TIDMREC
RNS Number : 3284S
Record PLC
18 November 2011
Record plc
PRESS RELEASE
18 November 2011
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011
Record plc, the specialist currency manager, today announces its
unaudited interim results for the six months ended 30 September
2011.
Financial highlights:
-- AuME(1) $28.9bn (2) down 8% during the six months to 30 September 2011
-- Net client inflows during the six months of $1.0bn (six
months to 30 September 2010: net outflow of $2.7bn)
-- Profit before tax was GBP3.7m (six months to 30 September 2010: GBP7.0m)
-- Management fee income for the six months to 30 September 2011
fell to GBP11.3m (six months to 30 September 2010: GBP15.0m)
-- Average management fee rates of 11.9 bps for the six months
to 30 September 2011 (six months to 30 September 2010: 14.7
bps)
-- Operating margin 33% (six months to 30 September 2010: 46%)
-- Basic EPS of 1.26 pence (six months to 30 September 2010: 2.26 pence)
-- Interim dividend of 0.75p per share payable in December 2011
-- Subject to business conditions and a satisfactory outlook,
the intention is to recommend a final dividend of 0.75p per share
for the current financial year
-- Shareholders' equity decreased to GBP25.9m (30 September
2010: GBP29.6m) and included GBP19.7m cash (30 September 2010:
GBP27.1m)
(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.
(2)The AuME as reported at 30 September 2011 has been restated
by $0.3bn/GBP0.2bn relating to segregated currency for return.
Operating highlights:
-- Dynamic Hedging continued to perform in line with client expectations
-- Dynamic Hedging represented 38% of AuME at 30 September 2011
(30 September 2010: 37%) but grew to represent 65% of management
fee income (30 September 2010: 59%)
-- Commencement of a GBP0.7bn UK-based Dynamic Hedging mandate
offset by the loss of the second largest Dynamic Hedging client
($1.4bn) in early November
-- Alpha composite return of +0.02% for six months to 30
September 2011 (year to 31 March 2011 -3.39%)
-- During the six months to 30 September 2011 client numbers fell to 43 (46 at 31 March 2011)
-- Launch of currency momentum and currency value products
planned before the end of the financial year
Commenting on the results James Wood-Collins, Chief Executive of
Record plc, said:
"The financial performance of the business, which delivered
reduced pre-tax profits of GBP3.7m for the half year, reflects the
difficult environment for the Currency for Return Forward Rate Bias
Alpha product and a lower average fee rate for Dynamic Hedging.
"The Dynamic Hedging product has grown over recent years to
become 65% of management fee income. It continued to perform in
line with client expectations during the half-year, although
fluctuating risk aversion and shortened trends may cause cost to
clients to increase. The highlight for the period was the
commencement of a GBP0.7bn UK-based Dynamic Hedging mandate, offset
by the loss of our second largest Dynamic Hedging client in early
November. Bouts of risk aversion also caused Forward Rate Bias and
Emerging Market Currency for Return products to underperform in the
last three months of the half-year, although the Euro Stress Fund
has performed positively in this environment.
"By the end of the financial year we plan to launch the currency
momentum and currency value products. These combined with the
existing Hedging and Currency for Return products will give Record
a suite of eight products, as well as expanding Record's capability
to create bespoke solutions for individual clients. We are
confident that this expanded product range is capable of providing
institutional investors with a range of currency management
opportunities.
"During the first six months there have been a number of changes
in the sales team at Record, including the recruitment of two
senior individuals focussed on the US and Continental Europe
respectively. This initiative, combined with the existing sales
team, has positioned Record to focus on distribution of the
expanded product range. It is anticipated that this focus should
lead to additional mandates over the coming twelve months in both
Hedging and Currency for Return."
Analyst briefing
There will be a presentation for analysts at 9.30am on Friday 18
November 2011 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
James Wood-Collins Chief Executive Officer
Paul Sheriff Chief Operating Officer/Chief Financial Officer
MHP +44 20 3128 8100
Nick Denton, John Olsen, Vicky Watkins
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sep 30 Sep 31 Mar
11 10 11
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ ---------
Revenue 11,167 15,060 28,196
Cost of sales (123) - (102)
------------------------------------- ------------ ------------ ---------
Gross profit 11,044 15,060 28,094
Administrative expenses (7,188) (8,090) (15,740)
Loss on financial instruments
held as part of disposal group (191) (90) (1)
------------------------------------- ------------ ------------ ---------
Operating profit 3,665 6,880 12,353
Finance income 84 92 184
Profit before tax 3,749 6,972 12,537
Taxation (1,043) (1,991) (3,603)
------------------------------------- ------------ ------------ ---------
Profit after tax 2,706 4,981 8,934
Other comprehensive income - - -
Total comprehensive income for
the period 2,706 4,981 8,934
Total comprehensive income for
the period attributable to:
Non-controlling interests (75) - 27
Owners of the parent 2,781 4,981 8,907
------------------------------------- ------------ ------------ ---------
Earnings per share for profit
attributable to the equity holders
of the Company during the period
(expressed in pence per share)
Basic earnings per share 1.26p 2.26p 4.03p
Diluted earnings per share 1.26p 2.25p 4.03p
------------------------------------- ------------ ------------ ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
30 Sep 11 30 Sep 10 31 Mar 11
GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- -----------
Non-current assets
Property, plant and equipment 201 263 227
Intangible assets 1,138 765 1,085
Deferred tax assets 62 62 70
---------------------------------- ----------- ----------- -----------
1,401 1,090 1,382
Current assets
Trade and other receivables 6,237 6,887 6,904
Derivative financial assets - 62 -
Cash and cash equivalents 19,659 27,111 24,728
---------------------------------- ----------- ----------- -----------
25,896 34,060 31,632
Current assets held for
sale (disposal group) 4,444 850 3,022
---------------------------------- ----------- ----------- -----------
Total assets 31,741 36,000 36,036
---------------------------------- ----------- ----------- -----------
Current liabilities
Trade and other payables (3,215) (4,480) (4,089)
Corporation tax liabilities (1,043) (1,925) (1,837)
Derivative financial liabilities (78) - (12)
---------------------------------- ----------- ----------- -----------
(4,336) (6,405) (5,938)
---------------------------------- ----------- ----------- -----------
Total net assets 27,405 29,595 30,098
---------------------------------- ----------- ----------- -----------
Equity
Issued share capital 55 55 55
Share premium account 1,809 1,809 1,809
Capital redemption reserve 20 20 20
Retained earnings 24,031 27,711 27,262
---------------------------------- ----------- ----------- -----------
Equity attributable to owners
of the parent 25,915 29,595 29,146
Non-controlling interests 1,490 - 952
---------------------------------- ----------- ----------- -----------
Total equity 27,405 29,595 30,098
---------------------------------- ----------- ----------- -----------
Chairman's statement
Highlights of the period
The six months to 30 September 2011 represented a period of
relative stability of clients and mandates compared to the second
half of the year ended 31 March 2011. However, when compared to the
comparable six months of the prior year, this resulted in both
lower management fee income and lower profitability due to the
business mix and average fee income being higher in the prior
period. Market conditions were far from stable however,
particularly in the last three months of the half-year, introducing
challenges both to the emergence of investment performance
consistent with our long-term expectations, and to implementation
issues, in particular, bank counterparty management.
