today announces its
audited results for the year ended 31 March 2009.
Financial highlights:
* Management fee income of GBP45.6m (up 4%)
* Performance fee income of GBP1.4m (down 94%)
* Pre tax profit GBP26.8m (down 34%)
* Continued strong balance sheet with no debt and cash of GBP29.8m
* AuME* $31.5bn at 31 March 2009 was 43% lower than the prior year
* AuME* GBP22.0bn at 31 March 2009 was 21% lower than the prior year
* Operating profit margin to 31 March 2009 of 55% compared to 61% (ex IPO costs)
for the year ended 31 March 2008
* Basic EPS 8.73 pence per share (2008: 12.65 pence per share)
* Proposed final dividend for the year to 31 March 2009 is 2.16 pence per share
giving a total dividend for the year of 4.59 pence per share.
Operating highlights:
* Growing demand for Passive and Active Hedging Products
* Investment performance was negative for the year; although performance improved
towards the end of the year
* Client numbers fell by 20 to 121 by year end 31 March 2009
* As a currency manager Record manages only the impact of foreign exchange and
not the underlying assets, therefore its "assets under management" are notional
rather than real. To distinguish this from the AUM of conventional asset
managers, Record uses the concept of Assets under Management Equivalents (AuME)
and by convention this is quoted in US dollars.
Commenting on the results Neil Record, Chairman and Chief Executive Officer of
Record plc, said:
"Last year was undoubtedly a very challenging period for financial services
companies and Record faced a number of challenges during this period.
Unprecedented levels of volatility, and extreme risk aversion resulting in a
strong anti carry trend, meant that the performance of the Absolute Return
products was negative for the year, although performance improved more recently.
Against this backdrop the financial performance of the business held up well
with management fees growing by 4% offset by significantly lower performance
fees, pre tax profits of GBP26.8m and a strengthening of the balance sheet.
Looking to the current year, business has started on a positive note with the
commencement of a very large Active Hedging mandate and we anticipate the
signing of a second US active hedging mandate shortly. These combined mandates
are estimated at $6bn (AuME)".
Analyst briefing
There will be a presentation for analysts at 9.30am, today - Tuesday 16 June
2009 - at the offices of JPMorgan Cazenove Limited at 20 Moorgate London EC2R
6DA. A copy of the presentation will be made available on the Group's website at
www.recordcm.com.
+--------+---------------------------------+--------------------------+
| For further information, please contact: | |
+------------------------------------------+--------------------------+
| Record plc: | +44 1753 852222 |
+------------------------------------------+--------------------------+
| | | |
+--------+---------------------------------+--------------------------+
| | Neil Record | |
+--------+---------------------------------+--------------------------+
| | Chief Executive Officer | |
+--------+---------------------------------+--------------------------+
| | | |
+--------+---------------------------------+--------------------------+
| | Paul Sheriff | |
+--------+---------------------------------+--------------------------+
| | Chief Financial Officer | |
+--------+---------------------------------+--------------------------+
| | | |
+--------+---------------------------------+--------------------------+
| Hogarth Partnership | +44 207 357 9477 |
+------------------------------------------+--------------------------+
| | | |
+--------+---------------------------------+--------------------------+
| | Nick Denton, Julian Walker, Vicky Watkins |
+--------+---------------------------------+--------------------------+
Consolidated Income Statement for the year ended 31st March 2009
+--------------------------------------------+----------+--+-------------+
| | 2009 | | 2008 |
+--------------------------------------------+----------+--+-------------+
| | GBP'000 | | GBP'000 |
+--------------------------------------------+----------+--+-------------+
| REVENUE | | | |
+--------------------------------------------+----------+--+-------------+
| Management fees | 45,561 | | 43,987 |
+--------------------------------------------+----------+--+-------------+
| Performance fees | 1,436 | | 22,160 |
+--------------------------------------------+----------+--+-------------+
| Other revenue | (201) | | 82 |
+--------------------------------------------+----------+--+-------------+
| TOTAL REVENUE | 46,796 | | 66,229 |
+--------------------------------------------+----------+--+-------------+
| Cost of sales | (11) | | (296) |
+--------------------------------------------+----------+--+-------------+
| GROSS PROFIT | 46,785 | | 65,933 |
+--------------------------------------------+----------+--+-------------+
| Administrative expenses* | (20,928) | | (26,667) |
+--------------------------------------------+----------+--+-------------+
| OPERATING PROFIT | 25,857 | | 39,266 |
+--------------------------------------------+----------+--+-------------+
| Finance income | 917 | | 1,134 |
+--------------------------------------------+----------+--+-------------+
| Finance costs | (5) | | (7) |
+--------------------------------------------+----------+--+-------------+
| PROFIT BEFORE TAX | 26,769 | | 40,393 |
+--------------------------------------------+----------+--+-------------+
| Taxation | (7,494) | | (12,480) |
+--------------------------------------------+----------+--+-------------+
| PROFIT AFTER TAX | 19,275 | | 27,913 |
+--------------------------------------------+----------+--+-------------+
| | | | |
+--------------------------------------------+----------+--+-------------+
| Basic earnings per share | 8.73p | | 12.65p |
+--------------------------------------------+----------+--+-------------+
| Diluted earnings per share | 8.72p | | 12.62p |
+--------------------------------------------+----------+--+-------------+
*Note: comparative figure includes GBP1,293k of non-recurring costs related to
the IPO.
Consolidated Balance Sheet as at 31st March 2009
+--------------------------+-----------+-----------+--+----------+----------+
| | 2009 | | 2008 |
+--------------------------+-----------------------+--+---------------------+
| | GBP'000 | GBP'000 | | GBP'000 | GBP'000 |
+--------------------------+-----------+-----------+--+----------+----------+
| NON-CURRENT ASSETS | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| Property, plant and | 368 | | | 611 | |
| equipment | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| Deferred tax assets | 146 | | | 46 | |
+--------------------------+-----------+-----------+--+----------+----------+
| | | 514 | | | 657 |
+--------------------------+-----------+-----------+--+----------+----------+
| | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| CURRENT ASSETS | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| Trade and other | 7,742 | | | 8,917 | |
| receivables | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| Cash and cash | 29,798 | | | 22,545 | |
| equivalents | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| | | 37,540 | | | 31,462 |
+--------------------------+-----------+-----------+--+----------+----------+
| CURRENT LIABILITIES | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| Trade and other payables | (7,076) | | | (7,191) | |
+--------------------------+-----------+-----------+--+----------+----------+
| Corporation tax | (3,774) | | | (6,356) | |
| liabilities | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| Derivative financial | (13) | | | (23) | |
| liabilities | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| | | (10,863) | | | (13,570) |
+--------------------------+-----------+-----------+--+----------+----------+
| NET CURRENT ASSETS | | 26,677 | | | 17,892 |
+--------------------------+-----------+-----------+--+----------+----------+
| | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| TOTAL NET ASSETS | | 27,191 | | | 18,549 |
+--------------------------+-----------+-----------+--+----------+----------+
| | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| EQUITY | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| Issued share capital | 55 | | | 55 | |
+--------------------------+-----------+-----------+--+----------+----------+
| Share premium account | 1,809 | | | 1,809 | |
+--------------------------+-----------+-----------+--+----------+----------+
| Capital redemption | 20 | | | 20 | |
| reserve | | | | | |
+--------------------------+-----------+-----------+--+----------+----------+
| Retained earnings | 25,307 | | | 16,665 | |
+--------------------------+-----------+-----------+--+----------+----------+
| TOTAL EQUITY | | 27,191 | | | 18,549 |
+--------------------------+-----------+-----------+--+----------+----------+
'Set against the most challenging markets and economic backdrop of a generation,
Record has maintained the consistency of its investment processes, and enjoyed
substantial loyalty from clients. The operating profit margin remained strong
at 55% and whilst AuME declined by 43%, the largest component was exchange rate
differences that had no impact on fee income. Overall income was down by 29%
with management fee income (excluding performance fees) up 4%'.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S STATEMENT
It is now a given that the events of the last twelve months, both in the world
economy and in the financial services sector, have been unprecedented. Record's
challenge has been to maintain consistency in its investment approach, while
dealing with the very high level of disruption in the currency markets and the
understandable concerns of clients.
Record has two main investment products: Currency for Absolute Return, and
Currency Hedging. Currency for Absolute Return is our main income source,
accounting for 83% of client income in the year to March 2009.
Our Currency for Absolute Return product is based on our belief in two
fundamental characteristics in the currency markets - the 'carry trade' and
'momentum'. The carry trade is based on the observation that investing in
currencies with higher real (i.e. after inflation) interest rates using
lower real interest rate currencies has generated attractive excess returns over
very long periods of time (30+ years). In the year on which I am reporting (but
not generally), returns on the carry trade have been highly correlated with
equity market returns, and have accordingly been negative. As the credit crunch
has unfolded, the carry trade has become associated in the minds of investors
with generalised investment risk, so that when risk-aversion reduced and the
mood improved, as it did in April-July 2008 and again in February and March
2009, the carry trade generated positive returns. In August and October 2008,
and again in January 2009, when extreme risk aversion dominated, the carry trade
generated strongly negative returns.
We believe the behaviour of the carry trade in the credit crunch period has
arisen mainly through what now appears to be a large implicit exposure to the
carry trade by the banking sector. The carry trade is unusual, in that while it
is widely accepted as a long-term (although volatile) source of excess return,
it is hardly exploited at all by the institutional investment sector. Instead,
it seems that not just the known candidates (hedge funds, currency managers like
Record) exploited the carry trade going into the credit crunch, but also the
world's banking system. Then with the wholesale destruction of bank credit in
the second half of 2008, there was near-panic buying of low interest currencies
(particularly Yen), and similarly panic selling of high (or formerly high)
interest rate currencies (Sterling, Australian Dollar, New Zealand Dollar).
Against these headwinds, our risk-control process (which exploits the momentum
characteristic of the currency market) worked well. Our clients therefore
experienced much lower losses and volatility of returns than they would have
done without this fundamental part of our process.
However, the second half of calendar year 2008 saw another challenge - the
normally highly liquid and low-cost foreign exchange markets suffered a serious
blow with the collapse of Lehman Brothers, a major foreign exchange
market-maker. During the four or so weeks of unresolved crisis in the banking
sector in September-October, the currency market experienced the worst period of
prolonged illiquidity, particularly in the forward market, that I have seen in
30 years. The illiquidity was not evidenced by low volumes - quite the contrary
- but by the temporary breakdown of the network arrangements which allow
market-makers to offload their currency positions cheaply and easily to other
banking counterparties. The collapse of confidence in bank credit meant that
many of the interconnections in the market failed, forcing banks to offset
currency risk internally, much reducing transactional efficiency, and sharply
increasing the costs of dealing to customers. While the immediate crisis in the
foreign exchange market has now subsided, forward currency market pricing has
been left with an implied credit element, which makes the selection of our
counterparties, and the minimising of dealing costs to our clients a real test
of our dealing team's skills.
Despite these evident challenges for our absolute return product, I am confident
that Currency for Absolute Return is continuing to develop a secure place in
many institutional investors' portfolios, and indeed that allocations to this
asset class could be substantially increased in the coming years. In particular,
we believe that 'carry' is now sufficiently established and understood to begin
a transition from an 'alpha' to a 'beta'. This is investment parlance for saying
that we believe that the carry trade is such a stable and persistent source of
excess return, available to all investors (not just the above median half), with
such strong fundamental underpinnings, that it qualifies to be an asset class,
like equities, fixed income, property, etc.
As a result of the credit crunch and risk aversion of investors, risk reduction
has naturally risen up the agenda of investors. This has meant that we are
seeing an increasing demand for both our Passive and Active currency hedging
products.
New hedging clients come to us in two ways: either they decide through
longer-term analysis that currency hedging is a strategic need for their
portfolio, or an event in the market (usually a strong market movement in either
direction) creates an immediate tactical response. We have seen very large
currency movements in the past year, so that both these routes are active
sources of new hedging clients at the moment. In particular, we have signed
a large US State Pension Fund for Active Hedging and anticipate the signing of a
second US Active Hedging mandate shortly. These will build up over the coming
year, but when the mandates are fully mature they will add approximately $6
billion to our AuME.
We are working very actively in the US, where we think there are significant
opportunities to build our hedging (as well as our absolute return) client-base
and it is from the US that we expect the majority of new business to come in the
coming year.
Set against the most challenging markets and economic backdrop of a generation,
Record has maintained the consistency of its investment processes, and enjoyed
substantial loyalty from clients. Whilst AuME declined by 43%, the largest
component was exchange rate differences that had no impact on fee income.
Overall income was down by 29% with management fee income (excluding performance
fees) up 4%. The operating profit margin remained strong at 55%.
Overall profit before tax was GBP26.8m and earnings per share were 8.73 pence
per share. The proposed final dividend is maintained at 2.16 pence per share and
together with the interim dividend takes the total dividend for the year to 4.59
pence per share.
The balance sheet has strengthened during the year with shareholders' funds
rising by 47% to GBP27.2m and cash balances increasing by GBP7.3m to GBP29.8m.
The Group has a significant regulatory capital surplus and has cash reserves
equivalent to over two years operating costs.
Further detailed analysis of the results for the year can be found in the
Business review.
Currency for Absolute Return is a six-year-old product for Record, which
experienced very strong demand from institutional investors particularly in 2006
and 2007, and hence rapid growth in AuME over that period. At 31 March 2009,
AuME for Absolute Return stood at $13.4bn (2008: $29.0bn). Whilst performance
has been negative during the last twelve months and there has been a reduction
in client numbers, we believe that the investment case remains strong and that
there remains significant potential for growth in this product.
Active Currency Hedging is our longest-standing product, with continuous client
track records since 1985. AuME at 31 March 2009 stood at $4.0bn. Recent growth
in this product has been strong, although this has yet to be evident in reported
AuME figures or income. We are currently experiencing increased interest and
take-up in the US, as investors seek to capture and retain currency gains they
have made in the past five years on international investments.
Passive Currency Hedging, at $13.0bn AuME, accounted for 41% of Group-wide AuME
at 31 March 2009, but only 3% of fee income in the year ended 31 March 2009. We
decided in 2006 that we did not wish to offer a stand-alone product in this
low-margin sector, the exception being where the mandate is combined with either
an Absolute Return or Active Hedging account. In this difficult market
environment we are seeing a renewed interest in execution only Passive Hedging
where higher fee rates can be achieved.
Investment philosophy
Our investment philosophy is now well established. We believe that long-term
returns for investment clients in the currency market are only reliably
available by exploiting long-term and persistent inefficiencies. By contrast,
while there are undoubtedly short-term currency market anomalies that appear and
disappear (as in all markets), we do not aim to use these to add value for our
clients, since we believe our ability as a firm to do this consistently over
long horizons is low. We have maintained this philosophy in the face of
extraordinarily volatile and disrupted market conditions, and we intend to
continue to do so.
At the core of our philosophy, we recognise and exploit two currency market
inefficiencies (I use the term in the sense of 'opportunities') - 'carry' and
'momentum'. I have already discussed these above. We also recognise a third
inefficiency - 'mean reversion' - which we also think is a stable inefficiency.
Many 'fundamental' currency managers aim to exploit long-term mean-reversion,
but we take the view that the variability of the currency valuation cycle
length, and the stretchiness of the 'elastic band' that pulls currencies back to
'fair value', are both factors which make exploiting this inefficiency very
difficult. Instead, we exploit mean reversion at the other end of the horizon
spectrum (i.e. a month or less) in a small part of our portfolio to act as a
diversifier to the two main processes.
Our Active Hedging product uses primarily one inefficiency - momentum - to allow
our clients to effectively insure their portfolios against adverse currency
moves in a very efficient and low-cost manner. We do not generally exploit
carry in our hedging products.
Investment performance
The year ending 31 March 2009 has been one of negative performance for our
Currency for Absolute Return product. Expressed as a % of underlying assets with
no gearing ('gearing one' basis), the excess return of our segregated composite
was (3.5%).
