TIDMREC
RNS Number : 6022C
Record PLC
17 November 2009
Record plc
17 November 2009
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2009
Record plc, the specialist currency investment manager, today announces its
unaudited interim results, for the six months ended 30 September 2009.
Financial highlights:
· AuME(1) $36.0bn up 14% during the six months to 30 September 2009
· Profit before tax was GBP8.2m (six months to 30 September 2008: GBP15.0m)
· Management fee income for the six months to 30 September 2009 fell to GBP16.1m
(six months to 30 September 2008: GBP24.6m)
· Average management fee rates of 14.8 bps for the six months to 30 September
2009 (six months to 30 September 2008: 17.8 bps)
· Basic EPS of 2.68 pence (six months to 30 September 2008: 4.86 pence)
· Interim dividend of 2.0p/share payable in December 2009 and a further interim
dividend of 2.0p/share payable in March 2010 (2.43p/share paid December 2008)
· Subject to business conditions, intention to keep the total dividend payable
unchanged in the current financial year at 4.59p/share
· Shareholders equity increased to GBP28.3m (30 September 2008: GBP24.0m) and
included GBP27.1m cash (30 September 2008: GBP26.8m)
Operating highlights:
· Alpha composite return of 0.9% for six months to 30 September 2009 (year to 31
March 2009 -3.5%)
· Client numbers stabilised over last six months at 118 (121 at 31 March 2009)
· Two US active hedging mandates commenced in the first six months and accounted
for $7.6bn of AuME at 30 September 2009
· Co-operation agreement with FTSE and the launch of the FTSE Currency Forward
Rate Bias Index Series 'FRB 5 from 21 September 2009
(1) 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:
"The financial performance of the business in delivering pre tax profits of
GBP8.2m for the half year with both revenue and profit being marginally higher
in the second quarter than the first quarter is satisfactory in the
circumstances.
The highlight of the first six months was the signing and commencement of the
two large US Active Hedging mandates. As a result of these two mandates, and the
changes in Absolute Return mandates, we enter the second half of the financial
year with Active Hedging now representing half our income.
Investment performance was positive overall for the six months with Alpha
Composite (being one times geared) generating a return of 0.89% compared to a
negative return of -3.49% for the twelve months to 31 March 2009. For cash plus,
being seven times geared, this equated to a positive return of 5.42%.
We are pleased to have entered a co-operation agreement with FTSE and the launch
of the FTSE Currency Forward Rate Bias Index Series 'FRB 5' from 21 September
2009. We see this as a significant milestone in currency becoming more widely
accepted as an asset class. We have launched and invested in an index tracking
fund to track the FRB 5 index and intend to offer this to clients in 2010.
Overall, I believe the Group is well placed to benefit from its strong market
position when investors seek currency exposure as part of their investment or
risk management strategies."
Analyst briefing
There will be a presentation for analysts at 9.30am on Tuesday 17 November 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 | |
+-----------------+--------------------------+---------------------+
| | Chairman and Chief Executive Officer |
+-----------------+------------------------------------------------+
| | | |
+-----------------+--------------------------+---------------------+
| | Paul Sheriff | |
+-----------------+--------------------------+---------------------+
| | Chief Financial Officer | |
+-----------------+--------------------------+---------------------+
| | | |
+-----------------+--------------------------+---------------------+
| Hogarth | | +44 207 357 9477 |
| Partnership | | |
+-----------------+--------------------------+---------------------+
| | | |
+-----------------+--------------------------+---------------------+
| | Nick Denton, Julian Walker, Vicky Watkins |
+-----------------+--------------------------+---------------------+
RECORD PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 30 SEPTEMBER
2009
UNAUDITED
+-----------------------------------+------------+-----------+-----------+
| | Unaudited | Unaudited | Audited |
+-----------------------------------+------------+-----------+-----------+
| | Six months | Six | Year |
| | ended | months | ended |
| | | ended | |
+-----------------------------------+------------+-----------+-----------+
| | 30-Sep-09 | 30-Sep-08 | 31-Mar-09 |
+-----------------------------------+------------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------+------------+-----------+-----------+
| Revenue | | | |
+-----------------------------------+------------+-----------+-----------+
| Management fees | 16,122 | 24,638 | 45,561 |
+-----------------------------------+------------+-----------+-----------+
| Performance fees | 220 | 664 | 1,436 |
+-----------------------------------+------------+-----------+-----------+
| Other income | 50 | (4) | (201) |
+-----------------------------------+------------+-----------+-----------+
| Total revenue | 16,392 | 25,298 | 46,796 |
+-----------------------------------+------------+-----------+-----------+
| Cost of sales | - | (10) | (11) |
+-----------------------------------+------------+-----------+-----------+
| Gross profit | 16,392 | 25,288 | 46,785 |
+-----------------------------------+------------+-----------+-----------+
| Administrative expenses | (8,346) | (10,873) | (20,928) |
+-----------------------------------+------------+-----------+-----------+
| Operating profit | 8,046 | 14,415 | 25,857 |
+-----------------------------------+------------+-----------+-----------+
| Finance income | 136 | 562 | 917 |
+-----------------------------------+------------+-----------+-----------+
| Finance costs | - | (4) | (5) |
+-----------------------------------+------------+-----------+-----------+
| Profit before tax | 8,182 | 14,973 | 26,769 |
+-----------------------------------+------------+-----------+-----------+
| Taxation | (2,261) | (4,240) | (7,494) |
+-----------------------------------+------------+-----------+-----------+
| Profit after tax | 5,921 | 10,733 | 19,275 |
+-----------------------------------+------------+-----------+-----------+
| Other comprehensive income, net | - | - | - |
| of tax | | | |
+-----------------------------------+------------+-----------+-----------+
| Total comprehensive income | 5,921 | 10,733 | 19,275 |
+-----------------------------------+------------+-----------+-----------+
| Basic earnings per share | 2.68p | 4.86p | 8.73p |
+-----------------------------------+------------+-----------+-----------+
| Diluted earnings per share | 2.68p | 4.85p | 8.72p |
+-----------------------------------+------------+-----------+-----------+
| Dividends paid (GBP'000) | 4,767 | 4,778 | 10,142 |
+-----------------------------------+------------+-----------+-----------+
RECORD PLC
GROUP STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2009
UNAUDITED
+------------------------------------+-----------+-----------+-----------+
| | Unaudited | Unaudited | Audited |
+------------------------------------+-----------+-----------+-----------+
| | As at | As at | As at |
+------------------------------------+-----------+-----------+-----------+
| | 30-Sep-09 | 30-Sep-08 | 31-Mar-09 |
+------------------------------------+-----------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+-----------+-----------+-----------+
| Non-current assets | | | |
+------------------------------------+-----------+-----------+-----------+
| Property, plant and equipment | 292 | 518 | 368 |
+------------------------------------+-----------+-----------+-----------+
| Deferred tax assets | 173 | 78 | 146 |
+------------------------------------+-----------+-----------+-----------+
| | 465 | 596 | 514 |
+------------------------------------+-----------+-----------+-----------+
| Current assets | | | |
+------------------------------------+-----------+-----------+-----------+
| Trade and other receivables | 8,335 | 9,705 | 7,742 |
+------------------------------------+-----------+-----------+-----------+
| Cash and cash equivalents | 27,120 | 26,824 | 29,798 |
+------------------------------------+-----------+-----------+-----------+
| | 35,455 | 36,529 | 37,540 |
+------------------------------------+-----------+-----------+-----------+
| Current liabilities | | | |
+------------------------------------+-----------+-----------+-----------+
| Trade and other payables | (4,692) | (7,979) | (7,076) |
+------------------------------------+-----------+-----------+-----------+
| Corporation tax liabilities | (2,810) | (5,075) | (3,774) |
+------------------------------------+-----------+-----------+-----------+
| Derivative financial liabilities | (82) | (69) | (13) |
+------------------------------------+-----------+-----------+-----------+
| | (7,584) | (13,123) | (10,863) |
+------------------------------------+-----------+-----------+-----------+
| Net current assets | 27,871 | 23,406 | 26,677 |
+------------------------------------+-----------+-----------+-----------+
| Total net assets | 28,336 | 24,002 | 27,191 |
+------------------------------------+-----------+-----------+-----------+
| Equity | | | |
+------------------------------------+-----------+-----------+-----------+
| Issued share capital | 55 | 55 | 55 |
+------------------------------------+-----------+-----------+-----------+
| Share premium account | 1,809 | 1,809 | 1,809 |
+------------------------------------+-----------+-----------+-----------+
| Capital redemption reserve | 20 | 20 | 20 |
+------------------------------------+-----------+-----------+-----------+
| Retained earnings | 26,452 | 22,118 | 25,307 |
+------------------------------------+-----------+-----------+-----------+
| Total equity | 28,336 | 24,002 | 27,191 |
+------------------------------------+-----------+-----------+-----------+
Chairman and Chief Executive Officer's statement
Introduction
I am pleased to present Record plc's second interim report since the Company was
admitted to trading on the London Stock Exchange's main market for listed
securities in December 2007.