Dynamic Hedging has grown to represent 65% of our revenue for
the six months to 30 September 2011 and has performed in line with
client expectations, protecting US clients from foreign currency
weakness and UK clients from foreign currency strength. The
highlight for the period was the commencement of a GBP0.7bn
UK-based Dynamic Hedging mandate, which has since been offset by
the loss of our second largest Dynamic Hedging client ($1.4bn) in
early November. Our Currency for Return Forward Rate Bias Alpha
product has continued to experience modest net client outflows with
investment performance being flat for segregated mandates in
aggregate, although negative for the pooled funds.
The product range now consists of six products, being two for
Hedging and four for Currency for Return. We are planning to bring
a further two to market in the second half of the financial year,
being a currency momentum and a currency value product. Following
the development of these two, Record will have a comprehensive
suite of eight products that we will be able to offer to clients,
as well as the ability to combine some of these in "multi-strategy"
and bespoke mandates. This compares to the more limited offering at
the time of the IPO when Record had three distinct products.
Record is focussed on delivering new sales from this enhanced
product range. Steps were taken in the period to strengthen the
client team with the addition of a US sales executive and an
executive focussed on continental Europe. The recruitment of a US
sales resource is a proactive initiative to address the increased
importance that currency issues are assuming for US public and
private sector pension schemes and other institutional
investors.
Assets under Management Equivalents ('AuME') fell to $28.9bn at
30 September 2011, compared to $31.4bn at 31 March 2011. The
largest component of the decrease was equity market performance of
-$3.2bn. Net flows added to AuME over the six months, contributing
$1.0bn. Performance in Currency for Return contributed -$0.1bn and
foreign exchange movements accounted for a -$0.2bn decrease in
mandate sizes. The number of clients fell in the six months to 43
(46 at 31 March 2011), predominantly due to the redemptions by
pooled Currency for Return clients.
Management fees decreased to GBP11.3m for the six months to 30
September 2011, a decrease of 25% compared to the six months to 30
September 2010. Given prior valuation levels (or 'high water
marks') achieved there were no performance fees earned in the
period. Profit before tax for the period of GBP3.7m was 47% lower
than for the equivalent period in the prior year.
The operating margin, at 33%, was also less than that achieved
in the six months to 30 September 2010 (46%) although the decline
was less marked than that in revenues. This reflects the
flexibility in our cost base, which is due mainly to Record's Group
Profit Share (GPS) scheme which sets aggregate profit share at a
long term average of 30% of pre-GPS operating profit.
An interim dividend of 0.75p per share will be paid on 20
December 2011. The Board's intention, subject to business
performance and a satisfactory outlook, is to recommend a final
dividend for the current financial year of 0.75p per share.
Further and more detailed analysis of the results for the period
can be found in the Interim Management Review.
Investment performance
Investment performance during the period has reflected
fluctuating bouts of risk aversion across financial markets, with
different implications for different products. Navigating these
bouts of risk aversion continues to prove challenging.
US-based Dynamic Hedging clients have experienced performance
reflecting first US Dollar weakness, during which the product
allowed clients to benefit from overseas currency strength although
at some cost, and later US Dollar strength, leading to higher hedge
ratios and protection in particular against Euro and Pound Sterling
weakness. Trends have been relatively short by historical
standards, making their efficient capture more challenging.
UK-based Dynamic Hedging clients saw Sterling weakening overall,
although only consistently against the Japanese Yen over the
period, with other currencies demonstrating mixed and volatile
behaviour. Overall, the product generated modest underperformance
during the period.
Across all Currency for Return products, the period from April
to September 2011 produced mixed results as risk appetite and
aversion fluctuated. Overall Forward Rate Bias Alpha performance
during the period was marginally positive for the ungeared Alpha
composite, demonstrably outperforming passive Forward Rate Bias
strategies, although there was a noticeable dispersion in
performance of various accounts. It is increasingly evident given
statements from the Federal Reserve and the Bank of England, as
well as a softening of the European Central Bank's stance on
inflation, that significant interest rate differentials are
unlikely to appear between the US Dollar, Pound Sterling, Euro,
Japanese Yen and Swiss Franc in the short term, challenging both
active and passive Forward Rate Bias strategies that have
significant exposure to these currencies.
The newer Currency for Return products, in particular the
Emerging Market Currency Fund and the FTSE FRB10 Index Fund, also
generated positive returns from April to approximately June, in
line with our long-term investment expectations, before
underperforming from approximately July through to September as
risk aversion heightened due to uncertainties in Europe and the US.
The Euro Stress Fund launched at the end of May generated positive
returns towards the end of the period as the Euro weakened
following a very volatile path.
Strategy, growth plans and outlook
The Group continues to concentrate on promoting both Passive and
Dynamic Hedging together with those Currency for Return products
whose recent track records are encouraging, as well as engaging
with clients to create specific solutions to their currency needs.
Where appropriate, these specific solutions are created with a view
to their subsequent scalable extension to other clients. We have
seen a number of enquiries and RFPs and believe we will secure
further hedging mandates in the current financial year.
In the US, where investors continue moving towards Global Equity
benchmarks that typically increase international equity exposure,
there is increasing attention towards currency risk. Whilst Record
faces challenges in gaining acceptance for the Dynamic Hedging
product with consultants and clients there remains a good
opportunity to build on the track record to date.
In addition to the established Hedging products and Currency for
Return products, the Group has invested in three funds that have
been seed funded by Record, including the recently launched Euro
Stress Fund.
The challenge for Record is to gain acceptance in the investment
community for both the existing and new products. The existing
sales effort together with recent initiatives to strengthen the
client team will undoubtedly assist in opening up new opportunities
for Record.
In order to position Record to benefit from developments in the
currency market, the Group has invested in retaining talented
individuals and selectively recruiting additional resources,
enhancing its processes and investing in systems infrastructure,
all subject to appropriate cost control. In particular, the Group's
new back office system is currently in the final stages of testing
and should be fully operational in the second half of the financial
year.
Record continues to be respected for its currency expertise and
should be well positioned to win new business. Whilst it is clearly
disappointing to have lost our second largest Dynamic Hedging
client in early November and to continue to see outflows in the
established Currency for Return Forward Rate Bias Alpha product we
think that there are short term opportunities in both Passive and
Dynamic Hedging. In the medium term, and where recent product
performance is positive, growth in Currency for Return should
emerge.