The negative return was substantially accounted for by 'anti-carry' behaviour in
the currency market. If we measure this performance against a 'currency carry'
benchmark, a comparable long-term volatility benchmark would have shown a (5.6%)
return. This illustrates that our clients did not suffer anything like as much
as they would have done had we not employed our active risk-management process.
We maintain a range of pooled funds, which enable clients to treat Currency for
Absolute Return like an asset class - i.e. to invest in a Unit Trust, and have
no further administrative commitments or financial liability. The currency
excess return of these funds (which range in 'gearing' from 2.5 to 7 times the
'gearing one' product, and whose expected volatility ranges between 10% and 28%
p.a.) are as follows:
+----------------------+----------+---------------------+----------------------------+
| Annual Returns of Record Umbrella Currency Funds; year to 31 March 2009 |
+------------------------------------------------------------------------------------+
| Fund Name | Gearing | Annual Return % |Volatility since inception |
| | | | % p.a. |
+----------------------+----------+---------------------+----------------------------+
| Cash Plus | 7 | (25.8%) | 20.4% |
+----------------------+----------+---------------------+----------------------------+
| Equity Plus | 6 | (56.2%) | 29.0% |
+----------------------+----------+---------------------+----------------------------+
| US Cash Plus | 7 | (18.0%) | 21.0% |
+----------------------+----------+---------------------+----------------------------+
| US Equity Plus | 6 | (31.9%) | 26.4% |
+----------------------+----------+---------------------+----------------------------+
| Euro 1 | 3.5 | (9.6%) | 11.0% |
+----------------------+----------+---------------------+----------------------------+
| Sterling 10 | 2.5 | (7.1%) | 6.9% |
+----------------------+----------+---------------------+----------------------------+
| Sterling 20 | 5 | (15.7%) | 10.6% |
+----------------------+----------+---------------------+----------------------------+
| Alpha Composite | 1 | (3.5%) | 2.9% |
+----------------------+----------+---------------------+----------------------------+
| Global Equities* | N/A | (39.7%) | N/A |
| (S&P 500) | | | |
+----------------------+----------+---------------------+----------------------------+
*Included for comparison to global equities
We have maintained the daily liquidity of pooled funds even in the darkest days
of September and October 2008, and this has enabled both those clients who
believe that the carry trade has gone away (either temporarily or permanently)
to exit our funds quickly and at no cost; and also those who believe in
long-term mean reversion to enter, also quickly and at no cost.
Aligned Incentives
Record operates a profit share scheme whereby 30% of operating profits are
distributed between all members of staff. Every member of staff is entitled to a
profit-share, and the distribution amongst the staff is determined by each
members' profit-share 'units' and their salary. These are determined in a formal
six-monthly or annual process. There are no other incentive scheme arrangements
across the group, save for the Record Share Scheme under which awards are made
on an ad hoc basis.
The Board is actively reviewing its succession-planning arrangements, and we
believe that it is vital that the next generation of management are
appropriately incentivised through long term share ownership, not just as
receivers of profit-share payments. The Remuneration Committee has proposed
certain changes to the existing scheme that seek to further align the interests
of management with those of shareholders through a significant proportion of
future profit share payments being share-based. It is proposed to maintain the
overall cost of the profit share scheme at 30% of operating profits over the
medium term.
Board changes and Personnel
During the year there was one change to the Board, with Paul Sheriff joining as
Chief Financial Officer on 1st December 2008. Paul was previously Group Finance
Director at Arbuthnot Banking Group PLC, and prior to this was Commercial
Finance Director for Prudential's UK & European operations. I am delighted to
welcome Paul to the Board and look forward to his contribution to the future
success of Record.
Mike Timmins left the Board and retired on 30th November 2008. Mike joined
Record in 1992 as the Finance Director of what was then a small private company.
He quickly established a very well managed finance department, and was a vital
part of the small management team that worked over the next 17 years to
establish Record as a key player in the currency asset management sector. I am
personally grateful to Mike for his support to me and the company over this
period, and I wish him well in his retirement.
Peter Wakefield, Chief Operating Officer, has indicated that he wishes to retire
from Record to pursue other interests outside Financial Services. He will be
leaving the Board on 28 August 2009. The Board has decided that the activities
of the Chief Operating Officer will be split between the Chief Financial Officer
and the Chief Investment Officer.
Peter joined Record in 1999, and quickly became expert in all our currency
products, building strong relationships with investment consultants and clients.
He led the development of the pooled funds and was a key part of the IPO team in
2007. His good judgement and sharp intelligence will be missed.
The Board has recognised the need for a third Non-executive Director, and the
process to indentify an appropriate candidate is well advanced. The Board
anticipates making an announcement in the near future.
In addition to the Board changes outlined above, the senior management team has
been strengthened over the last year, particularly in the client team with the
addition of two senior staff-members, James Wood-Collins, who joins us from JP
Morgan Cazenove, and Adrian Jackson from Russell Investment Group.
On behalf of the Board I extend our thanks to all staff for their commitment to
the business and their hard work in this very difficult environment.
Group strategy and growth plans
Record has seen strong growth over the last five years, particularly in
investors seeking to generate a return through currencies. We see this
continuing and envisage significant opportunities arising as a result of the
turmoil in the financial markets. The Board are seeking to position Record to
exploit opportunities as and when they arise.
In these challenging markets, we are seeing an increased focus on balance sheet
risk management. Sterling investors (and to a lesser extent US Dollar investors)
that have been passively hedged have seen significant cash outflows, while those
investors that were unhedged have seen significant currency gains on
international portfolios that they wish to protect. Investors are looking at
alternative solutions to these two extremes and we believe that Record's Active
Hedging product is well positioned to exploit any opportunities that arise
Record believes the currency carry trade to be an investable product that over
30 years would have delivered a total return comparable to that of global
equities and superior to that of global bonds, at volatility comparable to bonds
and superior to equities. Long-term correlations between a 'carry' index and
either equities or bonds are low. We believe that this qualifies currency
'carry' to be an asset class in its own right. Record intends to launch a 'beta'
product that tracks a measurable index later in the year, and to widen the range
of return-seeking products it offers to give potential investors the fullest
range of ways to invest in this asset class.
Clients continue to approach Record with specific and varied currency
requirements. In order to deliver tailored solutions to clients, we continue to
invest in people and systems that enable Record to offer the appropriate
services.
We also believe that the next twelve months will see investors re-assess
investment allocations and believe that currency could be a beneficiary. The
Board also continues to position Record to benefit from developing interest in
emerging market currencies.
In conclusion, I am grateful to our stakeholders - staff, shareholders and
clients - for their loyalty to Record in this most difficult of the 25 years
that Record has been in existence. The board remains committed to the programme
that I have set out, and believes that the opportunities for those specialist
asset managers that survive the current turmoil will be very exciting indeed.
Neil Record
Chairman and Chief Executive Officer
Business review
This was a very challenging year for the Group, which saw AuME (US$) decrease by
43%, fee income decrease by 29% and profit before tax decrease by 34%. AuME
measured in Sterling fell by a lower amount of 21% and management fee income
increased by 4%.
Overview of financial year to 31 March 2009 (FY09)
The twelve months to 31 March 2009 was a very challenging period in the history
of the Group with currency markets exhibiting unprecedented levels of volatility
and a period of strong anti-carry behaviour. The Absolute Return products saw
negative performance for the year as a whole, although performance improved in
the final quarter of the year and was positive in the final month. The Group saw
significant falls in AuME, client numbers, fee income and operating profit.
Management fee income saw a small increase and AuME when measured in Sterling
saw a smaller decline. The balance sheet of the Group remained strong with
substantial cash and capital resources available to the Group.
AuME movements result both from factors within Record's control and external
factors. External factors include the Sterling/USD exchange rate and the
underlying asset value (usually equities) on which hedging mandates are based.
External factors accounted for 57% of the fall in AuME during the year.
Summary of highlights
* $31.5bn AuME at 31 March 2009 was 43% lower than the prior year.
* AuME in Sterling decreased to GBP22.0bn at 31 March 2009, 21% lower than at 31
March 2008.
* Client numbers decreased to 121 at 31 March 2009, 14% lower than at 31 March
2008.
* Management fee income of GBP45.6m was 4% higher than the previous year.
* Performance fee income of GBP1.4m was 94% lower than the previous year.
* Operating profit margin to 31 March 2009 of 55% compared to 61% (ex-IPO costs)
for the year ended 31 March 2008.
* Basic EPS decreased to 8.73p compared to 12.65p for the year to 31 March 2008.
* Proposed final dividend for the six months to 31 March 2009 is 2.16p per
share. Total dividend for the year 4.59p per share.
The Key Performance Indicators are:
+--------------------------------------+----------------+----------------+
| KPIs | 2009 | 2008 |
+--------------------------------------+----------------+----------------+
| * AuME at 31 March - US Dollars | $31.5bn | $55.7bn |
+--------------------------------------+----------------+----------------+
| * AuME at 31 March - Sterling | GBP22.0bn | GBP28.0bn |
+--------------------------------------+----------------+----------------+
| * Currency Alpha Composite* | (3.49%) | (2.39%) |
+--------------------------------------+----------------+----------------+
| * Client numbers at 31 March | 121 | 141 |
+--------------------------------------+----------------+----------------+
| * Number of employees at 31 March | 62 | 54 |
+--------------------------------------+----------------+----------------+
| * Operating costs**: management | 4.6 times | 5.0 times |
| fees cover | | |
+--------------------------------------+----------------+----------------+
| * Total remuneration : total | 2.8 times | 3.0 times |
| revenue cover | | |
+--------------------------------------+----------------+----------------+
| * Operating profit margin (ex IPO | 55% | 61% |
| costs) | | |
+--------------------------------------+----------------+----------------+
| * Profit Before Tax | GBP26.8m | GBP40.4m |
+--------------------------------------+----------------+----------------+
| * Basic EPS | 8.73 pence | 12.65 pence |
+--------------------------------------+----------------+----------------+
* Currency Alpha Composite - an investment return track record generated by the
aggregation of all standard segregated track records for Record's Currency for
Absolute Return product. The Currency Alpha Composite is asset-weighted, based
on AuME for each account. At 31 March 2009, there were 18 accounts and $6.8
billion in assets in the Currency Alpha Composite.
**excluding related profit share and IPO costs
Results for FY09
The following key performance indicators confirm the challenging environment
that the Group has encountered during the financial year to 31 March 2009:
AuME - decreased by $24.2 billion (down 43%) during the year. AuME decreased
across all products with the most significant reductions in the Absolute Return
products. The largest component of the decrease is due to the significant
changes in the USD/Sterling exchange rate. This exchange rate has limited impact
on income as the majority of mandates are Sterling denominated. AuME when
measured in sterling decreased by GBP6.0bn (down 21%).
Client numbers - this represents the number of separate legal entities that have
invested in a Record fund or appointed Record directly as an investment manager.
Each entity may have more than one mandate. The number of clients at 31 March
2009 was 14% lower than at the previous year end.
Number of employees - the number of employees increased from 54 to 62 during the
year to 31 March 2009. This is an increase of 15% due to the continued
strengthening of the research, trading and support services teams. Overall
employee costs when compared to the level of income and profit before tax
indicates the low level of fixed costs.
Operating costs to management fees - the movement in AuME and increase in
operating costs resulted in a small reduction in the cover of management fees to
operating costs to 4.6 times (2008: 5.0 times).
Total remuneration to revenue - the operational leverage experienced a small
reduction in the ratio of total remuneration costs to revenue which for the year
to 31 March 2009 was 2.8 times covered (2008: 3.0 times).
Operating profit margin - a combination of significantly reduced performance
fees, marginally higher costs, and a reduced profit share cost resulted in the
operating profit margin reducing to 55% for the year to 31 March 2009 (2008: 61%
ex IPO costs).
Basic EPS - the decrease in revenues is reflected in the Group's earnings per
share decreasing to 8.73p per share (2008: 12.65p per share).
AuME
The fall in AuME of $24.2bn in the 2009 financial year is analysed in the chart
below:
+------------------------------------+-------------------+
| AuME Movement in the year ended 31 March 2009 |
+--------------------------------------------------------+
| | $ billion |
+------------------------------------+-------------------+
| AuME at 31 March 2008 | $55.7 |
+------------------------------------+-------------------+
| Net client inflows/(outflows) | ($6.2) |
+------------------------------------+-------------------+
| Investment performance impact | ($4.1) |
+------------------------------------+-------------------+
| Equity market impact | ($3.5) |
+------------------------------------+-------------------+
| Foreign exchange impact | ($10.4) |
+------------------------------------+-------------------+
| AuME at 31 March 2009 | $31.5 |
+------------------------------------+-------------------+
The Group has seen net outflows of $6.2bn from clients including a $1.6bn inflow
from new clients. Other movements included:
(i) A fall of $10.4bn due to changes in exchange rates over the period,
which affects the conversion of non-
US Dollar mandate sizes into
US Dollar AuME. NB this does not have an equivalent impact on
the
Sterling value of fee income.
(ii) A fall of $4.1bn due to investment performance in the Group's pooled
funds, which is compounded on a
geared basis into the AuME in
those funds.
(iii) A fall of $3.5bn related to the levels of global stock and other
markets as many mandate sizes are
linked to stock and other market
levels.
Of these movements, (i) and (iii) are outside the control of the Group.
When expressed in Sterling, AuME in the 2009 financial year fell by 21% to
GBP22.0bn (2008: GBP28.0bn). This fall is more representative of the impact of
AuME on underlying management fee income with 74% of mandates being denominated
in Sterling, 9% being denominated in US Dollars, 9% being denominated in Swiss
Francs and 8% being denominated in Euros.
Investment Performance
The core investment process used within the pooled funds, the Trend/Forward Rate
Bias (FRB) strategy, relies on the tendency of higher interest rate currencies
to outperform lower interest rate currencies over the long-term. As widespread
risk aversion continued, lower interest rate currencies continued to increase in
value compared to higher interest rate currencies as institutions and
individuals closed 'carry trade positions', leading to 'anti-carry' trends in
many currency pairs. These trends took spot rates in many currency pairs to
levels far from long-term averages. As a result, and despite the built-in risk
controls, the Trend/FRB strategy produced a negative return over the period.
Incremental to losses from the Trend/FRB strategy, were losses arising from the
Range Trading strategy which runs in parallel with the Trend/FRB strategy. This
strategy relies on certain currency pairs trading in a narrow range to each
other, and has the advantage of generally being uncorrelated to the return from
the Trend/FRB strategy. Whilst this proved to be the case between April and
September 2008, in October 2008 the extreme currency volatility disrupted the
range-trading of even historically reliable currency pairs, such that losses
were sustained.
Although the market has been challenging during the period for investors
generally, we are confident that the fundamental principles underlying the
Trend/FRB strategy and the Range Trading strategy still exist in the foreign
exchange markets. In particular, with respect to the Trend/FRB strategy, we
believe that the core contributors to this return will be as prevalent over the
foreseeable future as they have been over most of the past thirty years. Once
the FRB reasserts itself in the foreign exchange markets, we are confident that
investment performance will improve.
Product Range
The AuME decreased through the year for all products. The Absolute Return*
product decreased by $15.6bn, a 54% decrease during the year. Record's Absolute
Return products are offered on either a segregated mandate basis or through
pooled funds, where clients subscribe for units in funds for which Record is the
distributor and investment manager. The most notable AuME decline was in pooled
funds that generally have a higher level of gearing (down 66% in the period). A
further fall in AuME is anticipated in the short term for segregated mandates as
a result of the loss of a major client announced in May 2009.
* The Absolute Return product involves Record entering into currency contracts
with the objective of generating positive returns.