Highlights of the period
The six months to 30 September 2009 have continued to be varied and challenging.
The addition of two significant US Active Hedging mandates has significantly
increased diversification between Absolute Return and Hedging with the business
moving towards an even split of income across these products. Whilst investment
performance of our Absolute Return products recovered during the six months
generating overall positive returns, there were significant net outflows during
the period.
The banking sector has recovered from the near collapse of the financial system
following the failure of Lehman Brothers in September 2008. The growing
confidence in the solvency and liquidity of the world's major banks has resulted
in a return to more normal operating conditions in the forward foreign exchange
markets. This has improved the execution of our currency investment process.
Our agreement with FTSE to develop and market a series of currency indices is a
very significant development in the move to currency being recognised as an
asset class in its own right. The launch of a manager-independent index will add
credibility to the case for investing in currency. The first index, the FTSE
Currency FRB (Forward Rate Bias) 5, represents an index that is readily
available as an investment opportunity and is a 'beta' return stream equivalent
to the equity beta. An index tracking product has been developed and is
currently being trialled with an investment of GBP1m from the Group. It is
intended to launch the product to clients in 2010.
The emerging markets are a significant market opportunity for the Group and it
is intended to launch a series of currency products to exploit this. A first
product has been developed and has been seeded with a GBP1m investment from the
Group.
Assets under Management Equivalents ('AuME') grew to $36.0bn at 30 September
2009, compared to $31.5bn at 31 March 2009. The largest component of the
increase was the net inflow into Active Hedging of $5.6bn. Net client outflows
in Absolute Return contributed $4.9bn to the net reduction over the six-month
period. Foreign exchange movements accounted for a $3.2bn increase and strong
equity market performance accounted for a $1.9bn increase in mandate sizes. The
number of clients stabilised in the six months at 118 (121 at 31 March 2009).
Management fees decreased to GBP16.1m for the six months to 30 September 2009, a
decrease of 34.6% compared to the six months to 30 September 2008. Given prior
valuation levels (or 'high water marks') achieved, performance fees earned in
the period were modest. Hence profit before tax for the period was significantly
less (45.4%) than for the equivalent period in the prior year.
The operating margin, at 49.1%, was also less than that achieved in the six
months to 30 September 2008 (57.0%) although the decline was less marked than
that in revenues. This reflects the flexibility in our cost base, not least due
to Record's Group Profit Share (GPS) scheme which sets aggregate profit share at
an average 30% of pre-GPS operating profit.
The Board has decided to change the dividend payment dates for the current
financial year. For the year ending 31 March 2010, two interim dividend payments
will be made, one in December 2009 and one in March 2010 and a final dividend
will be proposed for approval at the Annual General Meeting. Subject to
business conditions, the Board currently intends to keep the overall dividend
unchanged at 4.59p per share for the year.
An interim dividend of 2.0p per share will be paid on 22 December 2009 and a
further interim dividend of 2.0p per share will be paid on 16 March 2010.
From 1 October 2009, the Board was strengthened with the addition of two
Non-executive Directors, David Morrison and Jeremy Palmer. David brings
particular expertise in the management of generation change in growing
businesses, and Jeremy has a wide experience in the banking and wealth
management sectors. We are pleased to welcome David and Jeremy to the Board.
As announced in the Annual Report and Accounts, Peter Wakefield, the Chief
Operating Officer, left the Group on 28 August 2009. Peter spent ten years at
Record and was instrumental in the development of the pooled funds and the IPO.
I would like to thank Peter for the substantial contribution he has made to the
business over those ten years. The responsibilities of the Chief Operating
Officer have been split between the Chief Financial Officer and the Chief
Investment Officer.
Further and more detailed analysis of the results for the period can be found in
the Interim Management Review.
Investment performance
Investment performance of our Absolute Return products varied dramatically
between the first three months of the period and the second three months.
The first quarter (April-June 2009) saw a strong recovery of confidence in the
investment markets in general, and 'investment' (high interest) currencies in
particular. Since one of the principal drivers of Record's Absolute Return
product is the Forward Rate Bias (the 'carry' trade), this resulted in a strong
performance of this product. The 'gearing one' return of our 'alpha composite'
was 2.3%, and this translated to a 17.8% return in the quarter for our highest
geared (7x) fund - Cash Plus.
The second quarter of the period (July-September 2009) saw continued strength in
the equity markets, but this did not flow through to a continuation of a
recovery in the carry trade returns. This meant that we suffered a modest
negative return in the quarter (of -1.4%), which translated into a negative
return of -10.5% in the Cash Plus fund.
The lower volatility, the narrower bid-offer spreads, and a fall in the
correlation between currency and equity markets (which has dominated the last
two years) should ultimately feed through to better performance, and a
resumption of the longer-term positive excess return that our investment process
has delivered in the past.
At the time of writing, ultra-loose monetary policy still dominates almost all
of the major economies in our developed market currency universe. History and
economic logic tells us that this extreme policy position will only survive
while private sector demand remains heavily depressed. Once private sector
demand picks up, we will see a resumption of more normal monetary conditions,
and indeed we may see tight policies emerge to counter the very high fiscal
deficits prevalent in most major economies. This may bring particular
opportunities for our Absolute Return product.
In summary, investment performance over the six months has been much more normal
than hitherto, and we continue to have a very high level of confidence in the
principles underlying our Absolute Return products and in our proven ability to
out-perform 'naive' exploitation of the forward rate bias. We have no intention
of making any fundamental changes to our investment process, and based on our
understanding of the currency markets and our twenty five years of experience,
we are confident that our investment returns in the long term will match our own
expectations and those of our clients.
Strategy, growth plans and outlook
The significant movements in exchange rates over the last year have caused
investors to re-examine their strategy for managing exchange rate exposure. For
example, UK investors in international equities employing passive hedging
mandates have experienced painful cash flow consequences. Similar investors who
were unhedged are examining how they protect the currency gains. Record's
business is well placed to be a beneficiary.
The return of positive investment performance has improved the retention of
Absolute Return clients. If this trend continues then it would be reasonable to
expect investment consultants and clients to consider allocating additional
funding to this investment strategy. However, in the short term there may be
further Absolute Return outflows.
In the medium to long term, the 'asset class project' has now commenced with the
launch of the first currency index in conjunction with FTSE. The development of
products to track the FTSE indices has the potential to result in significant
inflow of investment into the currency universe. The first fund is now being
trialled internally with the intention to launch this externally in 2010.
In addition to the asset class project, we continue to pursue opportunities in
emerging markets. The first product has been developed and is now being trialled
internally. It is anticipated that a product will be marketed to clients in
2010.