Neil Record
Chairman
17 November 2011
Interim Management Review
Business overview
Whilst the first half of the financial year has seen AuME and
client numbers decrease when compared to the preceding six months,
the Group delivered pre tax profit of GBP3.7m and will pay an
interim dividend of 0.75p per share. Although the Group's hedging
business has fallen in AuME terms in the first six months this is
largely due to the fall in global equity markets in this period.
There has been a continuation in the reduction of Currency for
Return mandates, most notably for pooled accounts.
The Group now has six currency products and will continue with
this diversification through the launch of currency momentum and
currency value products before the end of the current financial
year. The Group is focussed on delivering new sales through
continuing to develop relationships with investment consultants,
supplemented by direct marketing by the in-house client team. The
addition of two executives focussed on the US and continental
Europe respectively is an investment in additional sales
capability.
Investment performance
The processes that underpin our Dynamic Hedging and Currency for
Return products are fundamentally different.
Dynamic Hedging seeks to allow our clients to benefit from
foreign currency strength while protecting them from foreign
currency weakness. Record's Dynamic Hedging product performs best
when currency movements exhibit trends over periods of 12 months or
longer.
Performance for US dollar based Dynamic Hedging, for the period
from April to September 2011, directly reflected the evolution of
the exchange rate for the US Dollar, which strengthened during the
period but followed a volatile path with relatively brief trends.
The period started with US Dollar weakness, and so the product
allowed clients to capture most of the overseas currency strength.
Subsequently, the dollar started strengthening in August and
appreciated sharply in September and, as a result, the desired
protection was delivered through higher hedge ratios, especially
for the Euro and Sterling exposures.
From the UK perspective, hedging clients saw overall weakening
of Sterling. The Japanese Yen was consistently strong relative to
Sterling whereas other currencies demonstrated mixed and volatile
behaviour. The US Dollar strengthened towards the end of the period
and the Swiss Franc dropped in value as a result of the Swiss
National Bank's (SNB) intervention. Overall, the product generated
modest underperformance during the period.
Across all Currency for Return products, the period from April
to September 2011 produced mixed results. The core investment
process for the Forward Rate Bias Alpha product is the
Trend/Forward Rate Bias (FRB) strategy, which relies on the
tendency of higher interest rate currencies to outperform lower
interest rate currencies over the long term. In addition to the FRB
strategy, the Forward Rate Bias Alpha product has a Range Trading
strategy which 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.
Overall Forward Rate Bias Alpha performance during the period
was marginally positive for the ungeared Alpha composite. There was
a noticeable dispersion in performance of various accounts,
primarily as a result of very sharp movements following the
intervention by the SNB. The range trading module consistently
generated positive returns while the Trend/FRB module detracted
from value.
For the Emerging Market Currency Fund investment performance was
split during the period. From April to June, the product generated
positive returns as the portfolio of Emerging Market currencies
outperformed the basket of Developed Market currencies, with
Brazilian Real and Hungarian Forint being the major contributors.
From July to September, the product generated negative returns as
widespread risk aversion saw Emerging Market currencies weaken.
Hungarian Forint, South African Rand and Turkish Lira were the
largest contributors to underperformance.
In a pattern similar to that of the Emerging Market Fund, the
FTSE FRB10 Index fund generated positive returns in the first half
of the period and detracted from value towards the end of the
period as risk aversion heightened due to uncertainties in Europe
and the US.
The Euro Stress Fund was launched at the end of May and
generated positive returns towards the end of the period as the
Euro weakened following a very volatile path. This fund is more
discretionary in style and is managed on a day to day basis by the
Portfolio Management Group.
Returns of Record Umbrella Currency Funds and comparable indices
for the six months to 30 September 2011
Fund name Gearing Half year Volatility
return since inception
p.a.(1)
Cash Plus 7 -8.53% 19.53%
UK Equity Plus 6 -19.99% 19.42%
FTSE FRB10 Index(2) 1.8 -5.04% N/A
Emerging Market Currency(3) 1 -9.24% N/A
Euro Stress 1 +3.11% N/A
Record Alpha composite +0.02% 2.78%
FTSE Currency FRB 5 GBP Excess
return -5.17% 5.87%
FTSE Currency FRB 10 GBP
Excess return -2.90% 4.70%
Global equities (S&P 500) -14.66% 14.85%(8)
(1)No volatility data is provided for products with less than 12
months historic data.
(2)FTSE FRB10 Index fund return data is since inception in
December 2010.
(3)Emerging Market Currency fund return data is since inception
in December 2010.
Euro Stress fund return data is since inception in May 2011.
The Record Alpha composite comprises 4 accounts and $0.75bn of
assets.
Inception date is 31 December 1987
For comparison only
(8) Since December 1987
Client development
Client numbers decreased to 43 at 30 September 2011 (46 at 31
March 2011).
Client numbers
30 September 30 September 31 March 2011
2011 2010
--------------------- ------------- ------------- --------------
Currency for Return
- segregated 7 9 8
Currency for Return
- pooled 10 25 13
--------------------- ------------- ------------- --------------
Currency for Return
- combined 17 34 21
Dynamic Hedging 11 10 10
Passive Hedging 22 21 24
Less clients with >
1 product (7) (8) (9)
--------------------- ------------- ------------- --------------
Total 43 57 46
--------------------- ------------- ------------- --------------
AuME analysis
As previously noted, the Group's AuME was $28.9bn at 30
September 2011, a decrease of $2.5bn during the six month
period.
AuME movement in the six months to 30 September 2011
$bn
------------------------------- ------
AuME at 31 March 2011 31.4
Net client inflows 1.0
Investment performance impact (0.1)
Equity market impact (3.2)
Foreign exchange impact (0.2)
------------------------------- ------
AuME at 30 September 2011 28.9
------------------------------- ------
Net client flows
During the six months to 30 September 2011 net client inflows
were $1.0bn, principally due to increases in Dynamic and Passive
Hedging offset by reductions in pooled and segregated Currency for
Return mandates.
Investment performance
Negative investment performance during the period contributed a
$0.1bn decline 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 Dynamic
Hedging, and some of the Currency for Return mandates, are linked
to stock and other market levels. Market performance had the
largest impact on AuME, decreasing AuME in the six months to 30
September 2011 by $3.2bn.
Forex
The foreign exchange effect of expressing non-US$ AuME in US$
had a small impact on AuME of $0.2bn. 70% of the Group's AuME is
non-US$ denominated and expressing this in US$ decreased AuME for
the period by $0.2bn.
Product mix
The factors determining the movements in AuME also impact its
composition. At 30 September 2011 Currency for Return represented
10% of total AuME, which was split between segregated (7% of total
AuME) and pooled mandates (3% of total AuME). This is down from 13%
at 30 September 2010 and down from 11% at 31 March 2011. Dynamic
Hedging represented $11.1bn and 38% of total AuME at 30 September
2011, up from 37% at 30 September 2010 and unchanged on 31 March
2011. Passive Hedging represented $14.7bn and 51% of total AuME at
30 September 2011, up from 48% at 30 September 2010 and 50% at 31
March 2011.