Active Hedging** mandates benefitted from net client inflows of $0.9bn. However
this was offset by a combination of the movement in the Sterling/USD exchange
rate and the fall in value of the underlying assets (typically international
equities) that the hedging programme is established to hedge against. The
aggregate of these movements is a fall in AuME of $1.0bn (a 20% decrease) in the
year. Indications are that certain groups of investors may be seeking to protect
existing gains or limit currency risk on portfolios denominated in currencies
other than their base currencies by choosing to hedge their currency exposures
actively rather than passively. If these indications are sustained and translate
into new client business for Record, the Active Hedging AuME is likely to
increase in both absolute and proportional terms. Record has signed a US Active
Hedging mandate that it anticipates will grow beyond $4 billion over the next
twelve months and commenced the programme in May 2009. A further US Active
Hedging mandate has been secured and it is anticipated that this mandate will be
signed in the coming months.
** The Active Hedging product seeks to eliminate the negative impact of currency
movements on an
investment portfolio that is not denominated in the
client's base currency but does not resist the beneficial
impacts.
Passive Hedging*** AuME decreased by $5.3bn (a 29% decrease in the year). This
decrease was principally the result of a combination of the movement in the
Sterling/USD exchange rate and the fall in value of the underlying assets
(typically international equities) that the hedging programme is established to
hedge against. A number of passive mandates are linked to overall programmes
under which an additional Absolute Return or Active mandate incorporates an
element of Passive Hedging.
*** The Passive Hedging product seeks to eliminate fully the economic impact of
currency movements on an investment portfolio that is not denominated in the
client's base currency.
+-----------------------------+------------+---------+-----------+----------+
| AuME by product |
+---------------------------------------------------------------------------+
| AuME $ billions | 31-Mar-09 | 31-Mar-08 |
+-----------------------------+----------------------+----------------------+
| Absolute Return - | 8.3 | 27% | 14.1 | 25% |
| segregated | | | | |
+-----------------------------+------------+---------+-----------+----------+
| Absolute Return - pooled | 5.1 | 16% | 14.9 | 27% |
+-----------------------------+------------+---------+-----------+----------+
| Sub-Total Absolute | 13.4 | 43% | 29.0 | 52% |
| Return | | | | |
+-----------------------------+------------+---------+-----------+----------+
| Active Hedging | 4.0 | 13% | 5.0 | 9% |
+-----------------------------+------------+---------+-----------+----------+
| Passive Hedging | 13.0 | 41% | 18.3 | 33% |
+-----------------------------+------------+---------+-----------+----------+
| Cash | 1.1 | 3% | 3.4 | 6% |
+-----------------------------+------------+---------+-----------+----------+
| Total | 31.5 | 100% | 55.7 | 100% |
+-----------------------------+------------+---------+-----------+----------+
+-----------------------------+------------+---------+-----------+----------+
| AuME by product |
+---------------------------------------------------------------------------+
| AuME GBP billions | 31-Mar-09 | 31-Mar-08 |
+-----------------------------+----------------------+----------------------+
| Absolute Return - | 5.8 | 27% | 7.1 | 25% |
| segregated | | | | |
+-----------------------------+------------+---------+-----------+----------+
| Absolute Return - pooled | 3.5 | 16% | 7.5 | 27% |
+-----------------------------+------------+---------+-----------+----------+
| Sub-Total Absolute | 9.3 | 43% | 14.6 | 52% |
| Return | | | | |
+-----------------------------+------------+---------+-----------+----------+
| Active Hedging | 2.8 | 13% | 2.5 | 9% |
+-----------------------------+------------+---------+-----------+----------+
| Passive Hedging | 9.1 | 41% | 9.2 | 33% |
+-----------------------------+------------+---------+-----------+----------+
| Cash | 0.8 | 3% | 1.7 | 6% |
+-----------------------------+------------+---------+-----------+----------+
| Total | 22.0 | 100% | 28.0 | 100% |
+-----------------------------+------------+---------+-----------+----------+
The overall product mix, whilst being 43% of AuME from the Absolute Return
products (2008: 52%) has become more diversified during the year with Hedging
AuME growing to 54% of AuME (2008: 42%). Both Absolute Return and Active
Hedging, which together represent 56% of AuME (2008: 61%), are higher margin
products compared to Passive Hedging. Absolute Return pooled funds made up 16%
of AuME (2008: 27%) and Absolute Return segregated funds 27% of AuME (2008:
25%).
Client Numbers
At 31 March 2009 Record had 121 clients. The Group has experienced a sustained
period of growth in client numbers over the previous three financial years with
client numbers growing from 31 as at 1 April 2005 to 141 as at 31 March 2008.
The net decline in client numbers in the 2009 financial year (minus 20) leaves
client numbers higher than 31 March 2007 (89).
+--------------------------------------+--------------+---------------+
| Client numbers by product |
+---------------------------------------------------------------------+
| | 31-Mar-09 | 31-Mar-08 |
+--------------------------------------+--------------+---------------+
| Absolute Return - segregated | 20 | 27 |
+--------------------------------------+--------------+---------------+
| Absolute Return - pooled | 87 | 106 |
+--------------------------------------+--------------+---------------+
| Sub-Total Absolute Return | 107 | 133 |
+--------------------------------------+--------------+---------------+
| Active Hedging | 4 | 5 |
+--------------------------------------+--------------+---------------+
| Passive Hedging | 10 | 3 |
+--------------------------------------+--------------+---------------+
| Total | 121 | 141 |
+--------------------------------------+--------------+---------------+
The client losses were particularly prevalent in the pooled Absolute Return
product, with clients down from 106 to 87 in the year. The pooled fund structure
enables smaller clients to access the investment process and as a result there
is a greater number of clients of a smaller average size than with segregated
accounts. One of the features of the pooled funds is to provide daily liquidity
to investors. This daily liquidity is believed to have been a contributory
factor for certain investors' disinvestments.
Substantially all of Record's clients are wholesale investors with corporate and
public pension funds collectively representing 77% of the Group's AuME at 31
March 2009.
+------------------------------------+-------+----------+-------+----------+
| AuME by Client type |
+--------------------------------------------------------------------------+
| AuME $ billions / % | 31-Mar-09 | 31-Mar-08 |
+------------------------------------+------------------+------------------+
| Government & Public funds | 15.4 | 49% | 24.6 | 44% |
+------------------------------------+-------+----------+-------+----------+
| Corporate Pension funds | 9.0 | 28% | 19.2 | 35% |
+------------------------------------+-------+----------+-------+----------+
| Foundations & Investment funds | 7.1 | 23% | 11.9 | 21% |
+------------------------------------+-------+----------+-------+----------+
| Total | 31.5 | 100% | 55.7 | 100% |
+------------------------------------+-------+----------+-------+----------+
+----------------------------------+---------+---------+---------+---------+
| AuME by Client location |
+--------------------------------------------------------------------------+
| AuME $ billions / % | 31-Mar-09 | 31-Mar-08 |
+----------------------------------+-------------------+-------------------+
| UK | 14.4 | 46% | 32.0 | 58% |
+----------------------------------+---------+---------+---------+---------+
| Europe (excluding UK) | 13.3 | 42% | 17.8 | 32% |
+----------------------------------+---------+---------+---------+---------+
| North America | 2.0 | 6% | 3.5 | 6% |
+----------------------------------+---------+---------+---------+---------+
| Rest of the World | 1.8 | 6% | 2.4 | 4% |
+----------------------------------+---------+---------+---------+---------+
| Total | 31.5 | 100% | 55.7 | 100% |
+----------------------------------+---------+---------+---------+---------+
Gearing
The Absolute Return product allows clients to pick the level of exposure they
desire in the currency programme. The pooled funds offer clients the ability to
be 2.5, 3.5, 5, 6 or 7 times geared with Sterling, US Dollars or Euros as the
base currency. The segregated mandates allow clients individually to pick the
level of gearing.
The level of gearing has a direct impact on the level of volatility to which the
investment will be exposed. A seven times geared fund should anticipate
volatility of 28%, compared to a 2.5 times geared fund volatility of 10%. An
equity portfolio, by comparison, typically has a volatility of around 15%.
This level of gearing obviously impacts the returns that clients have
experienced and this has been particularly relevant in an environment of
predominantly negative returns. Certain segregated clients, with low levels of
gearing (less than 1 times in some instances), have seen relatively modest
losses in absolute terms when compared to other asset classes. Conversely,
pooled clients in the higher geared funds have seen significant losses that have
increased their propensity to redeem their investment.
Financial review
Total revenue decreased by 29% to GBP46.8m, principally due to the significant
reduction in performance fees. Total expenditure (excluding IPO costs) decreased
by 18% to GBP20.9m through a reduction in the Group Profit Share cost. Profit
before tax decreased by 34% to GBP26.8m.
+--------------------------------------------+-------------+-------------+
| GBP'000 | FY09 | FY08 |
+--------------------------------------------+-------------+-------------+
| Management fees | 45,561 | 43,987 |
+--------------------------------------------+-------------+-------------+
| Performance fees | 1,436 | 22,160 |
+--------------------------------------------+-------------+-------------+
| Other revenue | (201) | 82 |
+--------------------------------------------+-------------+-------------+
| Total revenue | 46,796 | 66,229 |
+--------------------------------------------+-------------+-------------+
| Personnel (excluding Group Profit Share | (5,628) | (5,101) |
| Scheme) | | |
+--------------------------------------------+-------------+-------------+
| Non-personnel cost | (4,220) | (3,740) |
+--------------------------------------------+-------------+-------------+
| Total expenditure (excl. Group Profit | (9,848) | (8,841) |
| Share Scheme) | | |
+--------------------------------------------+-------------+-------------+
| Group Profit Share Scheme | (11,091) | (16,829) |
+--------------------------------------------+-------------+-------------+
| Operating profit before IPO costs | 25,857 | 40,559 |
+--------------------------------------------+-------------+-------------+
| % | 55.3% | 61.2% |
+--------------------------------------------+-------------+-------------+
| Non recurring IPO costs | - | (1,293) |
| Net interest received | 912 | 1,127 |
+--------------------------------------------+-------------+-------------+
| Profit before tax | 26,769 | 40,393 |
+--------------------------------------------+-------------+-------------+
| Tax | (7,494) | (12,480) |
+--------------------------------------------+-------------+-------------+
| Profit after tax | 19,275 | 27,913 |
+--------------------------------------------+-------------+-------------+
Fees
Over a three year period, the growth in the number of clients and increase in
AuME has driven the growth in total fee income, which was equal to a compound
annual growth rate of 61% for the period 1 April 2006 to 31 March 2009. In the
financial year ended 31 March 2009, the fall in the number of clients and the
associated decline in AuME together with a significant reduction in performance
fees have driven a decline in total fee income of 29%. Excluding performance
fees, management fees increased by 4%.
Record charges fees to its clients based upon the AuME of the product provided.
Record typically offers all Absolute Return clients the choice of paying an
asset based management fee only or the alternative of management fee plus
performance fee. Higher performance fee rates usually accompany lower management
fee rates and vice versa. The fee combinations are structured so that Record is
indifferent between them in the medium-term. Those Absolute Return pooled fund
clients that have chosen to pay only management fees have been offered, from
April 2009, the option to move to management plus performance fees comprising a
management fee approximately 45% lower than the existing arrangement together
with a 'high water mark' at inception of the mandate. It is anticipated that all
pooled clients who currently pay management fees only will take up this offer.
+----------------------------------------+---------------+---------------+
| Average management fee rates by product - (bps*) |
+------------------------------------------------------------------------+
| Product | FY09 | FY08 |
+----------------------------------------+---------------+---------------+
| Absolute Return: | 29.8 | 30.0 |
| - pooled | | |
+----------------------------------------+---------------+---------------+
| - segregated | 27.2 | 25.3 |
+----------------------------------------+---------------+---------------+
| Absolute Return - combined average | 28.5 | 27.9 |
+----------------------------------------+---------------+---------------+
| Active Hedging | 20.6 | 22.5 |
+----------------------------------------+---------------+---------------+
| Passive Hedging | 1.7 | 1.3 |
+----------------------------------------+---------------+---------------+
| Composite average fee rate | 17.1 | 16.3 |
+----------------------------------------+---------------+---------------+
*bps = basis points which are 100th of one percentage point
(Achieved average management fee rates = fees earned in period / average AuME
through period)
Both management fees and performance fees are normally invoiced on a quarterly
basis, although Record invoices management fees for some of its larger clients
on a monthly basis. Performance fees are subject to a 'high water mark' clause
that states that cumulative performance, typically since inception of the
mandate, must be above the previous high point on which performance fees were
charged before performance fees are charged again. Record charges similar fees
for both segregated and pooled Absolute Return mandates.
+---------------------------------------+--------------+----------------+
| Total fee analysis |
+-----------------------------------------------------------------------+
| Fees GBPm | FY09 | FY08 |
+---------------------------------------+--------------+----------------+
| Management | 45.6 | 44.0 |
+---------------------------------------+--------------+----------------+
| Performance | 1.4 | 22.1 |
+---------------------------------------+--------------+----------------+
| Other | (0.2) | 0.1 |
+---------------------------------------+--------------+----------------+
| Total | 46.8 | 66.2 |
+---------------------------------------+--------------+----------------+
Management Fees
Management fee income during the 2009 financial year was GBP45.6m (2008:
GBP44.0m). The table below shows strong growth in both Hedging products, with
management fee income attributable to Active Hedging up 27% in the period and
Passive Hedging up 36%. The management fee income attributable to the Absolute
Return product is down 0.3% to GBP38.0m. Whilst management fee income has
actually increased for the year as a whole, there was a softening of management
fee income in the second half in the Absolute Return pooled funds that saw a
significant fall in AuME, partially offset by increased management fee income
across the Hedging products.
+--------------------------------------+--------------+---------------+
| Management fee by product (excluding performance fees) |
+---------------------------------------------------------------------+
| Fees GBPm | FY09 | FY08 |
+--------------------------------------+--------------+---------------+
| Absolute Return - segregated | 18.3 | 16.0 |
+--------------------------------------+--------------+---------------+
| Absolute Return - pooled | 19.7 | 22.1 |
+--------------------------------------+--------------+---------------+
| Sub-Total Absolute Return | 38.0 | 38.1 |
+--------------------------------------+--------------+---------------+
| Active Hedging | 6.1 | 4.8 |
+--------------------------------------+--------------+---------------+
| Passive Hedging | 1.5 | 1.1 |
+--------------------------------------+--------------+---------------+
| Total | 45.6 | 44.0 |
+--------------------------------------+--------------+---------------+
Performance Fees
Performance fees earned in the year were GBP1.4m compared with GBP22.1m in the
previous year (a decrease of 94%). Performance fee structures apply primarily to
Absolute Return mandates. Clients may choose between management fee only
structures or lower management fees with performance fee structures. The balance
is evenly split between management fee only clients and management fees with
performance fee clients. It is anticipated that the majority of pooled fund
clients will take up the offer to move from management only fees to management
plus performance fees whilst maintaining a 'high water mark' at inception of the
mandate. This would result in a significantly higher proportion of management
plus performance fee mandates.
Group Profit Share Scheme
The Group operates a Group profit share scheme such that 30% of operating profit
before interest, tax and profit share is made available to be awarded to
employees.
Operating margin
The operating profit for the financial year ended 31 March 2009 of GBP25.9m was
GBP14.7m lower than the operating profit for the previous financial year
(2008: GBP40.6m - before IPO costs of GBP1.3m). The Group achieved an operating
profit margin of 55% for the financial year ended 31 March 2009 (61% in 2008
ex IPO costs). This results principally from lower fee income offset by a
reduction in group profit share.
During the financial year ended 31 March 2009, total operating expenditure
(ex IPO costs in financial year ended 31 March 2008) of the Group decreased by
GBP4.7m to GBP20.9m, a decrease of 18%. This results from a GBP1.0m increase in
expenditure offset by a GBP5.7m reduction in the group profit share scheme.
Personnel
In order to support the growth of the business over the previous three years,
the number of employees in the Group has increased to 62 at 31 March 2009 from
54 at 31 March 2008. The key areas of growth have been the research, trading and
support services teams.