In order to position Record to benefit from developments in the currency market,
the Group has continued to recruit talented individuals, enhance its processes
and invest in systems infrastructure. In particular, the Group is currently in
the process of replacing its back office system that will result in increased
capital expenditure in the next twelve months.
When investors choose to allocate new money to currency management, or to reduce
risk from existing currency exposures, we continue to believe that Record is
well-placed to win a significant proportion of this business.
Neil Record
Chairman and Chief Executive Officer
16 November 2009
Interim Management Review
Business overview
The first half of the financial year has seen AuME increase and client numbers
stabilise when compared to the preceding six months. At 30 September 2009 Record
had 118 clients which compares with 121 clients at 31 March 2009. The Group's
core distribution strategy is to continue to focus on its investment consultant
relationships, supplemented by direct marketing by the in-house client team.
The first six months has seen the addition of two significant Active Hedging
mandates but a continuation of the reduction in Absolute Return mandates, most
notably for segregated accounts.
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. The period from
April to September 2009 was a period of 'two halves'. During the first three
months high interest rate currencies outperformed low interest rate currencies
and the Trend/FRB strategy produced strong positive results. During July,
August and September the high interest rate currencies (most notably Sterling)
underperformed, which resulted in negative performance. The overall performance
during the half year period was positive.
The Range Trading strategy, which runs in parallel with the Trend/FRB strategy,
relies on certain currency pairs trading in a narrow range to each other, and
has the advantage of being generally uncorrelated to the return from the
Trend/FRB strategy. Performance of the Range Trading strategy was positive over
the period.
Market conditions during the period have improved with the levels of volatility
declining and bid-offer spreads contracting. Overall we believe that the core
contributors to the 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.
+----------------------+---------+----------------+---------------------------+
| Annual Returns of Record Umbrella Currency Funds; six months to 30 |
| September 2009 |
+-----------------------------------------------------------------------------+
| Fund Name |Gearing | Annual Return | Volatility since |
| | | % | inception % p.a. |
+----------------------+---------+----------------+---------------------------+
| Cash Plus | 7 | 5.4% | 20.4% |
+----------------------+---------+----------------+---------------------------+
| Equity Plus | 6 | 36.0% | 28.6% |
+----------------------+---------+----------------+---------------------------+
| US Cash Plus | 7 | 10.5% | 21.3% |
+----------------------+---------+----------------+---------------------------+
| US Equity Plus | 6 | 29.4% | 25.4% |
+----------------------+---------+----------------+---------------------------+
| Euro 1 | 3.5 | 2.5% | 10.7% |
+----------------------+---------+----------------+---------------------------+
| Sterling 10 | 2.5 | 0.7% | 6.9% |
+----------------------+---------+----------------+---------------------------+
| Sterling 20 | 5 | (1.2%) | 10.9% |
+----------------------+---------+----------------+---------------------------+
| Alpha composite | 1 | 0.9% | 2.9% |
+----------------------+---------+----------------+---------------------------+
| FTSE Currency FRB | 1 | (2.2%) | N/A |
| 5 USD Excess | | | |
| return(2)* | | | |
+----------------------+---------+----------------+---------------------------+
| Global Equities* | N/A | 32.5% | N/A |
| (S&P 500) | | | |
+----------------------+---------+----------------+---------------------------+
*Included for comparison.
(2) Source: FTSE
Client development
Client numbers decreased marginally to 118 at 30 September 2009 (121 at 31 March
2009). Two US clients have commenced significant Active Hedging mandates in the
period with combined AuME of $7.6bn at 30 September 2009. This is anticipated to
grow over the next 3 months to $7.9bn.
AuME analysis
As previously noted, the Group's Assets under Management Equivalents ('AuME')
was $36.0bn at 30 September 2009, an increase of $4.5bn during the six month
period.
+------------------------------------+-------------------+
| AuME Movement in the six months to 30 September 2009 |
+--------------------------------------------------------+
| | US$ billion |
+------------------------------------+-------------------+
| AuME at 31 March 2009 | $31.5 |
+------------------------------------+-------------------+
| Net client inflows/(outflows) | ($1.1) |
+------------------------------------+-------------------+
| Investment performance impact | $0.5 |
+------------------------------------+-------------------+
| Equity market impact | $1.9 |
+------------------------------------+-------------------+
| Foreign exchange impact | $3.2 |
+------------------------------------+-------------------+
| AuME at 30 September 2009 | $36.0 |
+------------------------------------+-------------------+
Net client flows
During the six months to 30 September 2009 net client outflows were $1.1bn, with
gains in Active Hedging being offset principally by reductions in segregated
Absolute Return and Passive Hedging.
Investment performance
Positive investment performance during the period contributed $0.5bn of the
increase in AuME since investment returns are compounded on a geared basis into
the AuME of the pooled funds managed by Record.
Stock and other market performance
Record's AuME is also affected by movements in stock and other market levels
because substantially all the Passive and Active Hedging, and some of the
Absolute Return mandates are linked to stock and other market levels. Market
performance had a positive impact, increasing AuME in the six months to 30
September 2009 by $1.9bn.
Forex
The foreign exchange impact of expressing non-US$ AuME in US$ was the most
significant factor. 73% of the Group's AuME is non-US$ denominated and
expressing this in US$ accounted for $3.2bn of the increase in AuME reported for
the period.
AuME composition
The factors determining the movements in AuME also impact its composition. At 30
September 2009 Absolute Return AuME represented 28.3% of total AuME, which was
split between segregated (11.7% of total AuME) and pooled mandates (16.6% of
total AuME). This is down from 50.4% at 30 September 2008 and 42.5% at 31 March
2009. The corresponding gain was in Active Hedging, which increased in absolute
and relative terms to $11.1bn and 30.8% of total AuME at 30 September 2009.
+---------------------+--------+--------+--------+---------+--------+---------+
| AuME by product expressed in US Dollars |
+-----------------------------------------------------------------------------+
| AuME $ billions | 30 Sep 09 | 30 Sep 08 | 31 Mar 09 |
+---------------------+-----------------+------------------+------------------+
| Absolute Return - | 4.2 | 11.7% | 12.0 | 25.1% | 8.3 | 26.3% |
| segregated | | | | | | |
+---------------------+--------+--------+--------+---------+--------+---------+
| Absolute Return - | 6.0 | 16.6% | 12.1 | 25.3% | 5.1 | 16.2% |
| pooled | | | | | | |
+---------------------+--------+--------+--------+---------+--------+---------+
| Sub-Total | 10.2 | 28.3% | 24.1 | 50.4% | 13.4 | 42.5% |
| Absolute Return | | | | | | |
+---------------------+--------+--------+--------+---------+--------+---------+
| Active Hedging | 11.1 | 30.8% | 5.9 | 12.3% | 4.0 | 12.7% |
+---------------------+--------+--------+--------+---------+--------+---------+
| Passive Hedging | 13.4 | 37.2% | 15.1 | 31.7% | 13.0 | 41.3% |
+---------------------+--------+--------+--------+---------+--------+---------+
| Cash | 1.3 | 3.7% | 2.7 | 5.6% | 1.1 | 3.5% |
+---------------------+--------+--------+--------+---------+--------+---------+
| Total | 36.0 | 100% | 47.8 | 100% | 31.5 | 100% |
+---------------------+--------+--------+--------+---------+--------+---------+
+---------------------+--------+--------+--------+---------+--------+---------+
| AuME by product expressed in Sterling |
+-----------------------------------------------------------------------------+
| AuME GBP billions | 30 Sep 09 | 30 Sep 08 | 31 Mar 09 |
+---------------------+-----------------+------------------+------------------+
| Absolute Return - | 2.6 | 11.7% | 6.7 | 25.1% | 5.8 | 26.3% |
| segregated | | | | | | |
+---------------------+--------+--------+--------+---------+--------+---------+
| Absolute Return - | 3.8 | 16.6% | 6.8 | 25.3% | 3.5 | 16.2% |
| pooled | | | | | | |
+---------------------+--------+--------+--------+---------+--------+---------+
| Sub-Total | 6.4 | 28.3% | 13.5 | 50.4% | 9.3 | 42.5% |
| Absolute Return | | | | | | |
+---------------------+--------+--------+--------+---------+--------+---------+
| Active Hedging | 6.9 | 30.8% | 3.3 | 12.3% | 2.8 | 12.7% |
+---------------------+--------+--------+--------+---------+--------+---------+
| Passive Hedging | 8.4 | 37.2% | 8.5 | 31.7% | 9.1 | 41.3% |
+---------------------+--------+--------+--------+---------+--------+---------+
| Cash | 0.8 | 3.7% | 1.5 | 5.6% | 0.8 | 3.5% |
+---------------------+--------+--------+--------+---------+--------+---------+
| Total | 22.5 | 100% | 26.8 | 100% | 22.0 | 100% |
+---------------------+--------+--------+--------+---------+--------+---------+
The AuME composition has also changed in terms of the underlying base
currencies. As a result of the commencement of two significant US Active Hedging
mandates, US Dollar is the base currency for 26.9% of total AuME at 30 September
2009 (31 March 2009: 15.2%). Sterling is still the most significant base
currency making up 40.1% of total AuME at 30 September 2009 (31 March 2009:
44.1%).