AuME by product expressed in US Dollars ($bn)
As at 30 September As at 30 September As at 31 March
2011 2010 2011
Currency for Return
- segregated 2.0 7% 2.1 7% 2.2 7%
Currency for Return
- pooled 0.8 3% 1.9 6% 1.2 4%
------------------------ ---------- --------- ---------- --------- -------- -------
Sub-total Currency for
Return 2.8 10% 4.0 13% 3.4 11%
Dynamic Hedging 11.1 38% 11.5 37% 11.9 38%
Passive Hedging 14.7 51% 14.8 48% 15.7 50%
Cash 0.3 1% 0.5 2% 0.4 1%
------------------------ ---------- --------- ---------- --------- -------- -------
Total 28.9 100% 30.8 100% 31.4 100%
------------------------ ---------- --------- ---------- --------- -------- -------
AuME by product expressed in Sterling (GBPbn)
As at 30 September As at 30 September As at 31 March
2011 2010 2011
Currency for Return
- segregated 1.3 7% 1.4 7% 1.4 7%
Currency for Return
- pooled 0.5 3% 1.2 6% 0.8 4%
------------------------ ---------- --------- ---------- --------- -------- -------
Sub-total Currency for
Return 1.8 10% 2.6 13% 2.2 11%
Dynamic Hedging 7.2 38% 7.2 37% 7.4 38%
Passive Hedging 9.4 51% 9.4 48% 9.8 50%
Cash 0.2 1% 0.3 2% 0.2 1%
------------------------ ---------- --------- ---------- --------- -------- -------
Total 18.6 100% 19.5 100% 19.6 100%
------------------------ ---------- --------- ---------- --------- -------- -------
The AuME composition has remained largely unchanged in terms of
the underlying base currencies. Swiss Franc is the base currency
for 36% of total AuME at 30 September 2011 (31 March 2011: 33%),
US$ is the base currency for 30% of total AuME at 30 September 2011
(31 March 2011: 32%), and Sterling is the base currency for 30% of
total AuME at 30 September 2011 (31 March 2011:31%).
AuME by base currency and product
Currency for Currency for Dynamic Hedging Passive Hedging
Return - segregated Return - Pooled
----------------- ------------------------- --------------------- ---------------------- --------------------
Base currency 30 Sep 31 Mar 30 Sep 31 Mar 30 Sep 31 Mar 30 Sep 31 Mar
(billions) 11 11 11 11 11 11 11 11
Sterling GBP 0.2 GBP 0.3 GBP 0.5 GBP 0.8 GBP 1.6 GBP 1.2 GBP 3.0 GBP 3.6
US Dollar USD 1.0 USD 1.0 - - USD 7.7 USD 8.9 - -
Swiss Franc CHF 0.5 CHF 0.5 - - CHF 1.0 CHF 1.0 CHF 7.9 CHF 7.9
Euro - - - - - - EUR 0.9 EUR 1.0
Canadian Dollar CAD 0.2 CAD 0.2 - - - - - -
----------------- ------------ ----------- ---------- --------- ---------- ---------- --------- ---------
Total USD 2.0 USD 2.2 USD 0.8 USD 1.2 USD 11.1 USD 11.9 USD 14.7 USD 15.7
----------------- ------------ ----------- ---------- --------- ---------- ---------- --------- ---------
AuME by client type ($bn)
As at 30 September As at 30 September As at 31 March
2011 2010 2011
Government and public
funds 18.4 64% 18.7 61% 18.7 59%
Corporate 6.9 24% 8.2 27% 8.4 27%
Foundations and investment
funds 3.6 12% 3.9 12% 4.3 14%
---------------------------- ---------- --------- ---------- --------- -------- -------
Total 28.9 100% 30.8 100% 31.4 100%
---------------------------- ---------- --------- ---------- --------- -------- -------
AuME by client location ($bn)
As at 30 September As at 30 September As at 31 March
2011 2010 2011
UK 8.5 29% 9.8 32% 9.7 31%
Europe (excluding
UK) 12.9 45% 12.2 40% 12.9 41%
North America 7.5 26% 8.8 28% 8.8 28%
------------------- ---------- --------- ---------- --------- -------- -------
Total 28.9 100% 30.8 100% 31.4 100%
------------------- ---------- --------- ---------- --------- -------- -------
Product development
As highlighted in the Chairman's statement, Record continues to
focus on bringing new products to market with three new products
having been launched in the last twelve months. The Record Currency
FTSE FRB10 Index fund, that tracks the FTSE Currency FRB10 Index
has been run for nearly twelve months and has demonstrated
successfully that the index can be replicated and closely tracked.
The first emerging market currency pooled fund has also been run
successfully for nearly twelve months with a seed investment of
GBP1m from the Group.
In June 2011, the Jersey-based Euro Stress fund was launched.
This product was similarly funded with a GBP1m seed investment from
the Group.
Currency momentum and currency value strategies are being
explored and it is anticipated that these products and strategies
will be launched before the end of the current financial year.
Revenue
Management fee income for the six months to 30 September 2011
was GBP11.3m, which was 25% lower than for the six months to 30
September 2010 (GBP15.0m). Dynamic Hedging and Currency for Return
products generated lower management fees whilst Passive Hedging
generated higher management fees during the six months to 30
September 2011. In the six months to 30 September 2011 Dynamic
Hedging generated 65% of the management fee income, with Currency
for Return generating 22%. The reduction in Dynamic Hedging
management fee income is primarily due to the tiered fee structure
that was introduced for the largest Dynamic Hedging client from 1
April 2011.
Management fees by product (GBPm)
Six months Six months Year ended
ended 30 September ended 30 September 31 March 2011
2011 2010
---------------------- -------------------- -------------------- ---------------
Currency for Return
- segregated 1.8 2.7 4.8
Currency for Return
- pooled 0.6 2.2 3.1
---------------------- -------------------- -------------------- ---------------
Sub-total Currency
for Return 2.4 4.9 7.9
Dynamic Hedging 7.4 8.8 17.5
Passive Hedging 1.5 1.3 2.7
---------------------- -------------------- -------------------- ---------------
Total management fee
income 11.3 15.0 28.1
---------------------- -------------------- -------------------- ---------------
The average fee rate achieved for Dynamic Hedging decreased to
20.2bps (six months to 30 September 2010: 24.0bps) whilst average
fee rates for Passive Hedging increased to 3.1bps (six months to 30
September 2010: 2.9bps). The average segregated Currency for Return
mandate fee rate decreased to 27.6bps whilst the average pooled
fund fee rate declined to 18.7bps (29.9bps and 24.2bps respectively
for the six months to 30 September 2010).
Record typically offers all Currency for 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.