The recruitment process has been carefully structured to ensure that the right
people are recruited to the Group, and this continues with a comprehensive
induction programme for all new joiners to facilitate their introduction to
Record. With staff retention being a key HR strategy, staff turnover has again
been very low this year (6%) which includes the retention of all newly recruited
staff. An improved performance review and objective setting process, personal
development planning including the development of career paths, together with
the continuation of our open and involving office culture, are all key
priorities in the development and retention of our staff. In addition the Group
Profit Share Scheme facilitates acquisition of equity in the Company by staff,
improving both motivation and retention.
Personnel costs (excluding Group Profit Share Scheme) increased to GBP5.6m which
represented a 10% increase on the previous year. Of the net increase of eight
staff during the year, two were in investment research, two were in trading, one
in client services and the balance of three in the support services of IT,
compliance, finance and legal. The Group profit share scheme is currently 30% of
pre-profit share EBIT and decreased to GBP11.1m from GBP16.8m in the previous
financial year. This represents a year on year decrease of 34% compared with a
29% year on year decrease in total fee income.
Cash flow
The Group's ability to generate cash has remained strong. The Group generated
GBP7.3m of net cash flow during the financial year ended 31 March 2009. The cash
generated from operations before tax was GBP27.2m, GBP10.2m was paid in taxation
and GBP10.1m was paid in dividends. At 31 March 2009 the closing cash and cash
equivalents was GBP29.8m.
Capital management
The Board's intention is to retain sufficient capital within the business to
meet continuing obligations, sustain future growth and to provide a buffer
against adverse market conditions. The Group has built a financial model to
assist it in estimating future capital requirements over a four-year time
horizon under various scenarios. The Group has no debt. Shareholders funds were
GBP27.2m at 31 March 2009 (2008: GBP18.5m).
Regulatory capital
The Group has an established process for reviewing and amending its Internal
Capital Adequacy Assessment Process ('ICAAP'). The process involves an active
risk-based approach to monitoring and managing risks, and ensuring that it
maintains a minimum amount of capital to cover those risks. At 31 March 2009
Record had Tier 1 capital of GBP18.5m which provided excess regulatory capital
throughout the year. The Group's capital resources were comfortably in excess of
the regulatory requirements throughout the year.
Dividends
An interim dividend of 2.43p per share was paid on 30 December 2008 in respect
of the six months to 30 September 2008. The Board has recommended maintaining a
final dividend of 2.16p per share, equivalent to GBP4.8m. This would take the
overall dividend to 4.59p per share, representing a 53% payment of profits after
tax for the year ended 31 March 2009.
Subject to shareholder approval, the dividend will be paid on 5 August 2009 to
shareholders on the register on 26 June 2009, the ex-dividend date being 24 June
2009.
Regulatory environment
Record Currency Management Limited ('RCML') is authorised and regulated in the
UK by the Financial Services Authority. RCML is additionally registered as an
Investment Adviser with the Securities and Exchange Commission in the United
States and in the category of International Adviser (Investment Counsel &
Portfolio Manager) with the Ontario Securities Commission in Ontario.
The ICAAP came into effect on 1 January 2008 involving the Group's assessment of
its key risks and how much capital it needs in respect of those risks. The Group
holds a significant capital surplus over the regulatory requirement.
Risk management
The Board recognises that risk is inherent in all business, markets and
instruments in which the Group operates and therefore places high priority on
ensuring there is a strong risk management culture within the Group. Effective
risk management and strong internal controls are central to the Group's business
model and during the year the Group has made further progress in developing this
framework.
The Audit Committee was established to provide oversight and independent
challenge in relation to internal control and risk management systems and
procedures. The compliance director is responsible for ensuring compliance with
appropriate legal and other regulatory standards, and for internal risk review
of operational processes.Additionally, Mazars LLP were appointed during the
course of the financial year to provide ongoing additional assurances in respect
of Record's Internal Controls arrangements.
The Board has established a Risk Management Committee which is chaired by the
Chief Operating Officer and has the Chief Financial Officer, the Head of
Operations, the Head of Portfolio Management and the Compliance Director as
members. The Committee reviews existing and new risks, and the incidence and
nature of any operational errors with the objective of ensuring that adequate
systems and controls are in place to minimise and preferably eliminate such
errors and their impact on both the Group and its clients.
The Group appointed Grant Thornton UK LLP as the reporting accountant for its
Audit and Assurance 01/06 (AAF) report. There are two types of assurance
engagements associated with the framework: "reasonable" assurance engagements
and "limited" assurance engagements. The Group undertakes the higher standard of
"reasonable" assurance engagements.
Below we summarise the Group's principal risks.
Investment process and performance
The Group is paid by its clients to generate positive investment performance
over the medium and long term by taking investment risk on their behalf. Any
sustained period of poor investment performance reduces the value of the AuME in
the Group's pooled funds, and could lead to mandate terminations by clients, to
loss of confidence in the Group's investment model by clients, potential
clients, and the investment consultants who advise them.
Operational risk management
Operational risk is the risk of loss to the Group resulting from inadequate or
failed internal processes and/or systems, or from external events impacting on
its processes and/or systems.
In general, Record seeks to mitigate operational risks by implementing a strong
control environment and actively managing these risks through the work of the
Risk Management Committee. Record additionally prepares an annual AAF 01/06
report. The contents of this report, which have been independently reviewed and
tested by Grant Thornton UK LLP, provide assurances of the Group's procedures
and controls to mitigate operating risk.
The Group's investment processes are at the day-to-day level systematic and
non-discretionary in nature. The systematic process is implemented by a
proprietary IT system (ROMP) which prompts trades that are executed by a
dedicated trading team without discretion. ROMP therefore controls the trading
to ensure that portfolios are both within the investment guidelines agreed with
clients and within the structure dictated by the investment process. A dedicated
portfolio management team oversee investment process and provide post-trade
compliance assurances whose reports are also part of the ROMP system. The Group
is consequently exposed to the risk of a failure of ROMP or other IT systems.
The Group has an in-house IT team dedicated to the support and development of
ROMP.
The Group has developed comprehensive disaster recovery and business contingency
plans, and reviews these regularly. These cover scenarios from server failure to
destruction of the Group's offices. All server and network components are
designed for disaster recovery. Alternative office facilities and equipment are
available at a disaster recovery provider should the premises be compromised.
Disaster recovery procedures are tested on a regular basis at the site of the
disaster recovery provider.
Credit and market risks
The Group is exposed to credit risk in respect of the cash it holds on deposit
with banks, and to market risk with respect to the exchange rates at which it
converts its non-Sterling income into Sterling.
The Group has adopted a credit risk policy to manage its credit risks, under
which it keeps its cash on deposit with at least two A1/A+ or better rated banks
at any one time. The Group has adopted a policy of hedging its non-Sterling
income from the moment of invoice until the anticipated date of receipt, by
using forward fixed rate currency sales contracts.
The Group regularly reviews these two policies to ensure that they remain
appropriate to its business and to market conditions as these evolve.
Staffing
The Group's success depends partly on its ability to attract, motivate and
retain highly-skilled personnel. Loss of key personnel could impact on the
management of the Group and/or lead to a loss of AuME.
The Group's investment process is steered by an Investment Committee of three,
and managed on a day-to-day basis by a systematic process which is not reliant
on any individual employee. In addition, all clients have two contact points to
ensure continuity in the client relationship.
The Group also seeks to retain staff through competitive pay and benefits
packages, through deferred and/or 'locked-in' share ownership arrangements, and
by developing a collaborative and enjoyable working environment and ethos.
The Company considers that its remuneration policy, and in particular the
operation of the Group Profit Share Scheme, promotes effective risk management.
Distribution
The Group's products are distributed predominantly with the support of the
investment consultancy businesses of the major actuarial firms. The Group is
consequently exposed to loss of confidence within these firms in the management
of the Group, in its investment processes, or in currency management in general.
The Group devotes considerable senior management time and effort to its
relationships with the investment consultancy firms that are important to it, to
ensure that developments within the Group and in its investment research and
processes are understood by these firms.
The Group is also developing distribution through other channels, such as
third-party marketing and manager of managers' structures.
Reputation
Many of the risks noted above could also be affected by, or could themselves
affect, the wider reputation of the Group. The Group seeks to maintain its
strong reputation at all times, particularly by treating its clients and other
business contacts fairly and with high levels of client service; and by
recruiting high calibre staff who act upon the Company's intentions in this
regard at all times.
The new financial year
The challenging business environment is reflected in the financial performance
for the year to 31 March 2009. Progress has been made in strengthening the
management team, continued development of risk management processes and
strengthening of internal controls within the Group. The Group continues to
invest in enhanced processes and systems that will position the business to
benefit when market conditions improve.
There are particular opportunities in the current environment for the Group's
Active Hedging product and this is demonstrated through the commencement of
a $4bn US mandate. The Group is committed in its fundamental belief in the
forward rate bias and anticipates the resumption of positive returns from this
investment strategy.
RECORD PLC
GROUP INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2009
+-----------------------------------------+--------+-------------+--+-------------+
| | Note | 2009 | | 2008 |
+-----------------------------------------+--------+-------------+--+-------------+
| | | GBP'000 | | GBP'000 |
+-----------------------------------------+--------+-------------+--+-------------+
| REVENUE | | | | |
+-----------------------------------------+--------+-------------+--+-------------+
| Management fees | | 45,561 | | 43,987 |
+-----------------------------------------+--------+-------------+--+-------------+
| Performance fees | | 1,436 | | 22,160 |
+-----------------------------------------+--------+-------------+--+-------------+
| Other revenue | | (201) | | 82 |
+-----------------------------------------+--------+-------------+--+-------------+
| TOTAL REVENUE | 3 | 46,796 | | 66,229 |
+-----------------------------------------+--------+-------------+--+-------------+
| Cost of sales | | (11) | | (296) |
+-----------------------------------------+--------+-------------+--+-------------+
| GROSS PROFIT | | 46,785 | | 65,933 |
+-----------------------------------------+--------+-------------+--+-------------+
| Administrative expenses* | | (20,928) | | (26,667) |
+-----------------------------------------+--------+-------------+--+-------------+
| OPERATING PROFIT | 4 | 25,857 | | 39,266 |
+-----------------------------------------+--------+-------------+--+-------------+
| Finance income | | 917 | | 1,134 |
+-----------------------------------------+--------+-------------+--+-------------+
| Finance costs | | (5) | | (7) |
+-----------------------------------------+--------+-------------+--+-------------+
| PROFIT BEFORE TAX | | 26,769 | | 40,393 |
+-----------------------------------------+--------+-------------+--+-------------+
| Taxation | 7 | (7,494) | | (12,480) |
+-----------------------------------------+--------+-------------+--+-------------+
| PROFIT AFTER TAX | | 19,275 | | 27,913 |
+-----------------------------------------+--------+-------------+--+-------------+
| | | | | |
+-----------------------------------------+--------+-------------+--+-------------+
| Basic earnings per share | 8 | 8.73p | | 12.65p |
+-----------------------------------------+--------+-------------+--+-------------+
| Diluted earnings per share | 8 | 8.72p | | 12.62p |
+-----------------------------------------+--------+-------------+--+-------------+
*Note: comparative figure includes GBP1,293k of non-recurring costs related to
the IPO.
RECORD PLC
GROUP BALANCE SHEET AS AT 31 MARCH 2009
+--------------------------+-------+-----------+-----------+--+----------+----------+
| |Notes | 2009 | | 2008 |
+--------------------------+-------+-----------------------+--+---------------------+
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| NON-CURRENT ASSETS | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Property, plant and | 11 | 368 | | | 611 | |
| equipment | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Deferred tax assets | 16 | 146 | | | 46 | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| | | | 514 | | | 657 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| CURRENT ASSETS | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Trade and other | 13 | 7,742 | | | 8,917 | |
| receivables | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Cash and cash | 14 | 29,798 | | | 22,545 | |
| equivalents | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| | | | 37,540 | | | 31,462 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| CURRENT LIABILITIES | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Trade and other payables | 15 | (7,076) | | | (7,191) | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Corporation tax | 15 | (3,774) | | | (6,356) | |
| liabilities | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Derivative financial | 15 | (13) | | | (23) | |
| liabilities | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| | | | (10,863) | | | (13,570) |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| NET CURRENT ASSETS | | | 26,677 | | | 17,892 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| TOTAL NET ASSETS | | | 27,191 | | | 18,549 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| EQUITY | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Issued share capital | 17 | 55 | | | 55 | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Share premium account | | 1,809 | | | 1,809 | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Capital redemption | 18 | 20 | | | 20 | |
| reserve | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Retained earnings | | 25,307 | | | 16,665 | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| TOTAL EQUITY | | | 27,191 | | | 18,549 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
RECORD PLC
COMPANY BALANCE SHEET AS AT 31 MARCH 2009
+--------------------------+-------+-----------+-----------+--+----------+----------+
| |Notes | 2009 | | 2008 |
+--------------------------+-------+-----------------------+--+---------------------+
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| NON-CURRENT ASSETS | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Investments | 12 | | 30 | | | 30 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| CURRENT ASSETS | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Trade and other | 13 | 3 | | | 21 | |
| receivables | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Cash and cash | 14 | 2,018 | | | 2,129 | |
| equivalents | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| | | | 2,021 | | | 2,150 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| CURRENT LIABILITIES | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Trade and other payables | 15 | (28) | | | (10) | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Corporation tax | 15 | (18) | | | (18) | |
| liabilities | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| | | | (46) | | | (28) |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| NET CURRENT ASSETS | | | 1,975 | | | 2,122 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| TOTAL NET ASSETS | | | 2,005 | | | 2,152 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| EQUITY | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Issued share capital | 17 | 55 | | | 55 | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Share premium account | | 1,809 | | | 1,809 | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Capital redemption | 18 | 20 | | | 20 | |
| reserve | | | | | | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| Retained earnings | | 121 | | | 268 | |
+--------------------------+-------+-----------+-----------+--+----------+----------+
| TOTAL EQUITY | | | 2,005 | | | 2,152 |
+--------------------------+-------+-----------+-----------+--+----------+----------+
RECORD PLC
GROUP STATEMENT OF CHANGE IN EQUITY FOR THE YEAR ENDED 31 MARCH 2009
+---------------------+---------+----------+--------------+----------+---------------+
| | Called | Share | Capital | Retained | Total |
| | up | premium | redemption | earnings | shareholder's |
| | share | account | reserve | | equity |
| | capital | | | | |
+---------------------+---------+----------+--------------+----------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------+---------+----------+--------------+----------+---------------+
| As at 1 April 2008 | 55 | 1,809 | 20 | 16,665 | 18,549 |
+---------------------+---------+----------+--------------+----------+---------------+
| Profit for the year | - | - | - | 19,275 | 19,275 |
+---------------------+---------+----------+--------------+----------+---------------+
| Employee share | - | - | - | 88 | 88 |
| options | | | | | |
+---------------------+---------+----------+--------------+----------+---------------+
| Dividends paid | - | - | - | (10,142) | (10,142) |
+---------------------+---------+----------+--------------+----------+---------------+
| Own shares held by | - | - | - | (579) | (579) |
| EBT | | | | | |
+---------------------+---------+----------+--------------+----------+---------------+
| As at 31 March 2009 | 55 | 1,809 | 20 | 25,307 | 27,191 |
+---------------------+---------+----------+--------------+----------+---------------+
GROUP STATEMENT OF CHANGE IN EQUITY FOR THE YEAR ENDED 31 MARCH 2008
+---------------------+---------+----------+--------------+----------+---------------+
| | Called | Share | Capital | Retained | Total |
| | up | premium | redemption | earnings | shareholder's |
| | share | account | reserve | | equity |
| | capital | | | | |
+---------------------+---------+----------+--------------+----------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------+---------+----------+--------------+----------+---------------+
| As at 1 April 2007 | 55 | 1,636 | 20 | 13,172 | 14,883 |
+---------------------+---------+----------+--------------+----------+---------------+
| Profit for the year | - | - | - | 27,913 | 27,913 |
+---------------------+---------+----------+--------------+----------+---------------+
| Employee share | - | - | - | 1 | 1 |
| options | | | | | |
+---------------------+---------+----------+--------------+----------+---------------+
| Dividends paid | - | - | - | (24,151) | (24,151) |
+---------------------+---------+----------+--------------+----------+---------------+
| Issue of Shares | - | 173 | - | - | 173 |
+---------------------+---------+----------+--------------+----------+---------------+
| Own shares held by | - | - | - | (270) | (270) |
| EBT | | | | | |
+---------------------+---------+----------+--------------+----------+---------------+
| As at 31 March 2008 | 55 | 1,809 | 20 | 16,665 | 18,549 |