+--------------------+-----------+--------+--------+--------+---------+--------+---------+--------+---------+
| AuME by base currency and product |
+-------------------------------------------------------------------------------------------------+
| | Absolute | Absolute | Active Hedging | Passive Hedging |
| | Return Segregated | Return | | |
| | | Pooled | | |
+--------------------+--------------------+-----------------+------------------+------------------+
| Base currency | Sep 09 | Mar | Sep | Mar | Sep 09 | Mar | Sep 09 |Mar 09 |
| billions | | 09 | 09 | 09 | | 09 | | |
+--------------------+-----------+--------+--------+--------+---------+--------+---------+--------+
| Sterling | GBP1.5 | GBP2.2 | GBP3.4 | GBP3.2 | GBP0.9 | GBP0.3 | GBP2.9 | GBP3.6 |
+--------------------+-----------+--------+--------+--------+---------+--------+---------+--------+
| US Dollar | US$0.8 | US$3.3 | - | - | US$8.9 | US$1.3 | - | US$0.2 |
+--------------------+-----------+--------+--------+--------+---------+--------+---------+--------+
| Swiss Franc | SFr 0.6 | SFr | - | - | SFr | SFr | SFr | SFr |
| | | 1.7 | | | 0.8 | 2.6 | 8.0 | 7.8 |
+--------------------+-----------+--------+--------+--------+---------+--------+---------+--------+
| Euro | - | - | EUR0.4 | EUR0.3 | - | - | EUR0.7 | EUR0.6 |
+--------------------+-----------+--------+--------+--------+---------+--------+---------+--------+
| Canadian Dollar | C$0.5 | C$0.5 | - | - | - | - | - | - |
+--------------------+-----------+--------+--------+--------+---------+--------+---------+--------+
| Total | US$4.2 | US$8.3 | US$5.9 | US$5.0 | US$11.1 | US$4.0 | US$13.5 | US$13.0 |
+--------------------+-----------+--------+--------+--------+---------+--------+---------+--------+---------+
Product development
As highlighted in the Chairman and Chief Executive Officer's statement, Record
entered into a co-operation agreement with FTSE to develop a series of currency
indices. This is seen as a significant development for currency as this is
believed to be the first manager-independent index to capture the pure 'beta'.
The first index, the 'FTSE Currency FRB 5 Index', was launched on 21 September
2009 with further indices anticipated in due course. An index tracking product
has been developed to mirror the index returns and is currently being trialled.
Record plc invested GBP1m into the fund on 1 October 2009. Following an initial
trial period it is currently anticipated that this product will be made
available to clients in 2010.
The first emerging market product has also been developed and was seeded with a
GBP1m investment from the Group on 5 November 2009. It is intended to offer
this product to clients in 2010, following the trial period. It is believed that
this will be the first of a series of products in emerging markets.
The seed capital for both products will be redeemed once the products have
reached a sufficient size.
Revenue
Management fee income for the six months to 30 September 2009 was GBP16.1m,
which was 34.6% lower than for the six months to 30 September 2008 (GBP24.6m).
Absolute Return products generated lower management fees and both Passive
Hedging and Active Hedging generated higher management fees during the six
months to 30 September 2009. In the six months to 30 September 2009 Absolute
Return generated 56.9% of the management fee income, with Active Hedging
generating 36.7%.
+------------------------+-------------+-------------+-------------+
| Management fees by product - (GBPm) |
+------------------------------------------------------------------+
| Product | HY 30 Sep | HY 30 Sep | FY 31 Mar |
| | 09 | 08 | 09 |
+------------------------+-------------+-------------+-------------+
| Absolute | 4.6 | 9.2 | 18.3 |
| Return:- segregated | | | |
+------------------------+-------------+-------------+-------------+
| - pooled | 4.6 | 12.1 | 19.7 |
+------------------------+-------------+-------------+-------------+
| Absolute Return - | 9.2 | 21.3 | 38.0 |
| combined | | | |
+------------------------+-------------+-------------+-------------+
| Active Hedging | 5.9 | 2.7 | 6.1 |
+------------------------+-------------+-------------+-------------+
| Passive Hedging | 1.0 | 0.6 | 1.5 |
+------------------------+-------------+-------------+-------------+
| Total management fee | 16.1 | 24.6 | 45.6 |
| income | | | |
+------------------------+-------------+-------------+-------------+
A significant factor in the reduced management fee income reported for the six
months to 30 September 2009, is that the average management fee rate achieved
during the six months to September 2009 was lower for Absolute Return,
particularly pooled clients, than for the same six month period in 2008. Average
management fees for both Passive Hedging and Active Hedging increased during the
six months to 30 September 2009.
The average fee rates achieved for both segregated and pooled Absolute Return
mandates decreased to 25.7bps and 24.4bps respectively (26.3bps and 31.4bps
respectively for the six months to 30 September 2008). The average Active
Hedging management fee rate increased to 23.1bps (six months to 30 September
2008: 20.6bps).
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 had 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 previous arrangement together
with a 'high water mark' at inception of the mandate. The majority of eligible
clients have taken up this offer and this explains the significant reduction in
management fee rates experienced in the six months to 30 September 2009.
+------------------------+-------------+-------------+-------------+
| Average management fee rates by product - (bps*) |
+------------------------------------------------------------------+
| Product | HY 30 Sep | HY 30 Sep | FY 31 Mar |
| | 09 | 08 | 09 |
+------------------------+-------------+-------------+-------------+
| Absolute | 25.7 | 26.3 | 27.2 |
| Return:- segregated | | | |
+------------------------+-------------+-------------+-------------+
| - pooled | 24.4 | 31.4 | 29.8 |
+------------------------+-------------+-------------+-------------+
| Absolute Return - | 25.0 | 29.0 | 28.5 |
| combined | | | |
+------------------------+-------------+-------------+-------------+
| Active Hedging | 23.1 | 20.6 | 20.6 |
+------------------------+-------------+-------------+-------------+
| Passive Hedging | 2.4 | 1.4 | 1.7 |
+------------------------+-------------+-------------+-------------+
| Composite average fee | 14.8 | 17.8 | 17.1 |
| rate | | | |
+------------------------+-------------+-------------+-------------+
*bps = basis points = 1/100th of 1 percentage point
Performance fees earned during the six months to 30 September 2009 were GBP0.2m
compared with GBP0.7m during the same period to 30 September 2008. A fuller
explanation of the market conditions and the implication for the investment
performance of our Absolute Return product is given in the Chairman & CEO's
statement. A further factor in explaining performance fees is that our
performance fee structures 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.