Average management fee rates by product - (bps) (1)
Six months Six months Year ended
ended 30 September ended 30 September 31 March 2011
2011 2010
----------------------- -------------------- -------------------- ---------------
Currency for Return
- segregated 27.6 29.9 28.3
Currency for Return
- pooled 18.7 24.2 23.4
----------------------- -------------------- -------------------- ---------------
Currency for Return
- average 24.5 27.1 26.1
Dynamic Hedging 20.2 24.0 23.9
Passive Hedging 3.1 2.9 2.9
----------------------- -------------------- -------------------- ---------------
Composite average fee
rate 11.9 14.7 14.0
----------------------- -------------------- -------------------- ---------------
There was no performance fee earned in either the six months to
30 September 2011 or the year ending 31 March 2011. 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. A
fuller explanation of market conditions and the implications for
investment performance of our Currency for Return products is given
in the Chairman's statement.
Expenditure
Expenditure in the six months to 30 September 2011 fell by
GBP0.8m to GBP7.4m from GBP8.2m in the six months to 30 September
2010. The reduction was primarily in the Group Profit Share (GPS)
scheme which was 30% of pre-GPS operating profit in the period,
partially offset by an increase to personnel and non-personnel
costs.
Under the GPS scheme rules, the intention is to purchase shares
in the market following the announcement of interim and full year
financial results.
(1)bps = basis points = 1/100(th) of 1 percentage point
Expenditure analysis (GBPm)
Six months Six months Year ended
ended 30 September ended 30 September 31 March 2011
2011 2010
---------------------------- -------------------- -------------------- ---------------
Personnel costs 3.2 3.0 6.1
Non-personnel costs 2.4 2.1 4.3
---------------------------- -------------------- -------------------- ---------------
Administrative expenditure
excluding Group Profit
Share 5.6 5.1 10.4
Group Profit Share 1.6 3.0 5.3
---------------------------- -------------------- -------------------- ---------------
Total administrative
expenditure 7.2 8.1 15.7
Loss on financial
instruments held as
part of disposal group 0.2 0.1 -
---------------------------- -------------------- -------------------- ---------------
Total expenditure 7.4 8.2 15.7
---------------------------- -------------------- -------------------- ---------------
The Group is currently in the process of replacing its back
office systems and going forward it is anticipated that this will
result in a small increase in system costs. The new system will
support the Group in its desire to expand its range of products and
instruments in the future.
Operating margins
The operating profit for the six months to 30 September 2011 of
GBP3.7m (33% operating margin) reflects the lower management fee
income and lack of performance fees in the period and compares with
the operating profit of GBP6.9m (46% operating margin) for the same
period in 2010. The reduction in management fees of GBP3.7m
compares with the reduction of GBP3.2m in operating profit.
Operating cash flow
The Group generated GBP2.3m of cash flow from operating
activities during the six months ended 30 September 2011 (six
months ended 30 September 2010: GBP9.2m). Taxation paid during the
period was GBP1.8m compared with GBP2.4m for the six months to 30
September 2010. On 3 August 2011 the Group paid a final dividend of
2.59p per share in respect of the period ended 31 March 2011. This
equated to a distribution to shareholders of GBP5.7m (six months
ended 30 September 2010: GBP1.3m).
The Board's objective is to retain sufficient capital within the
business to meet continuing obligations, to sustain future growth
and to provide a buffer against adverse market conditions. The
Group has no debt to repay or to service. Shareholders' funds were
GBP25.9m at 30 September 2011 (30 September 2010: GBP29.6m).
Dividends
The Group will pay an interim dividend of 0.75p per share in
respect of the six months ended 30 September 2011. The dividend
will be paid on 20 December 2011 to shareholders on the register on
2 December 2011. The dividend payment will equate to a distribution
of GBP1.7m in total and will leave approximately GBP18.1m of cash
on the balance sheet which is significantly higher than necessary
to satisfy the financial resources and liquidity requirements of
the Financial Services Authority and represents between one and two
years of current overhead cover.
Subject to business conditions in the second half of the
financial year and a satisfactory outlook, the Group currently
intends to pay a final dividend of 0.75p for the financial year
ending 31 March 2012. The dividend policy will be further reviewed
at the year end.
Principal risks and uncertainties
The principal risks and uncertainties documented in the Annual
Report and Accounts for the year ended 31 March 2011 are still
relevant to Record.
The six months to 30 September 2011 has continued to see the
risk associated with account concentration. The proportion of
management fee income generated from the largest client was 28% at
30 September 2011. The proportion of management fee income
generated from the largest five clients was 62% at 30 September
2011 and for the largest ten clients was 81% at 30 September
2011.
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 Chief Operating Officer/Chief Financial Officer
17 November 2011 17 November 2011
Independent review report to Record plc (the "Company")
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 2011 which comprises the consolidated
statement of comprehensive income, consolidated statement of
financial position, consolidated statement of cash flows,
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 headlines, Chairman's
Statement and 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 it 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 2011 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
17 November 2011
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sep 30 Sep 31 Mar
11 10 11
Note GBP'000 GBP'000 GBP'000
------------------------------------- ----- ------------ ------------ ---------
Revenue 3 11,167 15,060 28,196
Cost of sales (123) - (102)
------------------------------------- ----- ------------ ------------ ---------
Gross profit 11,044 15,060 28,094
Administrative expenses (7,188) (8,090) (15,740)
Loss on financial instruments
held as part of disposal group (191) (90) (1)
------------------------------------- ----- ------------ ------------ ---------
Operating profit 3,665 6,880 12,353
Finance income 84 92 184
Profit before tax 3,749 6,972 12,537
Taxation (1,043) (1,991) (3,603)
------------------------------------- ----- ------------ ------------ ---------
Profit after tax 2,706 4,981 8,934
Other comprehensive income - - -
Total comprehensive income for
the period 2,706 4,981 8,934
Total comprehensive income for
the period attributable to:
Non-controlling interests (75) - 27
Owners of the parent 2,781 4,981 8,907
------------------------------------- ----- ------------ ------------ ---------
Earnings per share for profit
attributable to the equity holders
of the Company during the period
(expressed in pence per share)
Basic earnings per share 4 1.26p 2.26p 4.03p
Diluted earnings per share 4 1.26p 2.25p 4.03p
------------------------------------- ----- ------------ ------------ ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note Unaudited Unaudited Audited
as at as at as at
30 Sep 11 30 Sep 10 31 Mar 11
GBP'000 GBP'000 GBP'000
---------------------------------- ----- ----------- ----------- -----------
Non-current assets
Property, plant and equipment 201 263 227