+---------------------+---------+----------+--------------+----------+---------------+
COMPANY STATEMENT OF CHANGE IN EQUITY FOR THE YEAR ENDED 31 MARCH 2009
+---------------------+---------+----------+--------------+----------+---------------+
| | Called | Share | Capital | Retained | Total |
| | up | premium | redemption | earnings | shareholder's |
| | share | account | reserve | | equity |
| | capital | | | | |
+---------------------+---------+----------+--------------+----------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------+---------+----------+--------------+----------+---------------+
| As at 1 April 2008 | 55 | 1,809 | 20 | 268 | 2,152 |
+---------------------+---------+----------+--------------+----------+---------------+
| Profit for the year | - | - | - | 9,995 | 9,995 |
+---------------------+---------+----------+--------------+----------+---------------+
| Dividends paid | - | - | - | (10,142) | (10,142) |
+---------------------+---------+----------+--------------+----------+---------------+
| As at 31 March 2009 | 55 | 1,809 | 20 | 121 | 2,005 |
+---------------------+---------+----------+--------------+----------+---------------+
RECORD PLC
COMPANY STATEMENT OF CHANGE IN EQUITY FOR THE YEAR ENDED 31 MARCH 2008
+---------------------+---------+----------+--------------+----------+---------------+
| | Called | Share | Capital | Retained | Total |
| | up | premium | redemption | earnings | shareholder's |
| | share | account | reserve | | equity |
| | capital | | | | |
+---------------------+---------+----------+--------------+----------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------+---------+----------+--------------+----------+---------------+
| As at 1 April 2007 | 55 | 1,636 | 20 | 143 | 1,854 |
+---------------------+---------+----------+--------------+----------+---------------+
| Profit for the year | - | - | - | 24,276 | 24,276 |
+---------------------+---------+----------+--------------+----------+---------------+
| Dividends paid | - | - | - | (24,151) | (24,151) |
+---------------------+---------+----------+--------------+----------+---------------+
| Issue of Shares | - | 173 | - | - | 173 |
+---------------------+---------+----------+--------------+----------+---------------+
| As at 31 March 2008 | 55 | 1,809 | 20 | 268 | 2,152 |
+---------------------+---------+----------+--------------+----------+---------------+
RECORD PLC
GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2009
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| | 2009 | | 2008 |
+-----------------------------------+----------------------+-+------------------------------------------------------------------------------+
| | GBP'000 | GBP'000 | | GBP'000 | GBP'000 |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Profit after tax | 19,275 | | | 27,913 | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Adjustments for: | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Corporation tax | 7,494 | | | 12,480 | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Finance income | (917) | | | (1,134) | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Finance expense | 5 | | | 7 | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Loss on disposal | - | | | 1 | |
| of property, | | | | | |
| plant and | | | | | |
| equipment | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Depreciation of | 363 | | | 313 | |
| property, plant | | | | | |
| and equipment | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Share-based | - | | | 1 | |
| payments expense | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| | | 26,220 | | | 39,581 |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Changes in working capital | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Decrease/(Increase) | | 1,038 | | | (753) |
| in receivables | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| (Decrease)/Increase | | (27) | | | 3,442 |
| in payables | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Increase/(Decrease) | | (11) | | | 23 |
| in other financial | | | | | |
| liabilities | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| CASH INFLOW FROM OPERATING | | 27,220 | | | 42,293 |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Interest paid | | (5) | | | (6) |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Corporation taxes paid | | (10,176) | | | (8,815) |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| NET CASH INFLOW FROM OPERATING | | 17,039 | | | 33,472 |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| CASH INFLOW FROM INVESTING | | | | | |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Purchase of property, plant | (120) | | | (219) | |
| and equipment | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Interest received | 1,054 | | | 1,022 | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| NET CASH INFLOW FROM INVESTING | | 934 | | | 803 |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| CASH OUTFLOW FROM FINANCING | | | | | |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Purchase of treasury shares | (578) | | | (270) | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Cash inflow from issue of | - | | | 173 | |
| shares | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Dividends paid to equity | (10,142) | | | (24,151) | |
| shareholders | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| CASH OUTFLOW FROM FINANCING | | (10,720) | | | (24,248) |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| NET INCREASE IN CASH AND CASH | | 7,253 | | | 10,027 |
| EQUIVALENTS IN THE PERIOD | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Cash and cash equivalents at | | 22,545 | | | 12,518 |
| the beginning of the period | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| CASH AND CASH EQUIVALENTS AT | | 29,798 | | | 22,545 |
| THE END OF THE PERIOD | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
RECORD PLC
COMPANY CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2009
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| | 2009 | | 2008 |
+-----------------------------------+----------------------+-+------------------------------------------------------------------------------+
| | GBP'000 | GBP'000 | | GBP'000 | GBP'000 |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Profit after tax | 65 | | | 76 | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Adjustments for: | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Corporation tax | 19 | | | 18 | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Finance income | (84) | | | (93) | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| | | - | | | 1 |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Changes in working capital | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Decrease in | | - | | | 6 |
| receivables | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| (Decrease)/Increase | | 19 | | | (1) |
| in payables | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| CASH INFLOW FROM OPERATING | | 19 | | | 6 |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Corporation taxes paid | | (19) | | | (10) |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| NET CASH INFLOW FROM OPERATING | | - | | | (4) |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| CASH INFLOW FROM INVESTING | | | | | |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Dividends received | 9,930 | | | 24,200 | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Interest received | 101 | | | 73 | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| NET CASH INFLOW FROM INVESTING | | 10,031 | | | 24,273 |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| CASH OUTFLOW FROM FINANCING | | | | | |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Cash inflow from issue of | - | | | 173 | |
| shares | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Dividends paid to equity | (10,142) | | | (24,151) | |
| shareholders | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| CASH OUTFLOW FROM FINANCING | | (10,142) | | | (23,978) |
| ACTIVITIES | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| NET INCREASE (DECREASE) IN | | (111) | | | 291 |
| CASH AND CASH EQUIVALENTS IN | | | | | |
| THE PERIOD | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| Cash and cash equivalents at | | 2,129 | | | 1,838 |
| the beginning of the period | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
| CASH AND CASH EQUIVALENTS AT | | 2,018 | | | 2,129 |
| THE END OF THE PERIOD | | | | | |
+-----------------------------------+----------+-----------+-+-------------------------------------------------------------------+----------+
Notes to the accounts for the year ended 31 March 2009
1. Accounting policies
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all the periods presented unless otherwise stated.
(a) Accounting convention
Basis of preparation
The Group and Company have prepared their financial statements under
International Financial Reporting Standards (IFRSs) as adopted by the European
Union. IFRSs comprise standards and interpretations approved by the
International Accounting Standards Board (IASB) and the International Financial
Reporting Interpretations Committee (IFRIC) as adopted in the European Union as
at 31 March 2009. The financial statements have been prepared on an historical
cost basis, modified to include fair valuation of derivative financial
instruments.
The preparation of financial statements in accordance with the recognition and
measurement principles of IFRSs requires management to make judgements,
estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The bases for management
judgements, estimates and assumptions are discussed further in note 2.
Early adoption of International Financial Reporting Standards ('Standards')
At the date of authorisation of the consolidated financial information, the
following Standards and Interpretations were in issue but not yet mandatory and
have not been applied in the consolidated financial information:
IFRS 8 Operating Segments (effective 1 January 2009);
IFRS 7 (Amended 2009) Improving Disclosures about Financial Instruments
(effective 1 January 2009);
IAS 1 (Revised 2007) Presentation of Financial Statements (effective 1 January
2009).
The Directors do not anticipate that the adoption of these Standards will have a
material impact on the Company's consolidated financial statements in the period
of initial application. However, the Directors are aware that the application of
IFRS 8 will alter the amount and complexity of disclosure contained in their
next financial statements. IAS 1 will also impact on the way information is
presented in the financial statements. There are other standards and
interpretations that are in issue but not yet effective, but they are not
expected to impact the Group's financial statements.
The Company is taking advantage of the exemption in section 230 of the Companies
Act 1985 not to present its individual income statement and related notes that
form part of the financial statements. The Group profit after tax for the year
includes a loss of GBP146,602 (2008 profit: GBP124,666) which is dealt with in
the financial statements of the holding company.
(b) Basis of consolidation
The financial statements of entities treated as subsidiaries have been
consolidated using consistent accounting policies.
Subsidiaries are entities where the Company has the power to govern the
financial and operating policies, generally accompanied by a share of more than
50% of the voting rights. Intra-group balances and any unrealised gains and
losses on income and expenses arising from intra-group transactions are
eliminated in preparing the consolidated financial statements.
(c) Segment reporting
Group management consider that its services comprise one business segment (being
provision of currency management services) and that it operates in a market that
is not bound by geographical constraints. A segment is a distinguishable
component of an entity that is engaged either in providing products or services
(business segment), or in providing products or services within a particular
economic environment (geographical segment), which is subject to risks and
rewards that are different from those of other segments.
(d) Foreign currencies
Foreign currency transactions are translated into Sterling using the exchange
rates prevailing on the dates of the transactions. Exchange differences arising
on the settlement of monetary items, and on the retranslation of monetary items,
are included in the income statement for the period.
In order to hedge its exposure to certain foreign exchange risks, the Group
enters into forward contracts (see note 19 Financial risk management). The Group
does not apply hedge accounting.
(e) Revenue recognition
Revenue is recognised in the income statement as and when the services are
rendered, and when it is probable that the economic benefits associated with the
transactions will flow to the entity. It is measured at the fair value of the
consideration received or receivable for services provided in the normal course
of business, net of discounts and sales related taxes.
Management fees are accrued on a daily basis based upon Assets under Management
Equivalents (AuME). Should performance fees be applicable then these are
receivable based on the performance of each relevant fund or mandate as at the
quarter end date. Such fees are recognised by the Group on a quarterly basis
subject to termination mid-quarter when performance fees may be receivable and
calculated to the date of termination.
(f) Employee benefits
The Group operates defined contribution pension plans for the benefit of certain
employees. The Group makes contributions to independently administered plans,
such contributions being recognised as an expense when they fall due. The Group
has no legal or constructive obligation to make any further payments to the
plans other than the contributions due.
(g) Share-based payments
The Group issues share awards to employees. Share options issued under the Group
Bonus Scheme and the Flotation Bonus Scheme are classified as share-based
payments with cash alternatives under IFRS 2. The fair value of the debt
component of the amounts payable to the employee is calculated as the cash
amount offered to the employee at grant date and the fair value of the equity
component of the amounts payable to the employee is calculated as the market
value of the share options at grant date less the cash forfeited in order to
receive the share options. The debt component is charged to the income statement
over the period in which the bonus is earned, the equity component is charged to
the income statement over the vesting period of the option.
All other awards have been classified as equity-settled under IFRS 2. The fair
value of the amounts payable to employees under these awards is recognised as an
expense over the vesting period of the option, with a corresponding increase in
equity.
The fair value amounts for the options issued since listing on the London Stock
Exchange were determined using quoted share prices. Further details on the
share-based compensation plans are included in note 17.
(h) Leases
Leases of property, plant and equipment where the Group has substantially all
the risks and rewards of ownership are classified as finance leases. Finance
leases are capitalised at the lease's inception at the lower of the fair value
of the leased asset and the present value of the minimum lease payments. Each
lease payment is allocated between the liability and finance charges so as to
achieve a constant rate on the finance balance outstanding. The asset subject to
the finance lease is depreciated over the shorter of its useful life and the
lease term. The corresponding rental obligations, net of finance charges, are
included as a liability.
Leases of property, plant and equipment where the Group does not have
substantially all the risks and rewards of ownership are classified as operating
leases. Payments made under operating leases are charged to the income statement
on a straight-line basis over the lease term. Incentives provided by the lessor
are credited to the income statement on a straight-line basis over the full
lease term.
(i) Dividend distribution
Interim and special dividends are recognised when paid and final dividends when
approved by shareholders.
(j) Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation
less any recognised impairment losses. Cost includes expenditure that is
directly attributable to the acquisition or construction of these items.
Subsequent costs are included in the asset's carrying amount only when it is
probable that future economic benefits associated with the item will flow to the
Group and the costs can be measured reliably. All other costs, including repairs
and maintenance costs, are charged to the income statement in the period in
which they are incurred.
Property, plant and equipment are assessed for impairment where there is an
indication of impairment. Where impairment exists, the carrying amount of the
asset is reduced to its recoverable amount and the impairment loss is recognised
in the income statement. The depreciation charge for the asset is then adjusted
to reflect the asset's revised carrying amount.
Depreciation is provided on all property, plant and equipment and is calculated
on a straight-line basis to allocate cost less assessed residual value, other
than assets in the course of construction, over the estimated useful lives, as
follows:
Computer equipment - 50% per annum
Fixtures and fittings - 25% per annum
Leasehold improvements - over the full term of the lease
The assets' useful lives and residual values are reviewed and, if appropriate,
adjusted at each balance sheet date.
The gain or loss arising on disposal or scrapping of an asset is determined as
the difference between the sales proceeds, net of selling costs, and the
carrying amount of the asset and is recognised in the income statement.
(k) Trade and other receivables
Trade and other receivables are recognised initially at fair value net of
transaction costs and subsequently measured at amortised cost under the
effective interest method, less impairment. Provision for impairment is
established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the receivable. The
amount of the impairment is the difference between the asset's carrying amount
and the present value of the estimated future cash flows, discounted at the
original effective interest rate.
(l) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on demand deposits held with
banks, and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk
of changes in value.
(m) Trade and other payables
Trade payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
(n) Derivative financial liabilities
The Group uses foreign exchange forward contracts to manage its foreign currency
exposures. Derivatives are initially recognised at cost on the date on which the
contract is entered into unless fair value at acquisition is different to cost,
in which case fair value is recognised. Subsequently they are measured at fair
value with gains and losses recognised in the income statement. Transaction
costs are immediately recognised in the income statement.
(o) Taxation
Current tax is the tax currently payable based on taxable profit for the year.
Deferred taxation is calculated using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. However, if the deferred tax
arises from the initial recognition of goodwill or initial recognition of an
asset or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit nor
loss, it is not recognised. Deferred tax is determined using tax rates and laws
that have been enacted (or substantially enacted) by the balance sheet date and
are expected to apply when the related deferred tax asset is realised or the
deferred tax liability is settled.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax
assets are recognised to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be
utilised.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the income statement, except where they relate to items that are
charged or credited directly to equity in which case the related deferred tax is
also charged or credited directly to equity.
(p) Own shares
The Record plc Employee Benefit Trust (EBT) was formed under a Trust Deed dated
19 December 2007 to hold shares acquired under the Record plc share based
compensation plans. A total of 696,972 (2008; 168,287) Ordinary Shares were held
in the EBT at the balance sheet date. The holding of the EBT comprises own
shares that have not vested unconditionally to employees of the Group. Own
shares are recorded at cost and are deducted from retained earnings. The EBT is
consolidated in the Group financial statements.
Neither the purchase nor sale of own shares leads to a gain or loss being
recognised in the Group income statement. Further information regarding the
Record plc share-based compensation plans and relevant transactions made during
the year are included in note 17.
(q) Group and Company reserves
The share premium account records the difference between the nominal value of
shares issued and the value of the consideration received. The use of the share
premium account is governed by the Companies Act 1985.