Expenditure
Expenditure in the six months to 30 September 2009 fell GBP2.6m to GBP8.3m from
GBP10.9m in the six months to 30 September 2008. The reduction was primarily in
the Group Profit Share (GPS) scheme which was 30% of pre-GPS operating profit
in the period.
+------------------------+---------------+---------------+---------------+
| Expenditure |
+------------------------------------------------------------------------+
| | HY 30 Sep 09 | HY 30 Sep 08 | FY 31 Mar 09 |
+------------------------+---------------+---------------+---------------+
| Personnel costs | 3.1 | 2.6 | 5.6 |
+------------------------+---------------+---------------+---------------+
| Non-personnel costs | 1.7 | 2.1 | 4.2 |
+------------------------+---------------+---------------+---------------+
| Sub-total expenditure | 4.8 | 4.7 | 9.8 |
+------------------------+---------------+---------------+---------------+
| Group Profit Share | 3.5 | 6.2 | 11.1 |
+------------------------+---------------+---------------+---------------+
| Total expenditure | 8.3 | 10.9 | 20.9 |
+------------------------+---------------+---------------+---------------+
Looking forward, the Group is currently in the process of replacing its back
office systems and it is anticipated that this will result in a small increase
in system costs.
Operating margins
The operating profit for the six months to 30 September 2009 of GBP8.0m (49.1%)
reflects the lower management fee income and lack of performance fees in 2009
and compares with the operating profit of GBP14.4m (57.0%) for the same period
in 2008. The reduction in management fees of GBP8.5m compares with the reduction
of GBP6.4m in operating profit.
Operating cash flow
The Group generated GBP5.8m of net cash flow from operating activities during
the six months ended 30 September 2009 (six months ended 30 September 2008:
GBP14.9m). Taxation paid during the period was GBP3.8m compared with GBP6.3m for
the six months to 30 September 2008. On 5 August 2009 the Group paid a final
dividend of 2.16p per share in respect of the six month period ended 31 March
2009. This equated to a distribution to shareholders of GBP4.8m.
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 no debt to repay or service.
Shareholders' funds were GBP28.3m at 30 September 2009 (30 September 2008:
GBP24.0m).
Dividends
Subject to business conditions, the Group currently intends to maintain the
dividend at 4.59p per share for the financial year ending 31 March 2010,
recognising that this is an affordable dividend in the current environment that
maintains balance sheet strength The Group will pay an interim dividend of 2.0p
per share in December 2009, a further interim dividend of 2.0p per share in
March 2010 and anticipates proposing a final dividend of 0.59p per share for
approval at the Annual General Meeting.
The Group will pay an interim dividend of 2.0p per share in respect of the six
months ended 30 September 2009. The dividend will be paid on 22 December 2009 to
shareholders on the register on 26 November 2009. The dividend payment will
equate to a distribution of GBP4.4m in total and will leave approximately
GBP23.6m of cash on the balance sheet which is significantly higher than
necessary to satisfy the financial resources and liquidity requirements of the
FSA and represents over two years of current overhead cover.
A further interim dividend of 2.0p per share will be paid on 16 March 2010 to
shareholders on the register on 19 February 2010.
Principal risks and uncertainties
The principal risks and uncertainties documented in the Annual Report and
Accounts for the year ended 31 March 2009 are still relevant to Record.
In addition to these risks, the proportion of management fee income concentrated
on the top ten clients has increased from 40.4% at 31 March 2009 to 54.0% at 30
September 2009. Whilst there have been changes to the composition of the top ten
clients, the new US Active Hedging mandates have been largely responsible for
this increased concentration.
The proportion of revenue earned in foreign currency has also increased in the
period from 44.4% for the year ended 31 March 2009 to 52.6% for the six months
ended 30 September 2009. The Group hedges the invoiced foreign exchange
transaction risk using forward currency contracts.
Although the growth of the Active Hedging product has diversified the Group's
product base, the level of AuME and fee income is dependent on currency values,
performance of underlying assets (typically international equities) and the
clients' investment strategies.
Cautionary statement
This interim report contains certain forward looking statements with respect to
the financial condition, results, operations and business of Record. These
statements involve risk and uncertainty because they relate to events and depend
upon circumstances that will occur in the future. There are a number of factors
that could cause actual results or developments to differ materially from those
expressed or implied in this interim report. Nothing in this interim report
should be construed as a profit forecast.
Statement of Directors' responsibilities
The Directors of Record plc confirm that, to the best of their knowledge, the
condensed set of financial statements below have been prepared in accordance
with IAS 34 'Interim Financial Reporting', and that the interim management
report above includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website. Legislation in the
United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
+---------------------------------+--------------------------------------+
| Neil Record | Paul Sheriff |
+---------------------------------+--------------------------------------+
| Chairman and Chief Executive | Chief Financial Officer |
| Officer | |
+---------------------------------+--------------------------------------+
| | |
+---------------------------------+--------------------------------------+
| 16 November 2009 | 16 November 2009 |
+---------------------------------+--------------------------------------+
Independent review report to Record plc
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2009 which comprises the consolidated statement of
comprehensive income, consolidated statement of financial position, consolidated
cash flow statement, consolidated statement of changes in equity and the related
notes. We have read the other information contained in the half yearly financial
report which comprises only the financial highlights, Chairman and Chief
Executive Officer's statement, interim management review and considered whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained
in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information
performed by the Independent Auditor of the Entity'. Our review work has been
undertaken so that we might state to the company those matters we are required
to state to them in a review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company, for our review work, for this report, or for the
conclusion we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
As disclosed in Note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting,' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2009 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
GRANT THORNTON UK LLP
REGISTERED AUDITOR
CHARTERED ACCOUNTANTS
London
16 November 2009
RECORD PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 30 SEPTEMBER
2009
UNAUDITED
+-----------------------------------+------+------------+------------+-----------+
| | | Unaudited | Unaudited | Audited |
+-----------------------------------+------+------------+------------+-----------+
| | | Six months | Six months | Year |
| | | ended | ended | ended |
+-----------------------------------+------+------------+------------+-----------+
| | | 30-Sep-09 | 30-Sep-08 | 31-Mar-09 |
+-----------------------------------+------+------------+------------+-----------+
| |Note | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------+------+------------+------------+-----------+
| Revenue | 3 | | | |
+-----------------------------------+------+------------+------------+-----------+
| Management fees | | 16,122 | 24,638 | 45,561 |
+-----------------------------------+------+------------+------------+-----------+
| Performance fees | | 220 | 664 | 1,436 |
+-----------------------------------+------+------------+------------+-----------+
| Other income | | 50 | (4) | (201) |
+-----------------------------------+------+------------+------------+-----------+
| Total revenue | | 16,392 | 25,298 | 46,796 |
+-----------------------------------+------+------------+------------+-----------+
| Cost of sales | | - | (10) | (11) |
+-----------------------------------+------+------------+------------+-----------+
| Gross profit | | 16,392 | 25,288 | 46,785 |
+-----------------------------------+------+------------+------------+-----------+
| Administrative expenses | | (8,346) | (10,873) | (20,928) |
+-----------------------------------+------+------------+------------+-----------+
| Operating profit | | 8,046 | 14,415 | 25,857 |
+-----------------------------------+------+------------+------------+-----------+
| Finance income | | 136 | 562 | 917 |
+-----------------------------------+------+------------+------------+-----------+
| Finance costs | | - | (4) | (5) |
+-----------------------------------+------+------------+------------+-----------+
| Profit before tax | | 8,182 | 14,973 | 26,769 |
+-----------------------------------+------+------------+------------+-----------+