Intangible assets 1,138 765 1,085
Deferred tax assets 62 62 70
---------------------------------- ----- ----------- ----------- -----------
1,401 1,090 1,382
Current assets
Trade and other receivables 6,237 6,887 6,904
Derivative financial assets 7 - 62 -
Cash and cash equivalents 19,659 27,111 24,728
---------------------------------- ----- ----------- ----------- -----------
25,896 34,060 31,632
Current assets held for
sale (disposal group) 8 4,444 850 3,022
---------------------------------- ----- ----------- ----------- -----------
Total assets 31,741 36,000 36,036
---------------------------------- ----- ----------- ----------- -----------
Current liabilities
Trade and other payables (3,215) (4,480) (4,089)
Corporation tax liabilities (1,043) (1,925) (1,837)
Derivative financial liabilities 7 (78) - (12)
---------------------------------- ----- ----------- ----------- -----------
(4,336) (6,405) (5,938)
---------------------------------- ----- ----------- ----------- -----------
Total net assets 27,405 29,595 30,098
---------------------------------- ----- ----------- ----------- -----------
Equity
Issued share capital 9 55 55 55
Share premium account 1,809 1,809 1,809
Capital redemption reserve 20 20 20
Retained earnings 24,031 27,711 27,262
---------------------------------- ----- ----------- ----------- -----------
Equity attributable to owners
of the parent 25,915 29,595 29,146
Non-controlling interests 12 1,490 - 952
---------------------------------- ----- ----------- ----------- -----------
Total equity 27,405 29,595 30,098
---------------------------------- ----- ----------- ----------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 September 2010
Unaudited Called Share premium Capital Retained Non-controlling Total shareholders'
up share account redemption earnings interests equity
capital reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ---------- -------------- ------------ ---------- ---------------- --------------------
As at 1 April
2010 55 1,809 20 23,816 - 25,700
Dividends paid - - - (1,303) - (1,303)
Employee share
options - - - 217 - 217
-------------------- ---------- -------------- ------------ ---------- ---------------- --------------------
Transactions
with owners - - - (1,086) - (1,086)
Profit for the
period - - - 4,981 - 4,981
As at 30 September
2010 55 1,809 20 27,711 - 29,595
-------------------- ---------- -------------- ------------ ---------- ---------------- --------------------
Six months ended 31 March 2011
Called Capital
up share Share premium redemption Retained Non-controlling Total shareholders'
capital account reserve earnings interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- -------------- ------------ ---------- ---------------- --------------------
As at 30 September
2010 55 1,809 20 27,711 - 29,595
Dividends paid - - - (4,420) - (4,420)
Employee share
options - - - 45 - 45
Issue of units
in funds to
non-controlling
interests - - - - 925 925
------------------------ ---------- -------------- ------------ ---------- ---------------- --------------------
Transactions
with owners - - - (4,375) 925 (3,450)
Profit for the
period - - - 3,926 27 3,953
As at 31 March
2011 55 1,809 20 27,262 952 30,098
------------------------ ---------- -------------- ------------ ---------- ---------------- --------------------
Six months ended 30 September 2011
Called Share premium Capital Retained Non-controlling Total shareholders'
up share account redemption earnings interests equity
capital reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- -------------- ------------ ---------- ---------------- --------------------
As at 31 March
2011 55 1,809 20 27,262 952 30,098
Dividends paid - - - (5,726) - (5,726)
Own shares held
by EBT - - - (459) - (459)
Employee share
options - - - 173 - 173
Issue of units
in funds to
non-controlling
interests - - - - 613 613
------------------------ ---------- -------------- ------------ ---------- ---------------- --------------------
Transactions
with owners - - - (6,012) 613 (5,399)
Profit for the
period - - - 2,781 (75) 2,706
As at 30 September
2011 55 1,809 20 24,031 1,490 27,405
------------------------ ---------- -------------- ------------ ---------- ---------------- --------------------
CONSOLIDATED STATEMENT OF CASH FLOW
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sep 30 Sep 31 Mar
11 10 11
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------ ------------ --------
Profit after tax 2,706 4,981 8,934
Adjustments for:
Corporation tax 1,043 1,991 3,603
Finance income (84) (92) (184)
Depreciation of property, plant
and equipment 41 106 191
Share-based payments expense 173 217 262
---------------------------------------- ------------ ------------ --------
3,879 7,203 12,806
Changes in working capital
Decrease in receivables 651 1,441 1,418
(Decrease) / Increase in payables (874) 606 214
(Increase) / Decrease in other
financial assets (1,422) 126 (1,985)
Increase / (Decrease) in other
financial liabilities 66 (149) (136)
---------------------------------------- ------------ ------------ --------
CASH INFLOW FROM OPERATING ACTIVITIES 2,300 9,227 12,317
Corporation taxes paid (1,829) (2,367) (4,076)
---------------------------------------- ------------ ------------ --------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 471 6,860 8,241
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and
equipment (15) (166) (85)
Purchase of intangible assets (53) (230) (679)
Interest received 100 89 188
---------------------------------------- ------------ ------------ --------
NET CASH INFLOW / (OUTFLOW) FROM
INVESTING ACTIVITIES 32 (307) (576)
CASH FLOW FROM FINANCING ACTIVITIES
Cash inflow from issue of units
in funds 613 - 925
Purchase of treasury shares (459) - -
Dividends paid to equity shareholders (5,726) (1,303) (5,723)
---------------------------------------- ------------ ------------ --------
CASH OUTFLOW FROM FINANCING ACTIVITIES (5,572) (1,303) (4,798)
NET (DECREASE) / INCREASE IN CASH
AND CASH EQUIVALENTS IN THE PERIOD (5,069) 5,250 2,867
Cash and cash equivalents at the
beginning of the period 24,728 21,861 21,861
CASH AND CASH EQUIVALENTS AT THE
END OF THE PERIOD 19,659 27,111 24,728
---------------------------------------- ------------ ------------ --------
Closing cash and cash equivalents
consists of:
Cash at bank and in hand 19,659 27,111 24,728
----------------------------------- ------- ------- -------
Notes to the accounts
1. Basis of preparation
The condensed set of financial statements included in this
half-yearly financial report have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union. The financial
information 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 2011 (which were prepared in accordance with IFRSs as
adopted by the European Union) have been delivered to 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.
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 2011.
3. Segmental analysis
The Directors, who together are the entity's Chief Operating
Decision Maker, consider that its 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 Directors receive revenue analysis disaggregated
by product, whilst operating costs are presented on an aggregated
basis because this reflects the unified basis in which the products
are marketed, delivered and supported.
(a) Product revenues
The Group has split its currency management revenues by product
and fee type. The Currency for Return products are delivered
through both segregated mandates and a pooled fund structure.
Revenues from the three new products (Emerging Market Currency
Fund, FTSE FRB10 Index Fund and Euro Stress Fund) are not material
and have been included in the Currency for Return pooled funds
revenues. Other Group activities include consultancy.