Where shares have been redeemed or purchased wholly out of the Company's
profits, the Companies Act 1985 requires a transfer to the capital redemption
reserve equal to the amount by which the Company's issued share capital is
diminished. Furthermore the provisions of the Act relating to a reduction of the
Company's share capital apply as if the capital redemption reserve were paid up
share capital of the Company.
2. Critical accounting estimates and judgements
The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates. The
estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future
periods. Note 17 covers the assumptions made in calculating the fair value of
share options offered by the Group to its employees. The Directors have judged
that the Group does not bear substantially all the risks and rewards of
ownership of its leasehold premises and therefore accounts for the leases as
operating leases as described in note 21.
3. Segmental analysis
The Directors consider that its services comprise one business segment (being
the provision of currency management services) and that it operates in a market
that is not bound by geographical constraints.
For management purposes, the Group sub-divides the single business segment into
two currency management products being 'Hedging' and 'Absolute Return' and
reports its performance between two fee structures being 'management fees' and
'performance fees'. Revenue information analysing the aforementioned products is
presented below:
(a) Product class
The Group's main trading activities can be split between investment management
and other Group activities including consultancy.
+--------------------------------------+--------------+---------------+
| Product Class |
+---------------------------------------------------------------------+
| Fees | FY09 | FY08 |
+--------------------------------------+--------------+---------------+
| | GBP'000 | GBP'000 |
+--------------------------------------+--------------+---------------+
| Active hedging | | |
+--------------------------------------+--------------+---------------+
| Management fees | 6,065 | 4,785 |
+--------------------------------------+--------------+---------------+
| Performance fees | 831 | 142 |
+--------------------------------------+--------------+---------------+
| Passive hedging | | |
+--------------------------------------+--------------+---------------+
| Management fees | 1,547 | 1,144 |
+--------------------------------------+--------------+---------------+
| Absolute Return segregated funds | | |
+--------------------------------------+--------------+---------------+
| Management fees | 18,261 | 15,941 |
+--------------------------------------+--------------+---------------+
| Performance fees | - | 7,419 |
+--------------------------------------+--------------+---------------+
| Absolute Return pooled funds | | |
+--------------------------------------+--------------+---------------+
| Management fees | 19,688 | 22,117 |
+--------------------------------------+--------------+---------------+
| Performance fees | 605 | 14,599 |
+--------------------------------------+--------------+---------------+
| Other revenues | (201) | 82 |
+--------------------------------------+--------------+---------------+
| Total | 46,796 | 66,229 |
+--------------------------------------+--------------+---------------+
(b) Geographical regions served
The geographical analysis of turnover is based on destination. All turnover
originated in the UK. All assets of the Group are located in the UK.
Other group activities form less than 1% of the total Group income. This is not
considered significant and they are not analysed by geographical region.
+--------------------------------------+--------------+---------------+
| Currency Management Income by Geographical Region |
+---------------------------------------------------------------------+
| Fees | FY09 | FY08 |
+--------------------------------------+--------------+---------------+
| | GBP'000 | GBP'000 |
+--------------------------------------+--------------+---------------+
| North America | 5,193 | 5,102 |
+--------------------------------------+--------------+---------------+
| UK | 27,388 | 48,840 |
+--------------------------------------+--------------+---------------+
| Other European | 9,249 | 8,995 |
+--------------------------------------+--------------+---------------+
| Rest of World | 5,167 | 3,210 |
+--------------------------------------+--------------+---------------+
| Other Group Activities | (201) | 82 |
+--------------------------------------+--------------+---------------+
| Total | 46,796 | 66,229 |
+--------------------------------------+--------------+---------------+
4. Operating Profit
Operating profit for the year is stated after charging / (crediting):
+-------------------------------------------------+-------------+--------------+
| | FY09 | FY08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Depreciation of property, plant and equipment | 363 | 313 |
+-------------------------------------------------+-------------+--------------+
| Fees payable to the Company's auditors for the | 32 | 27 |
| audit of the Company's annual accounts | | |
+-------------------------------------------------+-------------+--------------+
| The audit of the Company's subsidiaries, | 31 | 28 |
| pursuant to legislation | | |
+-------------------------------------------------+-------------+--------------+
| Other services pursuant to such legislation | 59 | 113 |
+-------------------------------------------------+-------------+--------------+
| Other services relating to taxation | 29 | 22 |
+-------------------------------------------------+-------------+--------------+
| Operating lease rentals: Land and buildings | 195 | 195 |
+-------------------------------------------------+-------------+--------------+
| Loss on sale of property, plant and equipment | - | 1 |
+-------------------------------------------------+-------------+--------------+
| Exchange losses on hedging activities | 782 | 58 |
+-------------------------------------------------+-------------+--------------+
| Other exchange (gains) / losses | (538) | 96 |
+-------------------------------------------------+-------------+--------------+
Record was admitted to the official list of the UK listing authority on 3
December 2007. In the year ended 31 March 2008, nonrecurring costs totalling
GBP1,292,193 were charged against the income statement within administrative
expenses in this respect.
5. Staff Costs
The average monthly number of employees, including Directors, employed by the
Group during the year was:
+--------------------------------------------+-------------+--------------+
| | FY09 | FY08 |
+--------------------------------------------+-------------+--------------+
| Client Services | 9 | 7 |
+--------------------------------------------+-------------+--------------+
| Investment and Research | 10 | 7 |
+--------------------------------------------+-------------+--------------+
| Operations | 18 | 16 |
+--------------------------------------------+-------------+--------------+
| Information Systems | 6 | 4 |
+--------------------------------------------+-------------+--------------+
| Finance and Administration | 6 | 6 |
+--------------------------------------------+-------------+--------------+
| Compliance | 2 | 1 |
+--------------------------------------------+-------------+--------------+
| Corporate | 7 | 6 |
+--------------------------------------------+-------------+--------------+
| Annual Average | 58 | 47 |
+--------------------------------------------+-------------+--------------+
The Company had no employees during the year (2008: nil).
The aggregate payroll costs of the above employees, including Directors, were as
follows:
+-------------------------------------------------+-------------+--------------+
| | FY09 | FY08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Wages and salaries | 14,408 | 19,044 |
+-------------------------------------------------+-------------+--------------+
| Social security costs | 1,822 | 2,499 |
+-------------------------------------------------+-------------+--------------+
| Pension costs | 489 | 386 |
+-------------------------------------------------+-------------+--------------+
| Equity-settled share-based payments | 149 | 1 |
+-------------------------------------------------+-------------+--------------+
| Aggregate payroll costs | 16,868 | 21,930 |
+-------------------------------------------------+-------------+--------------+
6. Directors' remuneration
+-------------------------------------------------+-------------+--------------+
| Aggregate emoluments of the Directors | FY09 | FY08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Emoluments (excluding pension contribution) | 6,402 | 9,626 |
+-------------------------------------------------+-------------+--------------+
| Pension contribution | 198 | 184 |
+-------------------------------------------------+-------------+--------------+
During the year, six Directors of the Company (2008: five) participated in the
Company's Group Personal Pension Plan; a defined contribution pension scheme.
In the previous year a loan was made to L F Hill in respect of personal expenses
paid by the Company, and was settled in full in April 2008.
+-------------------+--------------+--------------+-------------+-----------------+
| Name |Date of Loan | Outstanding |Outstanding | Maximum |
| | | at 01/04/08 |at 31/03/09 | liability in |
| | | | | period |
+-------------------+--------------+--------------+-------------+-----------------+
| L F Hill | 31/03/08 | GBP4,524 | - | GBP4,524 |
+-------------------+--------------+--------------+-------------+-----------------+
7. Taxation - Group
+-------------------------------------------------+-------------+--------------+
| | FY09 | FY08 |
+-------------------------------------------------+-------------+--------------+
| Tax expense comprises: | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Current tax expense | 7,594 | 12,565 |
+-------------------------------------------------+-------------+--------------+
| Adjustments recognised in current year in | - | 3 |
| relation to the current tax of prior years | | |
+-------------------------------------------------+-------------+--------------+
| Total current tax | 7,594 | 12,568 |
+-------------------------------------------------+-------------+--------------+
| Deferred tax (income) relating to the | (100) | (88) |
| origination and reversal of temporary | | |
| differences | | |
+-------------------------------------------------+-------------+--------------+
| Total tax expense | 7,494 | 12,480 |
+-------------------------------------------------+-------------+--------------+
The total charge for the year can be reconciled to the accounting profit as
follows:
+-------------------------------------------------+-------------+--------------+
| | FY09 | FY08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Profit before taxation | 26,769 | 40,393 |
+-------------------------------------------------+-------------+--------------+
| Taxation at the standard rate of tax in the UK | 7,495 | 12,118 |
| of 28% (2008: 30%) | | |
+-------------------------------------------------+-------------+--------------+
| Tax effects of: | | |
+-------------------------------------------------+-------------+--------------+
| Other disallowable expenses and non-taxable | 10 | 347 |
| income | | |
+-------------------------------------------------+-------------+--------------+
| Capital allowances for the period lower than | 57 | 46 |
| depreciation | | |
+-------------------------------------------------+-------------+--------------+
| Lower tax rates on UK subsidiary undertakings | (6) | (10) |
+-------------------------------------------------+-------------+--------------+
| Adjustments recognised in current year in | (50) | 3 |
| relation to the current tax of prior years | | |
+-------------------------------------------------+-------------+--------------+
| Other temporary differences | (12) | (24) |
+-------------------------------------------------+-------------+--------------+
| Total tax expense recognised in income | 7,494 | 12,480 |
| statement | | |
+-------------------------------------------------+-------------+--------------+
At the period end the Group had net deferred tax assets of GBP146,598 (2008:
GBP46,371). At the balance sheet date there were earned and unearned share
options not exercised with an intrinsic value for tax purposes of GBP460,002
(2008: GBP144,727). On exercise the Group will be entitled to a corporation tax
deduction in respect of the difference between the exercise price and the strike
price.
The standard rate of corporation tax in the UK is 28% (2008: 30%). A full
corporation tax computation is prepared at the year end. The actual charge as a
percentage of the profit before tax may differ from the underlying tax rate.
Differences typically arise as a result of capital allowances differing from
depreciation charged, and certain types of expenditure not being deductible for
tax purposes, other differences may also arise.
The tax charge for the year ended 31 March 2009 was GBP7,494,179 (2008:
GBP12,480,139) which was 28.0% of profit before tax (2008: 30.9%).
8. Earnings per share
Basic earnings per share is calculated by dividing the profit for the financial
period attributable to equity holders of the parent by the weighted average
number of ordinary shares in issue during the year.
Diluted earnings per share are calculated as for the basic earnings per share
with a further adjustment to the weighted average number of ordinary shares to
reflect the effects of all potential dilution.
There is no difference between the profit for the financial year attributable to
equity holders of the parent used in the basic and diluted earnings per share
calculations.
+------------------------------------------------+-------------+--+-------------+
| | FY09 | | FY08 |
+------------------------------------------------+-------------+--+-------------+
| Weighted average number of shares used in | 220,878,796 | | 220,739,001 |
| calculation of basic earnings per share | | | |
+------------------------------------------------+-------------+--+-------------+
| Effect of dilutive potential ordinary shares - | 246,472 | | 499,040 |
| share options | | | |
+------------------------------------------------+-------------+--+-------------+
| Weighted average number of shares used in | 221,125,268 | | 221,238,041 |
| calculation of diluted earnings per share | | | |
+------------------------------------------------+-------------+--+-------------+
| | | | |
+------------------------------------------------+-------------+--+-------------+
| | pence | | pence |
+------------------------------------------------+-------------+--+-------------+
| Basic earnings per share | 8.73 | | 12.65 |
+------------------------------------------------+-------------+--+-------------+
| Diluted earnings per share | 8.72 | | 12.62 |
+------------------------------------------------+-------------+--+-------------+
The potential dilutive shares for 2008 relate to the share options in place at
the beginning of the year that were exercised during the year. In 2009, the
Group granted 488,967 share options with a potentially dilutive effect.
9. Dividends
The dividends paid by the Group during the year ended 31 March 2009 totaled
GBP10,141,982 (4.59p per share). The dividends paid during the year ended 31
March 2008 totalled GBP24,150,890 (10.91p per share), which included a special
dividend of GBP20,000,000 paid on 9 November 2007.
10. Retirement benefit obligations
The Group operates a defined contribution pension scheme. The assets of the
scheme are held separately from those of the Group in an independently
administered fund. The pension cost charge represents contributions payable by
the Group to the fund and amounted to GBP489,490 (2008: GBP386,142).
11. Property, plant and equipment - Group
+-------------------+---------------+-------------+---------------+---------------+
| | Leasehold | Computer | Fixtures and | Total |
| | improvements | equipment | fittings | |
+-------------------+---------------+-------------+---------------+---------------+
| 2009 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------+---------------+-------------+---------------+---------------+
| Cost | | | | |
+-------------------+---------------+-------------+---------------+---------------+
| At 1 April 2008 | 483 | 628 | 253 | 1,364 |
+-------------------+---------------+-------------+---------------+---------------+
| Additions | 23 | 81 | 16 | 120 |
+-------------------+---------------+-------------+---------------+---------------+
| Disposals | - | (69) | - | (69) |
+-------------------+---------------+-------------+---------------+---------------+
| At 31 March 2009 | 506 | 640 | 269 | 1,415 |
+-------------------+---------------+-------------+---------------+---------------+
| Depreciation | | | | |
+-------------------+---------------+-------------+---------------+---------------+
| At 1 April 2008 | 212 | 426 | 115 | 753 |
+-------------------+---------------+-------------+---------------+---------------+
| Charge for the | 103 | 203 | 57 | 363 |
| year | | | | |
+-------------------+---------------+-------------+---------------+---------------+
| Disposals | - | (69) | - | (69) |
+-------------------+---------------+-------------+---------------+---------------+
| At 31 March 2009 | 315 | 560 | 172 | 1,047 |
+-------------------+---------------+-------------+---------------+---------------+
| Net book amounts | | | | |
+-------------------+---------------+-------------+---------------+---------------+
| At 31 March 2009 | 191 | 80 | 97 | 368 |
+-------------------+---------------+-------------+---------------+---------------+
| At 1 April 2008 | 271 | 202 | 138 | 611 |
+-------------------+---------------+-------------+---------------+---------------+
+-------------------+---------------+-------------+---------------+---------------+
| | Leasehold | Computer | Fixtures and | Total |
| | improvements | equipment | fittings | |
+-------------------+---------------+-------------+---------------+---------------+
| 2008 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------+---------------+-------------+---------------+---------------+
| Cost | | | | |
+-------------------+---------------+-------------+---------------+---------------+
| At 1 April 2007 | 473 | 495 | 200 | 1,168 |
+-------------------+---------------+-------------+---------------+---------------+
| Additions | 10 | 156 | 53 | 219 |
+-------------------+---------------+-------------+---------------+---------------+
| Disposals | - | (23) | - | (23) |
+-------------------+---------------+-------------+---------------+---------------+
| At 31 March 2008 | 483 | 628 | 253 | 1,364 |
+-------------------+---------------+-------------+---------------+---------------+
| Depreciation | | | | |
+-------------------+---------------+-------------+---------------+---------------+
| At 1 April 2007 | 116 | 279 | 67 | 462 |
+-------------------+---------------+-------------+---------------+---------------+
| Charge for the | 96 | 169 | 48 | 313 |
| year | | | | |
+-------------------+---------------+-------------+---------------+---------------+
| Disposals | - | (22) | - | (22) |
+-------------------+---------------+-------------+---------------+---------------+
| At 31 March 2008 | 212 | 426 | 115 | 753 |
+-------------------+---------------+-------------+---------------+---------------+
| Net book amounts | | | | |
+-------------------+---------------+-------------+---------------+---------------+
| At 31 March 2008 | 271 | 202 | 138 | 611 |
+-------------------+---------------+-------------+---------------+---------------+
| At 1 April 2007 | 357 | 216 | 133 | 706 |
+-------------------+---------------+-------------+---------------+---------------+
12. Investments
+-------------------------------------------------+-------------+--------------+
| Company | 31-Mar-09 | 31-Mar-08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Investment in subsidiaries (at cost) | | |
+-------------------------------------------------+-------------+--------------+
| Record Currency Management Limited | 10 | 10 |
+-------------------------------------------------+-------------+--------------+
| Record Group Services Limited | 10 | 10 |
+-------------------------------------------------+-------------+--------------+
| Record Portfolio Management Limited | 10 | 10 |
+-------------------------------------------------+-------------+--------------+
| Record Fund Management Limited | - | - |
+-------------------------------------------------+-------------+--------------+
| N P Record Trustees Limited | - | - |
+-------------------------------------------------+-------------+--------------+
| | 30 | 30 |
+-------------------------------------------------+-------------+--------------+
Particulars of subsidiary undertakings
+----------------------------------+-------------------------------------------+
| Name | Nature of Business |
+----------------------------------+-------------------------------------------+
| Record Currency Management | Currency overlay and investment |
| Limited | management services |
+----------------------------------+-------------------------------------------+
| Record Group Services Limited | Management services to other Group |
| | undertakings |
+----------------------------------+-------------------------------------------+
| Record Portfolio Management | Dormant |
| Limited | |
+----------------------------------+-------------------------------------------+
| Record Fund Management Limited | Dormant |
+----------------------------------+-------------------------------------------+
| N P Record Trustees Limited | Trust company |
+----------------------------------+-------------------------------------------+
The Group's interest in the equity capital of subsidiary undertakings is 100% of
the Ordinary Share capital in all cases. All subsidiary undertakings are
incorporated in England and Wales.