| Taxation | | (2,261) | (4,240) | (7,494) |
+-----------------------------------+------+------------+------------+-----------+
| Profit after tax | | 5,921 | 10,733 | 19,275 |
+-----------------------------------+------+------------+------------+-----------+
| Other comprehensive income, net | | - | - | - |
| of tax | | | | |
+-----------------------------------+------+------------+------------+-----------+
| Total comprehensive income | | 5,921 | 10,733 | 19,275 |
+-----------------------------------+------+------------+------------+-----------+
| Basic earnings per share | 6 | 2.68p | 4.86p | 8.73p |
+-----------------------------------+------+------------+------------+-----------+
| Diluted earnings per share | 6 | 2.68p | 4.85p | 8.72p |
+-----------------------------------+------+------------+------------+-----------+
| Dividends paid (GBP'000) | 9 | 4,767 | 4,778 | 10,142 |
+-----------------------------------+------+------------+------------+-----------+
RECORD PLC
GROUP STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2009
UNAUDITED
+------------------------------------+------+-----------+-----------+-----------+
| | | Unaudited | Unaudited | Audited |
+------------------------------------+------+-----------+-----------+-----------+
| | | As at | As at | As at |
+------------------------------------+------+-----------+-----------+-----------+
| | | 30-Sep-09 | 30-Sep-08 | 31-Mar-09 |
+------------------------------------+------+-----------+-----------+-----------+
| |Note | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+------+-----------+-----------+-----------+
| Non-current assets | | | | |
+------------------------------------+------+-----------+-----------+-----------+
| Property, plant and equipment | | 292 | 518 | 368 |
+------------------------------------+------+-----------+-----------+-----------+
| Deferred tax assets | | 173 | 78 | 146 |
+------------------------------------+------+-----------+-----------+-----------+
| | | 465 | 596 | 514 |
+------------------------------------+------+-----------+-----------+-----------+
| Current assets | | | | |
+------------------------------------+------+-----------+-----------+-----------+
| Trade and other receivables | 7 | 8,335 | 9,705 | 7,742 |
+------------------------------------+------+-----------+-----------+-----------+
| Cash and cash equivalents | | 27,120 | 26,824 | 29,798 |
+------------------------------------+------+-----------+-----------+-----------+
| | | 35,455 | 36,529 | 37,540 |
+------------------------------------+------+-----------+-----------+-----------+
| Current liabilities | | | | |
+------------------------------------+------+-----------+-----------+-----------+
| Trade and other payables | | (4,692) | (7,979) | (7,076) |
+------------------------------------+------+-----------+-----------+-----------+
| Corporation tax liabilities | | (2,810) | (5,075) | (3,774) |
+------------------------------------+------+-----------+-----------+-----------+
| Derivative financial liabilities | | (82) | (69) | (13) |
+------------------------------------+------+-----------+-----------+-----------+
| | | (7,584) | (13,123) | (10,863) |
+------------------------------------+------+-----------+-----------+-----------+
| Net current assets | | 27,871 | 23,406 | 26,677 |
+------------------------------------+------+-----------+-----------+-----------+
| Total net assets | | 28,336 | 24,002 | 27,191 |
+------------------------------------+------+-----------+-----------+-----------+
| Equity | | | | |
+------------------------------------+------+-----------+-----------+-----------+
| Issued share capital | 8 | 55 | 55 | 55 |
+------------------------------------+------+-----------+-----------+-----------+
| Share premium account | | 1,809 | 1,809 | 1,809 |
+------------------------------------+------+-----------+-----------+-----------+
| Capital redemption reserve | | 20 | 20 | 20 |
+------------------------------------+------+-----------+-----------+-----------+
| Retained earnings | | 26,452 | 22,118 | 25,307 |
+------------------------------------+------+-----------+-----------+-----------+
| Total equity | | 28,336 | 24,002 | 27,191 |
+------------------------------------+------+-----------+-----------+-----------+
RECORD PLC
GROUP CASH FLOW STATEMENT FOR THE HALF YEAR ENDED 30 SEPTEMBER 2009
UNAUDITED
+--------------------------------------------+-----------+-----------+-----------+
| | Unaudited | Unaudited | Audited |
+--------------------------------------------+-----------+-----------+-----------+
| | Six | Six | Year |
| | months | months | ended |
| | ended | ended | |
+--------------------------------------------+-----------+-----------+-----------+
| | 30-Sep-09 | 30-Sep-08 | 31-Mar-09 |
+--------------------------------------------+-----------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------------------+-----------+-----------+-----------+
| Profit after tax | 5,921 | 10,733 | 19,275 |
+--------------------------------------------+-----------+-----------+-----------+
| Adjustments for: | | | |
+--------------------------------------------+-----------+-----------+-----------+
| Corporation tax | 2,261 | 4,240 | 7,494 |
+--------------------------------------------+-----------+-----------+-----------+
| Finance income | (136) | (562) | (917) |
+--------------------------------------------+-----------+-----------+-----------+
| Finance expense | - | 4 | 5 |
+--------------------------------------------+-----------+-----------+-----------+
| Depreciation of property, plant and | 128 | 178 | 363 |
| equipment | | | |
+--------------------------------------------+-----------+-----------+-----------+
| | 8,174 | 14,593 | 26,220 |
+--------------------------------------------+-----------+-----------+-----------+
| Changes in working capital | | | |
+--------------------------------------------+-----------+-----------+-----------+
| (Increase)/decrease in receivables | (600) | (820) | 1,038 |
+--------------------------------------------+-----------+-----------+-----------+
| Increase/(decrease) in payables | (1,806) | 1,070 | (27) |
+--------------------------------------------+-----------+-----------+-----------+
| Increase/(decrease) in other financial | 69 | 46 | (11) |
| liabilities | | | |
+--------------------------------------------+-----------+-----------+-----------+
| Cash flows from operating activities | 5,837 | 14,889 | 27,220 |
+--------------------------------------------+-----------+-----------+-----------+
| Interest paid | - | (4) | (5) |
+--------------------------------------------+-----------+-----------+-----------+
| Income tax paid | (3,788) | (6,337) | (10,176) |
+--------------------------------------------+-----------+-----------+-----------+
| Net cash inflow from operating activities | 2,049 | 8,548 | 17,039 |
+--------------------------------------------+-----------+-----------+-----------+
| Cash flows from investing activities | | | |
+--------------------------------------------+-----------+-----------+-----------+
| Purchase of property, plant and equipment | (52) | (85) | (120) |
+--------------------------------------------+-----------+-----------+-----------+
| Interest received | 144 | 594 | 1,054 |
+--------------------------------------------+-----------+-----------+-----------+
| Net cash flows from investing activities | 92 | 509 | 934 |
+--------------------------------------------+-----------+-----------+-----------+
| Cash outflow from financing activities | | | |
+--------------------------------------------+-----------+-----------+-----------+
| Purchase of EBT | (52) | - | (578) |
+--------------------------------------------+-----------+-----------+-----------+
| Dividends paid to equity shareholders | (4,767) | (4,778) | (10,142) |
+--------------------------------------------+-----------+-----------+-----------+
| Net cash outflow from financing activities | (4,819) | (4,778) | (10,720) |
+--------------------------------------------+-----------+-----------+-----------+
| Net increase in cash and cash equivalents | (2,678) | 4,279 | 7,253 |
+--------------------------------------------+-----------+-----------+-----------+
| Cash and cash equivalents at beginning of | 29,798 | 22,545 | 22,545 |
| period | | | |
+--------------------------------------------+-----------+-----------+-----------+
| Cash and cash equivalents at the period | 27,120 | 26,824 | 29,798 |
| end | | | |
+--------------------------------------------+-----------+-----------+-----------+
RECORD PLC
GROUP STATEMENT OF CHANGE IN EQUITY
UNAUDITED
+----------------------------------+---------+---------+------------+----------+---------------+
| | Share | Share | Capital | Retained | Total |
| | capital | premium | redemption | earnings | shareholders' |
| | | | reserve | | equity |
+----------------------------------+---------+---------+------------+----------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+---------+---------+------------+----------+---------------+
| As at 1 April 2008 | 55 | 1,809 | 20 | 16,665 | 18,549 |
+----------------------------------+---------+---------+------------+----------+---------------+
| Profit and total comprehensive | - | - | - | 10,733 | 10,733 |
| income for the period | | | | | |
+----------------------------------+---------+---------+------------+----------+---------------+
| Dividends paid | - | - | - | (4,778) | (4,778) |
+----------------------------------+---------+---------+------------+----------+---------------+