Revenue by product and fee type
Six months Six months Year ended
ended ended 31 Mar 11
30 Sep 11 30 Sep
10
GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ----------- -----------
Dynamic Hedging
Management fees 7,373 8,813 17,539
Performance fees - - -
Passive hedging
Management fees 1,454 1,278 2,718
Currency for Return segregated
funds
Management fees 1,812 2,735 4,771
Performance fees - - -
Currency for Return pooled
funds
Management fees 640 2,177 3,111
Performance fees - - -
-------------------------------------- ----------- ----------- -----------
Total management fee and performance
fee income 11,279 15,003 28,139
Other Group activities (112) 57 57
-------------------------------------- ----------- ----------- -----------
Total 11,167 15,060 28,196
-------------------------------------- ----------- ----------- -----------
(b) Geographical analysis
The geographical analysis of revenue is based on the destination
i.e. the location of the client to whom the services are provided.
All revenue originated in the UK.
Revenue by country
Six months Six months Year ended
ended ended 31 Mar 11
30 Sep 11 30 Sep
10
GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ----------- -----------
UK 3,061 5,070 8,440
US 5,206 6,926 13,604
Switzerland 2,710 2,545 5,343
Other 302 462 752
-------------------------------------- ----------- ----------- -----------
Total management fee and performance
fee income 11,279 15,003 28,139
Other Group activities (112) 57 57
-------------------------------------- ----------- ----------- -----------
Total 11,167 15,060 28,196
-------------------------------------- ----------- ----------- -----------
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.
(c) Major clients
During the six months ended 30 September 2011 GBP3.2m (29%) of
the Group's revenue was accounted for by a single client. During
the period, one other client accounted for more than 10% of the
Group's revenue contributing GBP1.4m (13%). This client terminated
its mandate in November 2011 as described in note 14.
4. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the financial year attributable to equity holders of the parent
by the weighted average number of ordinary shares in issue during
the year.
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 financial year
attributable to equity holders of the parent used in the basic and
diluted earnings per share calculations.
Six months Six months Year ended
ended ended 31 Mar 11
30 Sep 11 30 Sep 10
----------------------------------- ------------ ------------ ------------
Weighted average number of shares
used in calculation of basic
earnings per share 220,683,191 220,874,485 220,965,275
Effect of dilutive potential
ordinary shares - share options 113,523 355,560 306,347
----------------------------------- ------------ ------------ ------------
Weighted average number of shares
used in calculation of diluted
earnings per share 220,796,714 221,230,045 221,271,622
----------------------------------- ------------ ------------ ------------
pence pence pence
----------------------------------- ------------ ------------ ------------
Basic earnings per share 1.26 2.26 4.03
Diluted earnings per share 1.26 2.25 4.03
----------------------------------- ------------ ------------ ------------
The potential dilutive shares relate to the share options and
deferred share awards granted in respect of the following Group
incentive schemes: the Group Bonus Scheme and the Share Scheme.
There were share options and deferred share awards in place at the
beginning of the period over 304,964 shares. During the period
options were exercised, or share awards vested, over 176,532
shares. During the period, the Group granted options over 1,400,000
shares with a potentially dilutive effect. These options were
non-dilutive at the period end.
5. Dividends
The dividends paid by the Group during the six months ended 30
September 2011 in respect of the year ended 31 March 2011 totalled
GBP5,725,864 (2.59p per share). The dividends paid during the year
ended 31 March 2011 totalled GBP5,722,996 (2.59p per share). The
dividends paid by the Group during the six months ended 30
September 2010 totalled GBP1,302,689 (0.59p per share), with an
accelerated dividend of 2.00p per share having been paid in March
2010.
6. Investments
Record plc is the ultimate parent company of the Record Group
and has seven subsidiary undertakings that are listed below. There
are two new subsidiaries in the period, Record Currency Management
(Jersey) Limited which was incorporated in Jersey on 30 March 2011,
and Record Currency Management (US) Inc. which was incorporated in
Delaware, US on 30 June 2011. All other subsidiaries are
incorporated in England and Wales.
Particulars of subsidiary undertakings
Name Nature of Business
------------------------------- -----------------------------------
Record Currency Management Currency management services
Limited
------------------------------- -----------------------------------
Record Group Services Limited Management services to other Group
undertakings
------------------------------- -----------------------------------
Record Currency Management Fund management company
(Jersey) Limited
------------------------------- -----------------------------------
Record Currency Management Service company
(US) Inc.
------------------------------- -----------------------------------
Record Portfolio Management Dormant
Limited
------------------------------- -----------------------------------
Record Fund Management Limited Dormant
------------------------------- -----------------------------------
N P Record Trustees Limited Trust company
------------------------------- -----------------------------------
Record plc's interest in the equity capital of subsidiary
undertakings is 100% of the ordinary share capital in all
cases.
The consolidated financial statements include all the
subsidiaries listed above, the Record plc Employee Benefit Trust
(EBT) which is a special purpose entity consolidated in accordance
with SIC 12, and three seeded funds (see note 8).
7. Derivative financial assets and liabilities
Derivative financial instruments held for trading
The Group trialled a new product in emerging markets from
November 2009 until January 2011, managing a portfolio of forward
exchange contracts in order to achieve a return. These contracts
were classified as financial assets held for trading. At 30
September 2011 there were no outstanding contracts (at 30 September
2010 there were outstanding contracts with a principal value of
GBP3,363,728; 31 March 2011: GBPnil). The fair value of the
contracts was calculated using the market forward contract rates
prevailing at the period end date. The maximum exposure to credit
risk was represented by the fair value of the positions and this
was mitigated by using cash deposited of GBP1m as collateral.
As at 30 As at 30 As at 31
Sep 11 Sep 10 Mar 11
GBP'000 GBP'000 GBP'000
----------------------------------- --------- --------- ---------
Forward foreign exchange contracts - 28 -
held for trading
----------------------------------- --------- --------- ---------
The net gain or loss on forward exchange contracts at fair value
is included in other income. The net gain or loss on financial
assets is as follows:
Six months Six months Year ended
ended ended 31 Mar 11
30 Sep 11 30 Sep 10
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ----------- -----------
Net gain / (loss) on forward
exchange contracts at fair value
through profit or loss - (30) 2
----------------------------------- ------------ ----------- -----------
Derivative financial instruments held to hedge cash flow
The Group uses forward exchange contracts to reduce the risk
associated with sales denominated in foreign currencies. At 30
September 2011 there were outstanding contracts with a principal
value of GBP3,627,750 (31 March 2011: GBP4,361,326; 30 September
2010: GBP4,171,559) for the sale 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 30
September 2011.
As at 30 As at 30 As at 31
Sep 11 Sep 10 Mar 11
GBP'000 GBP'000 GBP'000
------------------------------------ --------- --------- ---------
Forward foreign exchange contracts (78) 34 (12)
------------------------------------ --------- --------- ---------
The net gain or loss on forward foreign exchange contracts held
to hedge cash flow is as follows:
Six months Six months Year ended
ended ended 31 Mar 11
30 Sep 11 30 Sep 10
GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- -----------
Net (loss) or gain on fair value
through profit or loss (19) 209 263
---------------------------------- ----------- ----------- -----------
8. Current assets held for sale (disposal group)
From time to time, the Group injects capital into funds operated
by the Group to launch or trial new products (seed capital). The
Group invested GBP1,004,000 in the Record Currency FTSE FRB10 Index
Fund and a further GBP1,000,000 into each of the Record Currency
Emerging Market Currency Fund and the Record Euro Stress Fund. In
all three cases, Record plc holds a majority of the issued units.