13. Trade and other receivables
+-------------------+--------------+--------------+----------------+---------------+
| | Group | Company |
+-------------------+-----------------------------+--------------------------------+
| | 31-Mar-09 | 31-Mar-08 | 31-Mar-09 | 31-Mar-08 |
+-------------------+--------------+--------------+----------------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------+--------------+--------------+----------------+---------------+
| Trade receivables | 7,026 | 7,616 | - | - |
+-------------------+--------------+--------------+----------------+---------------+
| Other receivables | 36 | 195 | 3 | 21 |
+-------------------+--------------+--------------+----------------+---------------+
| Prepayments | 680 | 1,106 | - | - |
+-------------------+--------------+--------------+----------------+---------------+
| | 7,742 | 8,917 | 3 | 21 |
+-------------------+--------------+--------------+----------------+---------------+
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
14. Cash and cash equivalents
+-----------------------------------+------------+------------+------------+-----------+
| | Group | Company |
+-----------------------------------+-------------------------+------------------------+
| | 31-Mar-09 | 31-Mar-08 | 31-Mar-09 | 31-Mar-08 |
+-----------------------------------+------------+------------+------------+-----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------+------------+------------+------------+-----------+
| Cash at bank and in hand - | 29,729 | 20,674 | 2,018 | 2,129 |
| Sterling | | | | |
+-----------------------------------+------------+------------+------------+-----------+
| Cash at bank and in hand - other | 69 | 1,871 | - | - |
| currencies | | | | |
+-----------------------------------+------------+------------+------------+-----------+
| | 29,798 | 22,545 | 2,018 | 2,129 |
+-----------------------------------+------------+------------+------------+-----------+
The Group holds short-term deposits that are made for varying periods, depending
on the cash requirements of the Group. These deposits earn interest at market
short-term deposit rates. The Group has unrestricted access to these deposits
which meet the definition of a cash equivalent.
15. Current liabilities
Amounts falling due within one year
+-------------------------+--------------+--------------+----------------+---------------+
| | Group | Company |
+-------------------------+-----------------------------+--------------------------------+
| | 31-Mar-09 | 31-Mar-08 | 31-Mar-09 | 31-Mar-08 |
+-------------------------+--------------+--------------+----------------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------+--------------+--------------+----------------+---------------+
| Trade payables | 130 | 68 | - | - |
+-------------------------+--------------+--------------+----------------+---------------+
| Amounts owed to Group | - | - | 28 | 10 |
| undertaking | | | | |
+-------------------------+--------------+--------------+----------------+---------------+
| Other payables | 760 | 270 | - | - |
+-------------------------+--------------+--------------+----------------+---------------+
| Other tax and social | 442 | 759 | - | - |
| security | | | | |
+-------------------------+--------------+--------------+----------------+---------------+
| Accruals and deferred | 5,744 | 6,094 | - | - |
| income | | | | |
+-------------------------+--------------+--------------+----------------+---------------+
| | 7,076 | 7,191 | 28 | 10 |
+-------------------------+--------------+--------------+----------------+---------------+
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
Current tax liabilities
+------------------------+--------------+--------------+----------------+---------------+
| | Group | Company |
+------------------------+-----------------------------+--------------------------------+
| | 31-Mar-09 | 31-Mar-08 | 31-Mar-09 | 31-Mar-08 |
+------------------------+--------------+--------------+----------------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+--------------+--------------+----------------+---------------+
| Corporation Tax | 3,774 | 6,356 | 18 | 18 |
+------------------------+--------------+--------------+----------------+---------------+
Derivative financial liabilities
+------------------------+--------------+--------------+----------------+---------------+
| | Group | Company |
+------------------------+-----------------------------+--------------------------------+
| | 31-Mar-09 | 31-Mar-08 | 31-Mar-09 | 31-Mar-08 |
+------------------------+--------------+--------------+----------------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+--------------+--------------+----------------+---------------+
| Derivative financial | 13 | 23 | - | - |
| liabilities | | | | |
+------------------------+--------------+--------------+----------------+---------------+
The Group uses forward exchange contracts to reduce the risk associated with
sales denominated in foreign currencies. At 31 March 2009 there were outstanding
contracts with a principal value of GBP3,375,693 (2008; GBP2,840,495) for the
purchase of foreign currencies in the normal course of business. The fair value
of the contracts is calculated using the market forward contract rates
prevailing at 31 March 2009. Further detail including sensitivity analysis on
the fair value of outstanding contracts is contained in note 19.
The net gain or (loss) on financial liabilities at fair value is included in
other income. The net loss on financial liabilities is as follows:
+-------------------------------------------------+-------------+--------------+
| | FY09 | FY08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Net gain or (loss) on financial liabilities at | (782) | (58) |
| fair value through income statement | | |
+-------------------------------------------------+-------------+--------------+
16. Deferred taxation - Group
The movement in the deferred tax asset / (liability) during the year was:
+-------------------------------------------------+-------------+--------------+
| | 31-Mar-09 | 31-Mar-08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Profit and loss account movement arising during | 100 | 88 |
| the year | | |
+-------------------------------------------------+-------------+--------------+
| Asset/(liability) brought forward | 46 | (42) |
+-------------------------------------------------+-------------+--------------+
| Asset carried forward | 146 | 46 |
+-------------------------------------------------+-------------+--------------+
The provision for deferred taxation consists of the tax effect of temporary
differences in respect of:
+-------------------------------------------------+-------------+--------------+
| | 31-Mar-09 | 31-Mar-08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Deferred tax allowance on unvested share | 103 | 53 |
| options | | |
+-------------------------------------------------+-------------+--------------+
| Excess of taxation allowances over depreciation | 43 | (7) |
| on fixed assets | | |
+-------------------------------------------------+-------------+--------------+
| | 146 | 46 |
+-------------------------------------------------+-------------+--------------+
At the period end the Group had deferred net tax assets of GBP146,598 (2008:
GBP46,371) including provision for share options not exercised with an intrinsic
value for tax purposes of GBP460,002 (2008: GBP144,727). On exercise the Group
will be entitled to a corporation tax deduction in respect of the difference
between the exercise price and the strike price. There is no other unprovided
deferred taxation.
17. Called up share capital
+------------------------------------------------+-------------+-------------+
| | 2009 |
+------------------------------------------------+---------------------------+
| | GBP'000 | Number |
+------------------------------------------------+-------------+-------------+
| Authorised | | |
+------------------------------------------------+-------------+-------------+
| Ordinary | 100 | 400,000,000 |
| Shares of | | |
| 0.025p each | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| Called up, | | |
| allotted and | | |
| fully paid | | |
+------------------------------------------------+-------------+-------------+
| Ordinary | 55 | 221,380,800 |
| Shares of | | |
| 0.025p each | | |
+------------------------------------------------+-------------+-------------+
| | |
+------------------------------------------------+---------------------------+
| | 2008 |
+------------------------------------------------+---------------------------+
| | GBP'000 | Number |
+------------------------------------------------+-------------+-------------+
| Authorised | | |
+------------------------------------------------+-------------+-------------+
| Ordinary | 100 | 400,000,000 |
| Shares of | | |
| 0.025p each | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| Called up, | | |
| allotted and | | |
| fully paid | | |
+------------------------------------------------+-------------+-------------+
| Ordinary | 55 | 221,380,800 |
| Shares of | | |
| 0.025p each | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| Changes to the | GBP'000 | Number |
| authorised and | | |
| issued share | | |
| capital | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| As at 1 April | 55 | 549,550 |
| 2007 | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| Exercise of | | |
| share options | | |
+------------------------------------------------+-------------+-------------+
| 'A' Ordinary | - | 3,902 |
| Shares issued | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| Conversion of | | |
| 'A' Ordinary | | |
| Shares to | | |
| Ordinary | | |
| Shares | | |
+------------------------------------------------+-------------+-------------+
| Ordinary | 15 | 150,485 |
| Shares of 10p | | |
| each | | |
+------------------------------------------------+-------------+-------------+
| 'A' Ordinary | (15) | (150,485) |
| Shares of 10p | | |
| each | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| Ordinary | 55 | 553,452 |
| Shares of 10p | | |
| each | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| 400 to 1 Split | | |
| of Ordinary | | |
| Shares | | |
+------------------------------------------------+-------------+-------------+
| Ordinary | 55 | 221,380,800 |
| Shares of | | |
| 0.025p each | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| Adjustment for | - | (168,287) |
| own shares | | |
| held by EBT | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| As at 31 March | 55 | 221,212,513 |
| 2008 | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| Adjustment for | - | (528,685) |
| own shares | | |
| held by EBT | | |
+------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------+-------------+-------------+
| As at 31 March | 55 | 220,683,828 |
| 2009 | | |
+------------------------------------------------+-------------+-------------+
The two classes of share authorised as at 1 April 2007 ranked pari passu in all
respects save that the 'A' Ordinary Shares were subject to a mandatory transfer
upon the termination of the shareholder's employment. On 23 August 2007, a
resolution was passed with the effect that all issued and unissued 'A' Ordinary
Shares were converted to Ordinary Shares. On 15 November 2007, a resolution was
passed with the effect that on admission to the main market for listed
securities of the London Stock Exchange, all issued and unissued Ordinary Shares
of 10p were each split into 400 ordinary shares of 0.025p.
The Group has established an Employee Benefit Trust (EBT) to hold shares to be
used to meet future liabilities relating to the Group's share-based compensation
plans. Under IFRS the EBT is considered to be under de facto control of the
Group, and has therefore been consolidated into the Group. As at 31 March 2009,
the EBT held 696,972 ordinary shares of 0.025p in Record plc (2008: 168,287).
Share-based compensation plans
During the year ended 31 March 2009 the Group has managed the following
share-based compensation plans:
The Record plc Group Bonus Scheme
The Record plc Group Bonus Scheme was adopted by the company on 1 November 2007.
Under the terms of the scheme rules, certain employees of the company may elect
to receive a proportion of their bonus in the form of a deferred share award.
The number of shares is calculated based on the residual bonus divided by the
market value of the shares at grant date. The shares are available to the
employee after the vesting period for nil consideration upon exercise. The Group
simultaneously granted additional rights to acquire shares ('bonus' shares;
equal to 20% of the shares elected for) to those same employees. Elected shares
vest equally over the next one and two years and bonus shares will vest in full
only after two years. The vesting of the shares is subject to certain good
leaver provisions.
The Record plc Flotation Bonus Scheme
The Record plc Flotation Bonus Scheme was adopted by the company on 15 November
2007. As a result of flotation, a cash bonus was made on a discretionary basis
to certain employees. Under the terms of the scheme rules, employees were able
to elect to receive a smaller cash bonus in exchange for the right to acquire a
number of shares. The number of shares was calculated based on the residual
bonus divided by the market value of the shares at grant date. The shares are
available to the employee after the vesting period for nil consideration upon
exercise. The Group simultaneously granted additional rights to acquire shares
('bonus' shares; equal to 50% of the shares elected for) to those same
employees. Elected shares vest equally over the next one and two years and bonus
shares will vest in full only after two years. The vesting of the shares is
subject to certain good leaver provisions. The rights to acquire the shares are
issued under Enterprise Management Incentive Discounted Share Price (EMI DSP)
option agreements.
The Record plc Share Scheme
The Record plc Share Scheme was adopted by the company on 1 August 2008. During
the year two new senior employees were granted deferred share awards upon
appointment. The number of shares for each employee was calculated based on
GBP200,000 divided by the market price of one Record plc ordinary share on the
day of appointment (or on the first business day after a close period, if the
appointment occurred within a close period). The shares are available to the
employee after the vesting period for nil consideration upon exercise. The
shares vest equally on the second, third and fourth anniversary of appointment.
The vesting of the shares is subject to certain good leaver provisions. The
rights to acquire the shares are issued under nil cost option agreements.
Share-based payment transactions with cash alternatives
Deferred share awards granted under both the Record plc Group Bonus Scheme and
the Record plc Flotation Bonus Scheme are accounted for under IFRS 2 as
share-based payment transactions with cash alternatives.
Equity-settled share-based payments
Deferred share awards granted under the Record plc Share Scheme are accounted
for under IFRS 2 as equity-settled share-based payment transactions
At 31 March 2009, options over 696,972 (2008; 168,287) ordinary shares of 0.025p
were outstanding under the Record plc share-based compensation plans. These
options are over issued shares held in an Employment Benefit Trust. Details of
outstanding share options awarded to employees are set out below:
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| Date of grant | At | Granted | Exercised | At | Exercise | Exercise / | Exercise / |
| | 01/04/08 | | forfeited | 31/03/09 | price GBP | vesting | vesting |
| | | | or vested | | | date: From | date: To |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| Flotation | | | | | | | |
| Bonus Scheme | | | | | | | |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| 21/12/07 | 168,287 | - | (59,440) | 108,847 | GBP0.00 | 21/12/08 | 21/12/09 |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| Group Bonus | | | | | | | |
| Scheme | | | | | | | |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| 20/06/08 | - | 99,158 | - | 99,158 | GBP0.00 | 20/06/09 | 20/06/10 |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| 28/11/08 | - | 103,669 | - | 103,669 | GBP0.00 | 28/11/09 | 28/11/10 |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| | | 202,827 | | 202,827 | | | |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| Record plc | | | | | | | |
| Share Scheme | | | | | | | |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| 04/08/08 | - | 170,245 | - | 170,245 | GBP0.00 | 04/08/10 | 04/08/12 |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| 01/09/08 | - | 215,053 | - | 215,053 | GBP0.00 | 01/09/10 | 01/09/12 |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| | | 385,298 | | 385,298 | | | |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| Total options | 168,287 | 588,125 | (59,440) | 696,972 | | | |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
| Weighted | GBPnil | GBPnil | GBPnil | GBPnil | | | |
| average | | | | | | | |
| exercise price | | | | | | | |
| of options | | | | | | | |
+----------------+----------+---------+-----------+----------+------------+-------------+------------+
The Directors had no interests in the combined share option schemes at the
beginning, during, nor at the end of the period.
There were no performance measures attached to vesting conditions in any of the
schemes.
Fair values of share-based compensation plans
The fair value amounts for the options issued since Admission were determined
using quoted share prices.