| Own shares held by EBT | - | - | - | (502) | (502) |
+----------------------------------+---------+---------+------------+----------+---------------+
| As at 30 September 2008 | 55 | 1,809 | 20 | 22,118 | 24,002 |
+----------------------------------+---------+---------+------------+----------+---------------+
| Profit and total comprehensive | - | - | - | 8,542 | 8,542 |
| income for the period | | | | | |
+----------------------------------+---------+---------+------------+----------+---------------+
| Employee share options | - | - | - | 88 | 88 |
+----------------------------------+---------+---------+------------+----------+---------------+
| Dividends paid | - | - | - | (5,364) | (5,364) |
+----------------------------------+---------+---------+------------+----------+---------------+
| Own shares held by EBT | - | - | - | (77) | (77) |
+----------------------------------+---------+---------+------------+----------+---------------+
| As at 31 March 2009 | 55 | 1,809 | 20 | 25,307 | 27,191 |
+----------------------------------+---------+---------+------------+----------+---------------+
| Profit and total comprehensive | - | - | - | 5,921 | 5,921 |
| income for the period | | | | | |
+----------------------------------+---------+---------+------------+----------+---------------+
| Employee share options | - | - | - | 43 | 43 |
+----------------------------------+---------+---------+------------+----------+---------------+
| Dividends paid | - | - | - | (4,767) | (4,767) |
+----------------------------------+---------+---------+------------+----------+---------------+
| Own shares held by EBT | - | - | - | (52) | (52) |
+----------------------------------+---------+---------+------------+----------+---------------+
| As at 30 September 2009 | 55 | 1,809 | 20 | 26,452 | 28,336 |
+----------------------------------+---------+---------+------------+----------+---------------+
Notes to the accounts
For the six months ended 30 September 2009
1 Basis of preparation
The financial information for the year ended 31 March 2009 set out in this
interim report does not constitute statutory accounts as defined in Section 434
of the Companies Act 2006. The Group's statutory financial statements for the
year ended 31 March 2009 have been filed with the Registrar of Companies. The
auditor's report on those financial statements was unqualified and did not
contain statements under Section 498(2) or Section 498(3) of the Companies Act
2006. The financial statements have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services Authority and IAS 34
'Interim Financial Reporting' as adopted by the European Union. The condensed
financial statements should be read in conjunction with the Group's Annual
Report for the year ended 31 March 2009, which have been prepared in accordance
with IFRSs as adopted by the European Union. The Annual Report for the year
ended 31 March 2009 is available on the Group's website.
2 Significant accounting policies
The condensed financial statements have been prepared under the historical cost
convention modified to include fair valuation of derivative financial
instruments.
The accounting policies presentation and methods of computation applied in the
interim financial statements are consistent with those applied in the financial
statements for the year ended 31 March 2009, except for the adoption of IAS 1
Presentation of Financial Statements (Revised 2007) and IFRS 8 Operating
segments.
3 Segmental analysis
The Directors consider that the Group's services comprise one operating segment
(being the provision of currency management services) and that it operates in a
market that is not bound by geographical constraints.
The Group provides the Directors with additional revenue information by product.
It is unable to allocate costs, assets and liabilities by product and on that
basis, the Directors consider that the group has only one segment.
The Group sub-divides the single operating 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 currency management and
other Group activities including consultancy.
+-----------------------------------------+-----------+-----------+-----------+
| | Six | Six | Year |
| | months | months | ended |
| | ended | ended | |
+-----------------------------------------+-----------+-----------+-----------+
| | 30-Sep-09 | 30-Sep-08 | 31-Mar-09 |
+-----------------------------------------+-----------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
| | | | |
+-----------------------------------------+-----------+-----------+-----------+
| Currency management income | | | |
+-----------------------------------------+-----------+-----------+-----------+
| Active hedging | | | |
+-----------------------------------------+-----------+-----------+-----------+
| Management fees | 5,921 | 2,687 | 6,065 |
+-----------------------------------------+-----------+-----------+-----------+
| Performance fees | - | 60 | 831 |
+-----------------------------------------+-----------+-----------+-----------+
| Passive hedging | | | |
+-----------------------------------------+-----------+-----------+-----------+
| Management fees | 1,026 | 616 | 1,547 |
+-----------------------------------------+-----------+-----------+-----------+
| Absolute Return segregated funds | | | |
+-----------------------------------------+-----------+-----------+-----------+
| Management fees | 4,577 | 9,175 | 18,261 |
+-----------------------------------------+-----------+-----------+-----------+
| Performance fees | - | - | - |
+-----------------------------------------+-----------+-----------+-----------+
| Absolute Return pooled funds | | | |
+-----------------------------------------+-----------+-----------+-----------+
| Management fees | 4,598 | 12,160 | 19,688 |
+-----------------------------------------+-----------+-----------+-----------+
| Performance fees | 220 | 604 | 605 |
+-----------------------------------------+-----------+-----------+-----------+
| | 16,342 | 25,302 | 46,997 |
+-----------------------------------------+-----------+-----------+-----------+
| Other revenues | 50 | (4) | (201) |
+-----------------------------------------+-----------+-----------+-----------+
| | 16,392 | 25,298 | 46,796 |
+-----------------------------------------+-----------+-----------+-----------+
| | | | |
+-----------------------------------------+-----------+-----------+-----------+
(b) Geographical regions served
The geographical analysis of revenue is based on the domicile of the client. 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.
+-----------------------------------------+-----------+-----------+-----------+
| | Six | Six | Year |
| | months | months | ended |
| | ended | ended | |
+-----------------------------------------+-----------+-----------+-----------+
| | 30-Sep-09 | 30-Sep-08 | 31-Mar-09 |
+-----------------------------------------+-----------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
| | | | |
+-----------------------------------------+-----------+-----------+-----------+
| Currency management income | | | |
+-----------------------------------------+-----------+-----------+-----------+
| US and Canada | 4,320 | 2,447 | 5,193 |
+-----------------------------------------+-----------+-----------+-----------+
| UK | 7,766 | 16,028 | 27,388 |
+-----------------------------------------+-----------+-----------+-----------+
| Other European | 3,598 | 4,584 | 9,249 |
+-----------------------------------------+-----------+-----------+-----------+
| ROW | 658 | 2,243 | 5,167 |
+-----------------------------------------+-----------+-----------+-----------+
| | 16,342 | 25,302 | 46,997 |
+-----------------------------------------+-----------+-----------+-----------+
| Other Group activities | 50 | (4) | (201) |
+-----------------------------------------+-----------+-----------+-----------+
| | 16,392 | 25,298 | 46,796 |
+-----------------------------------------+-----------+-----------+-----------+
4 Share-based payments
The Group issues share awards to employees. Share options issued under the
Flotation Bonus Scheme and the Group Profit Share 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 profit and loss over
the period in which the award is earned, the equity component is charged to
profit and loss over the vesting period of the option.
The Group has also issued nil cost options over a total of GBP400,000 worth of
issued shares to two senior employees. The fair value of these options is
charged to profit and loss over the vesting period of the options.
The fair value of options granted are measured at grant date using the
Black-Scholes formula, taking into account the terms and conditions upon which
the instruments were granted.
The fair value amounts for the options issued were determined using quoted share
prices.
5 Own shares
The Record plc Employee Benefit Trust (EBT) was formed under a Trust Deed dated
19 December 2007 to hold shares acquired under share awards made to employees. A
total of 168,287 ordinary shares were acquired on 21 December 2007 under the
Record plc Flotation Bonus Scheme by the Trust, a further 282,926 shares have
been purchased under the Record plc Group Profit Share scheme and 383,531 shares
were purchased in respect of nil cost options awarded to two senior employees. A
total of 96,632 share options have vested. The EBT continues to hold 783,112
shares at 30 September 2009. 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 statement of comprehensive income.
6 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 period.
Diluted earnings per share is 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 period attributable to equity
holders of the parent used in the basic and diluted earnings per share
calculations.
+-----------------------------------------------------+--------------+--------------+--------------+
| | Six | Six | Year |
| | months | months | ended |
| | ended | ended | |
+-----------------------------------------------------+--------------+--------------+--------------+
| | 30-Sep-09 | 30-Sep-08 | 31-Mar-09 |
+-----------------------------------------------------+--------------+--------------+--------------+
| Weighted average number of shares used in | 220,668,098 | 221,069,397 | 220,878,796 |
| calculation of basic earnings per share | | | |
+-----------------------------------------------------+--------------+--------------+--------------+
| Effect of potential dilution - share options | 416,830 | 89,212 | 246,472 |
+-----------------------------------------------------+--------------+--------------+--------------+
| Weighted average number of shares used in | 221,084,928 | 221,158,609 | 221,125,268 |
| calculation of diluted earnings per share | | | |
+-----------------------------------------------------+--------------+--------------+--------------+
| | pence | pence | pence |
+-----------------------------------------------------+--------------+--------------+--------------+
| Basic earnings per share | 2.68 | 4.86 | 8.73 |
+-----------------------------------------------------+--------------+--------------+--------------+
| Diluted earnings per share | 2.68 | 4.85 | 8.72 |
+-----------------------------------------------------+--------------+--------------+--------------+
The potential dilutive shares relate to the share options granted in respect of
the Group's three incentive schemes i.e. the Group Profit Share scheme, the
Flotation Bonus Scheme and the Share Scheme. There were 696,972 share options in
place at the beginning of the period, 41,320 were exercised during the year. In
June 2009, the Group granted a further 82,460 share options with a potentially
dilutive effect.
7 Trade and other receivables
Other receivables as at 30 September 2009 included GBP1m held by Northern Trust
(the Custodian of the Record Umbrella Fund) which was subsequently subscribed
into the newly created Carry 250 fund on 1 October 2009. The Carry 250 fund is a
sub-fund of the Record Umbrella Fund. The subscription is seed capital for the
sub-fund which is expected to be redeemed in the near future once the sub-fund
reaches a sufficient size.
8 Called up share capital
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| | As at 30 | As at 30 | | As at 31 March |
| | September 2009 | September 2008 | | 2009 |
+--------------------+-----------------------+-----------------------+---------+-----------------------+
| | | Number |GBP'000 | Number | |GBP'000 | Number |
| |GBP'000 | | | | | | |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| Authorised | | | | | | | |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| Ordinary shares of | 100 |400,000,000 | 100 |400,000,000 | | 100 | 400,000,000 |
| 0.025p | | | | | | | |
| each | | | | | | | |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| Called up, | | | | | | | |
| allotted and fully | | | | | | | |
| paid | | | | | | | |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| Ordinary shares of | 55 |221,380,800 | 55 |221,380,800 | | 55 | 221,380,800 |
| 0.025p | | | | | | | |
| each | | | | | | | |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| | | | | | | | |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| Changes to the authorised and issued | | | | | |
| share capital | | | | | |
+--------------------------------------------+---------+-------------+---------+---------+-------------+
| | | | | | GBP'000 | | Number |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| Ordinary shares of 0.025p each as at | | | 55 | | 221,212,513 |
| 1 April 2008 | | | | | |
+--------------------------------------------+---------+-------------+---------+---------+-------------+
| Adjustment for own shares held by EBT | | | - | | (480,328) |
+--------------------------------------------+---------+-------------+---------+---------+-------------+
| As at 30 September | | | | | 55 | | 220,732,185 |
| 2008 | | | | | | | |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| | | | | | | | |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| Adjustment for additional own shares | | | - | | (48,357) |
| held by EBT | | | | | |
+--------------------------------------------+---------+-------------+---------+---------+-------------+
| As at 31 March | | | | | 55 | | 220,683,828 |
| 2009 | | | | | | | |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| | | | | | | | |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
| Adjustment for additional own shares | | | - | | (41,140) |
| held by EBT | | | | | |
+--------------------------------------------+---------+-------------+---------+---------+-------------+
| As at 30 September | | | | | 55 | | 220,642,688 |
| 2009 | | | | | | | |
+--------------------+---------+-------------+---------+-------------+---------+---------+-------------+
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 30 September
2009, the EBT held 738,112 ordinary shares of 0.025p in Record plc (30 September
2008: 648,615; 31 March 2009: 696,972).
9 Dividends
The dividends paid by the Group during the six months ended 30 September 2009
totalled GBP4,766,771 (2.16p per share) in respect of the year ended 31 March
2009. The dividends paid in the year ended 31 March 2009 totalled GBP10,141,982
(4.59p per share). This included a final dividend of GBP4,778,190 (2.16p per
share) paid in respect of the year ended 31 March 2008 and an interim dividend
of GBP5,363,792 (2.43p per share) paid on 30 December 2008.
10 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 compensation for the key management personnel who are considered to be
related parties is as follows:
+---------------------------------------------+-----------+-----------+-----------+
| | Six | Six | Year |
| | months | months | ended |
| | ended | ended | |
+---------------------------------------------+-----------+-----------+-----------+
| | 30-Sep-09 | 30-Sep-08 | 31-Mar-09 |
+---------------------------------------------+-----------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------------------+-----------+-----------+-----------+
| Short-term employee benefits | 3,925 | 5,457 | 10,947 |
+---------------------------------------------+-----------+-----------+-----------+
| Post-employment benefits | 175 | 160 | 319 |
+---------------------------------------------+-----------+-----------+-----------+
| Share-based payment benefits | 82 | - | 149 |
+---------------------------------------------+-----------+-----------+-----------+
| | 4,182 | 5,617 | 11,415 |
+---------------------------------------------+-----------+-----------+-----------+
Transactions with subsidiaries
Details of transactions between the Company and its subsidiaries, which are
related parties of the Company, are shown below:
+---------------------------------------------+-----------+-----------+-----------+
| | Six | Six | Year |
| | months | months | ended |
| | ended | ended | |
+---------------------------------------------+-----------+-----------+-----------+
| | 30-Sep-09 | 30-Sep-08 | 31-Mar-09 |
+---------------------------------------------+-----------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------------------+-----------+-----------+-----------+
| Liabilities settled by subsidiary on behalf | - | - | 19 |
| of parent | | | |
+---------------------------------------------+-----------+-----------+-----------+
| Net dividends received | 4,782 | 4,530 | 9,930 |
+---------------------------------------------+-----------+-----------+-----------+
| | | | |
+---------------------------------------------+-----------+-----------+-----------+
| | | | |
+---------------------------------------------+-----------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------------------+-----------+-----------+-----------+
| Amounts due to subsidiaries | 1,028 | 10 | 28 |
+---------------------------------------------+-----------+-----------+-----------+
11 Post balance sheet events
There are no post balance sheet events for the period since 30 September 2009.
Information for shareholders
Record plc
Registered in England and Wales
Company No. 1927640
Registered office
Morgan House
Madeira Walk
Windsor
Berkshire
SL4 1EP
United Kingdom
Tel: +44 (0)1753 852 222
Fax: +44 (0)1753 852 224
Principal UK trading subsidiaries
Record Currency Management Limited
Registered in England and Wales
Company No. 1710736
Record Group Services Limited
Registered in England and Wales
Company No. 1927639
Further information on Record plc can be found on the Group's website:
www.recordcm.com
Registrar
Capita Registrars Limited
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire
HD8 0GA
Further information about the Registrar is available on their website
www.capitaregistrars.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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