18. Capital redemption reserve
The Group has bought in a total of 202,072 Ordinary Shares of 10p for
cancellation. The buy-ins occurred in five tranches, all occurring prior to the
share split.
+-------------------+----------------------------+
| March 2001 | 66,553 Ordinary Shares of |
| | 10p |
+-------------------+----------------------------+
| April 2004 | 36,357 Ordinary Shares of |
| | 10p |
+-------------------+----------------------------+
| February 2005 | 50,000 Ordinary Shares of |
| | 10p |
+-------------------+----------------------------+
| October 2005 | 24,581 Ordinary Shares of |
| | 10p |
+-------------------+----------------------------+
| December 2005 | 24,581 Ordinary Shares of |
| | 10p |
+-------------------+----------------------------+
The cost of the buy-ins was taken directly to retained earnings. The nominal
value of the shares was taken to a capital redemption reserve.
19. Financial risk management
The Group's current activities result in the following financial risks and
management's responses to those risks in order to minimise any resulting adverse
effects on the Company's financial performance.
Objectives, policies and processes for managing risk and the methods used to
measure the risk
Financial assets principally comprise trade receivables and cash and cash
equivalents. Financial liabilities comprise trade and other payables and
derivative financial liabilities. The main risks arising from financial
instruments are credit risk, liquidity risk, foreign currency risk and interest
rate risk each of which is discussed in further detail below. The Group monitors
and mitigates financial risk on a consolidated basis and therefore separate
disclosures for the Company have not been included.
The Group has implemented a framework to manage the risks of its business and to
ensure that the Directors have in place risk management practices appropriate to
a listed company. The management of risk is directed by the Board and reviewed
by the Audit Committee.
Credit risk
The Group's Risk Management Committee has established a credit risk policy to
ensure that it only trades with counterparties that meet requirements consistent
with the Group's agreed risk appetite. The Chief Financial Officer is
responsible for reviewing the Group's credit exposure and ensuring that any
credit concerns are raised to the Risk Management Committee and that action is
taken to mitigate these risks.
The table below is an analysis of financial assets by due date:
+------------------------+--------------+--------------+----------------+---------------+
| | Not past due | 0-3 months | More than 3 | Total |
| | | past due | months past | |
| | | | due | |
+------------------------+--------------+--------------+----------------+---------------+
| At 31 March 2009 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+--------------+--------------+----------------+---------------+
| Trade and other | 6,736 | 326 | - | 7,062 |
| receivables | | | | |
+------------------------+--------------+--------------+----------------+---------------+
| At 31 March 2008 | | | | |
+------------------------+--------------+--------------+----------------+---------------+
| Trade and other | 7,758 | 53 | - | 7,811 |
| receivables | | | | |
+------------------------+--------------+--------------+----------------+---------------+
The Group's principal financial assets are cash deposits and trade receivables.
The credit risk associated with cash is limited as the financial institutions
involved have high credit ratings assigned by international credit agencies. The
main credit risk therefore arises from trade receivables.
All trade receivables are of a short-term nature. The Directors have a credit
policy in place and the exposure to credit risk is monitored on an ongoing
basis. Credit evaluations are performed on all customers requiring credit over a
certain amount. The Group does not require collateral in respect of financial
assets.
At each balance sheet date, there were no significant concentrations of credit
risk. The maximum exposure to credit risk is represented by the carrying amount
of each financial asset in the balance sheet.
Liquidity risk
The Group is exposed to liquidity risk, namely that it may be unable to meet its
payment obligations as they fall due.
The liquidity of the Group is managed on a daily basis by Group Finance
function, to ensure that the Group always has sufficient cash and cash
equivalents available to meet its liabilities. It is the Group's policy to
ensure that it has access to funds to cover all forecast commitments for at
least the following four months.
Interest rate risk
Interest rate risk is the risk that the Group will sustain losses from adverse
movements in interest bearing assets. There is an exposure to interest rates on
banking deposits held in the ordinary course of business. This exposure is
continually monitored to ensure that the Group is maximising its interest
earning potential within accepted liquidity and credit constraints.
+--------------------------+------------+----------+--------------------+---------------+
| | Fixed Rate | Floating | Not directly | Total |
| | | Rate | exposed to | |
| | | | interest rate risk | |
+--------------------------+------------+----------+--------------------+---------------+
| At 31 March 2009 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+------------+----------+--------------------+---------------+
| Financial Assets | | | | |
+--------------------------+------------+----------+--------------------+---------------+
| Trade and other | - | - | 7,062 | 7,062 |
| receivables | | | | |
+--------------------------+------------+----------+--------------------+---------------+
| Cash and cash | 26,828 | 2,970 | - | 29,798 |
| equivalents | | | | |
+--------------------------+------------+----------+--------------------+---------------+
| Total Financial Assets | 26,828 | 2,970 | 7,062 | 36,860 |
+--------------------------+------------+----------+--------------------+---------------+
| Financial Liabilities | | | | |
+--------------------------+------------+----------+--------------------+---------------+
| Trade and other payables | - | - | (1,332) | (1,332) |
+--------------------------+------------+----------+--------------------+---------------+
| Derivative financial | - | - | (13) | (13) |
| liabilities | | | | |
+--------------------------+------------+----------+--------------------+---------------+
| Total Financial | - | - | (1,345) | (1,345) |
| Liabilities | | | | |
+--------------------------+------------+----------+--------------------+---------------+
+--------------------------+------------+----------+--------------------+---------------+
| | Fixed Rate | Floating | Not directly | Total |
| | | Rate | exposed to | |
| | | | interest rate risk | |
+--------------------------+------------+----------+--------------------+---------------+
| At 31 March 2008 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+------------+----------+--------------------+---------------+
| Financial Assets | | | | |
+--------------------------+------------+----------+--------------------+---------------+
| Trade and other | - | - | 7,811 | 7,811 |
| receivables | | | | |
+--------------------------+------------+----------+--------------------+---------------+
| Cash and cash | 22,315 | 230 | - | 22,545 |
| equivalents | | | | |
+--------------------------+------------+----------+--------------------+---------------+
| Total Financial Assets | 22,315 | 230 | 7,811 | 30,356 |
+--------------------------+------------+----------+--------------------+---------------+
| Financial Liabilities | | | | |
+--------------------------+------------+----------+--------------------+---------------+
| Trade and other payables | - | - | (1,097) | (1,097) |
+--------------------------+------------+----------+--------------------+---------------+
| Derivative financial | - | - | (23) | (23) |
| liabilities | | | | |
+--------------------------+------------+----------+--------------------+---------------+
| Total Financial | - | - | (1,120) | (1,120) |
| Liabilities | | | | |
+--------------------------+------------+----------+--------------------+---------------+
The Group has not performed an interest rate risk sensitivity analysis as it is
not significantly exposed to interest rate movements. The nature of the Group's
financial instruments means that changes in equity and effects on the
consolidated profit and loss arising from interest rate movements that might
reasonably be anticipated are not likely to be significant. The majority of the
Group's receivables are trade receivables on 30 day terms and the Group's fixed
rate cash and cash equivalents are primarily short-term treasury deposits.
The Group's policy is to hold at least four months overhead cover in cash and it
uses a programme of term deposits to maximise the return on the cash.
The effective interest rates applicable to these term deposits are as follows:
+-------------------------------------------------+-------------+--------------+
| | FY09 | FY08 |
+-------------------------------------------------+-------------+--------------+
| Short term deposits | 3.97% | 5.88% |
+-------------------------------------------------+-------------+--------------+
Foreign currency risk
Foreign currency risk is the risk that the Group will sustain losses through
adverse movements in currency exchange rates.
The Group is exposed to foreign currency risks on sales and cash holdings that
are denominated in a currency other than Sterling. The principal currencies
giving rise to this risk are primarily the US Dollar, the Euro, the Canadian
Dollar and the Swiss Franc.
In the year ended 31 March 2009, the Group invoiced the following amounts in
currencies other than Sterling.
+-------------------------------------------------+-------------+--------------+
| | Local | Value in |
| | currency | reporting |
| | value | currency |
+-------------------------------------------------+-------------+--------------+
| | '000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| US Dollar (USD) | 21,351 | 12,687 |
+-------------------------------------------------+-------------+--------------+
| Swiss Franc (CHF) | 10,053 | 5,511 |
+-------------------------------------------------+-------------+--------------+
| Euro (EUR) | 2,134 | 1,854 |
+-------------------------------------------------+-------------+--------------+
| Canadian Dollar (CAD) | 1,340 | 724 |
+-------------------------------------------------+-------------+--------------+
| Total | | 20,776 |
+-------------------------------------------------+-------------+--------------+
The value of revenues for the year ended 31 March 2009 that were denominated in
currencies other than Sterling was GBP20.8 million (44% of total revenues).
The Group's policy is to reduce the risk associated with sales denominated in
foreign currencies by using forward fixed rate currency sales contracts taking
into account any forecast foreign currency cash flows.
At 31 March 2009 there were outstanding contracts with a principal value of
GBP3,375,693 (2008; GBP2,840,495) for the purchase of foreign currencies in the
normal course of business.
Foreign currency risk sensitivity analysis
+----------------+----------+------------+-------------+--------------+---------+-------------+
| Foreign | Sterling | Average | Maturity | Market | Fair | Loss if |
| currency | amount | strike | date | forward rate | Value | spot rate |
| amount | | rate | | 31/03/09 | | at |
| | | | | | | maturity |
| | | | | | | strengthens |
| | | | | | | by a |
| | | | | | | further 1% |
+----------------+----------+------------+-------------+--------------+---------+-------------+
| '000 | GBP'000 | | | | GBP'000 | GBP'000 |
+----------------+----------+------------+-------------+--------------+---------+-------------+
| 4,247 USD | 2,819 | 1.4291 | 30/06/09 | 1.427293 | (4) | (29) |
+----------------+----------+------------+-------------+--------------+---------+-------------+
| 525 CHF | 344 | 1.6411 | 30/06/09 | 1.626467 | (3) | (4) |
+----------------+----------+------------+-------------+--------------+---------+-------------+
| 556 EUR | 212 | 1.1080 | 30/06/09 | 1.076766 | (6) | (2) |
+----------------+----------+------------+-------------+--------------+---------+-------------+
| | | | | | (13) | |
+----------------+----------+------------+-------------+--------------+---------+-------------+
The fair value of the derivative financial liabilities is exposed to the risk of
adverse foreign exchange rate movements. The table above shows the impact on
both the income statement and equity of each relevant foreign currency
strengthening by 1% of the market forward rate at 31 March 2009.
Company
The Company's principal financial asset is cash deposits of GBP2,018,285. Of
this balance, GBP2,017,000 is held on fixed rate deposits, the remainder on
floating rate deposit.
20. Contingent liabilities
(i) The Company, together with its subsidiary undertakings, has given a cross
guarantee in respect of certain indebtedness of the Group. The amount of such
indebtedness at 31 March 2009 was GBPnil (2008: GBPnil). The Company considers
the financial guarantee contracts to be insurance contracts.
(ii) At 31 March 2009, a subsidiary undertaking had outstanding contracts with a
principal value of just under GBP3.4 million (2008: GBP2.8 million) for the sale
and purchase of foreign currencies in the normal course of business. The
valuation of the outstanding contracts is provided in note 19 under the fair
value of derivative financial liabilities.
21. Operating lease commitments
On 25 January 2006, the Group signed a lease on new premises at Morgan House,
Madeira Walk, Windsor, Berkshire. This lease expires on 19 June 2016, although
may be determined five years from commencement (i.e. 24 January 2011) at the
option of the tenant. The annual commitment under this lease is GBP229,710
(2008: GBP229,710). The Group has retained its lease on the premises at 32
Peascod Street, Windsor, Berkshire which has a commitment of GBP86,000 per annum
(2008: GBP86,000). Those premises have been sublet at the same rate from May
2006 and the lease expires in December 2011.
At 31 March 2009 the Group had commitments under non-cancellable operating
leases relating to land and buildings as set out below:
+-------------------------------------------------+-------------+--------------+
| | 31-Mar-09 | 31-Mar-08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Not later than one year | 316 | 316 |
+-------------------------------------------------+-------------+--------------+
| Later than one year and not later than five | 342 | 657 |
| years | | |
+-------------------------------------------------+-------------+--------------+
| | 658 | 973 |
+-------------------------------------------------+-------------+--------------+
The total of future minimum sublease payments expected to be received under
non-cancellable subleases at the balance sheet dates:
+-------------------------------------------------+-------------+--------------+
| | 31-Mar-09 | 31-Mar-08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Not later than one year | 86 | 86 |
+-------------------------------------------------+-------------+--------------+
| Later than one year and not later than five | 151 | 237 |
| years | | |
+-------------------------------------------------+-------------+--------------+
| | 237 | 323 |
+-------------------------------------------------+-------------+--------------+
22. Related party transactions
The Group considers parties to be related if one party has the ability to
control the other party or exercise significant influence over the other party
in making financial or operational decisions.
The Company's subsidiary undertakings are listed in note 12, which includes a
description of the nature of their business.
As at the balance sheet date, the only amounts due from related parties were
Directors' loans as detailed in note 7.
The key management compensations are as follows:
+-------------------------------------------------+-------------+--------------+
| | FY09 | FY08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Short-term employee benefits | 10,947 | 15,328 |
+-------------------------------------------------+-------------+--------------+
| Post-employment benefits | 319 | 289 |
+-------------------------------------------------+-------------+--------------+
| Share-based payment benefits | 149 | 1 |
+-------------------------------------------------+-------------+--------------+
| Total | 11,415 | 15,618 |
+-------------------------------------------------+-------------+--------------+
Transactions with subsidiaries
Details of transactions between the Company and its subsidiaries, which are
related parties of the Company are shown below:
+-------------------------------------------------+-------------+--------------+
| | 31-Mar-09 | 31-Mar-08 |
+-------------------------------------------------+-------------+--------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+-------------+--------------+
| Liabilities settled by subsidiary on behalf of | 19 | 7 |
| parent | | |
+-------------------------------------------------+-------------+--------------+
| Net dividends received | 9,930 | 24,200 |
+-------------------------------------------------+-------------+--------------+
| Amounts due to subsidiaries | 28 | 10 |
+-------------------------------------------------+-------------+--------------+
23. Ultimate controlling parties
As at 31 March 2009 the Company had no ultimate controlling parties, nor at 31
March 2008.
24. Capital commitments
The Group had no capital commitments as at 31 March 2009, or at 31 March 2008.
25. Post balance sheet events
There are no post balance sheet events in the period since 31 March 2009.
26. Statutory accounts
This statement was approved by the Board on 15 June 2009. The financial
information set out above does not constitute the company's statutory accounts.
The statutory accounts for the financial year ended 31 March 2008 have been
delivered to the Registrar of Companies and received an audit report which was
unqualified, did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying the report, and did not
contain statements under section 237(2) and (3) of the Companies Act 1985. The
statutory accounts for the financial year ended 31 March 2009 received an audit
report which was unqualified, did not include a reference to any matters to
which the auditors drew attention by way of emphasis without qualifying the
report, and did not contain statements under section 237(2) and (3) of the
Companies Act 1985, and will be delivered to the Registrar of Companies.
Notes to Editors
This announcement includes information with respect to Record's financial
condition, its results of operations and business, strategy, plans and
objectives. All statements in this document, other than statements of historical
fact, including words such as "anticipates", "expects", "intends", "plans",
"believes", "seeks", "estimates", "may", "will", "continue", "project" and
similar expressions, are forward-looking statements.
These forward-looking statements are not guarantees of the Company's future
performance and are subject to risks, uncertainties and assumptions that could
cause the actual future results, performance or achievements of the Company to
differ materially from those expressed in or implied by such forward-looking
statements.
The forward-looking statements contained in this document are based on numerous
assumptions regarding Record's present and future business and strategy and
speak only as at the date of this announcement.
The Company expressly disclaims any obligation or undertaking to disseminate any
updates or revisions to any forward-looking statements contained in this
announcement whether as a result of new information, future events or otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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