In accordance with SIC-12 and IAS 27, such funds are considered to
be under control of the Group and as such the fund becomes a
subsidiary of the Group.
The Group consolidates the assets of its subsidiaries on a line
by line basis, but as the Group is actively seeking to reduce its
holding in these seeded funds through the sale of further units in
these funds to external investors and the subsequent redemption of
Record's own investment, the investments in the funds are
classified as being a disposal group held for sale.
The Group previously made a seed investment in the Record
Currency Fund Carry 250, and this was accounted for as a disposal
group held for sale on the same basis.
As at 30 As at 30 As at 31
Sep 11 Sep 10 Mar 11
GBP'000 GBP'000 GBP'000
---------------------------------- --------- --------- ---------
Seed capital classified as being
a disposal group held for sale 4,444 850 3,022
---------------------------------- --------- --------- ---------
The net loss on financial instruments held as part of a disposal
group is as follows:
Six months Six months Year ended
ended ended 31 Mar 11
30 Sep 11 30 Sep 10
GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- -----------
Net loss on financial instruments
held as part of disposal group 191 90 1
----------------------------------- ----------- ----------- -----------
The net loss on financial instruments held as part of disposal
group includes a loss of GBP74,720 attributable to non-controlling
interests.
9. Called up share capital
The share capital of Record plc consists only of fully paid
ordinary shares with a par value of 0.025p. All shares are equally
eligible to receive dividends and the repayment of capital and
represent one vote at the shareholders' meeting.
As at 30 Sep As at 30 Sep As at 31 Mar
11 10 11
--------------------- ---------------------- ---------------------- ----------------------
GBP'000 Number GBP'000 Number GBP'000 Number
--------------------- -------- ------------ -------- ------------ -------- ------------
Authorised
Ordinary shares
of 0.025p each 100 400,000,000 100 400,000,000 100 400,000,000
--------------------- -------- ------------ -------- ------------ -------- ------------
Called up, allotted
and fully paid
Ordinary shares
of 0.025p each 55 221,380,800 55 221,380,800 55 221,380,800
--------------------- -------- ------------ -------- ------------ -------- ------------
Changes to the issued share capital
GBP'000 Number
As at 1 April 2010 55 220,794,732
Adjustment for own shares held by EBT - 220,632
As at 30 September 2010 55 221,015,364
Adjustment for own shares held by EBT - 60,472
As at 31 March 2011 55 221,075,836
Adjustment for own shares held by EBT - (1,223,468)
As at 30 September 2011 55 219,852,368
--------------------------------------- -------- ------------
10 Share-based payments
During the six months ended 30 September 2011 the Group has
managed the following share-based compensation plans:
The Record plc Group Bonus Scheme
Under the terms of the scheme rules, certain employees of the
company could elect to receive a proportion of their bonus in the
form of a deferred share award. The number of shares was calculated
based on the residual bonus divided by the market value of the
shares at grant date. The shares were then available to the
employee after the vesting period for nil consideration upon
exercise. The final vesting of 48,100 shares under this scheme
occurred in June 2011.
The Record plc Group Profit Share Scheme
Under the terms of the scheme rules, employees and directors of
the company may elect to receive a proportion of their profit share
in the form of a share award. Directors and senior employees
receive one third of their profit share in cash, one third in
shares ('Earned Shares') and may elect to receive the final third
as cash only or to allocate some or all of the amount for the
purchase of Additional shares. Other employees receive two thirds
of their profit share in cash and may elect to receive the final
third as cash only or to allocate some or all of the amount for the
purchase of Additional shares. All employees electing to allocate a
portion of their profit share for the purchase of Additional shares
receive a Matching share value using a multiple decided by the
Remuneration Committee.
During the last financial year, significant shareholders were
required to take their profit share in cash and funded the Matching
share values for directors and senior employees from their profit
share value. From the start of this financial period, the funding
of the Matching share value is borne from the Profit Share Scheme
pool rather than from significant shareholders. Additionally, those
significant shareholders can no longer receive their profit share
in cash and must instead take their profit share in the same way as
for all other employees.
All shares the subject of share awards are transferred
immediately to a nominee and are subject to certain lock up
arrangements. None of these shares is subject to any vesting or
forfeiture provisions and the individual is entitled to full rights
in respect of the shares purchased. No such shares still under lock
up can be sold, transferred or otherwise disposed of without the
consent of the Remuneration Committee.
The Record plc Share Scheme
The Record plc Share Scheme was created for the granting of
share awards to senior employees. During the year ended 31 March
2009 two such employees were granted deferred share awards upon
appointment to the Group. These 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. The second vesting of
shares granted under this scheme occurred in the period, with
128,432 shares vesting.
The Record plc Share Scheme was amended in the period to
facilitate the grant of share options to certain individuals below
Board level selected by the Executive Committee as having the
skills and potential to contribute significantly to the business in
the future. The revised scheme rules allow the grant of
tax-approved options (subject to limits) as well as unapproved
options. During August 2011, options were issued to 5 such
individuals over a total of 1,400,000 shares under the unapproved
scheme. These options were granted at market price and will vest
evenly over 4 years, subject to employment and performance
conditions.
Share-based payment transactions with cash alternatives
Deferred share awards granted under the Record plc Group Bonus
Scheme and the Record plc Group Profit Share Scheme are accounted
for under IFRS 2 as share-based payment transactions with cash
alternatives.
Equity-settled share-based payments
Deferred share awards and options granted under the Record plc
Share Scheme are accounted for under IFRS 2 as equity-settled
share-based payment transactions.
The fair value of options granted is measured at grant date
using the Black-Scholes formula, taking into account the terms and
conditions under which the instruments were granted.
The fair value amounts for all options issued since Admission
were determined using quoted share prices.
11. Employee Benefit Trust
The Record plc Employee Benefit Trust (EBT) was formed to hold
shares acquired to meet obligations for 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 Bonus Scheme and 1,783,531 shares have been
purchased under the Record plc Share Scheme. A total of 706,312
shares have vested. The EBT continues to hold 1,528,432 shares at
30 September 2011 (31 March 2011: 304,964; 30 September 2010:
365,436). 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.
12. Non-controlling interests
Record plc has seeded three new funds, the Record Currency FTSE
FRB10 Index Fund, the Record Currency Emerging Market Currency Fund
and the Record Currency Euro Stress Fund. As Record plc holds a
majority of issued units in the case of all three seeded funds,
these funds have been consolidated into the Group's accounts. Three
other investors have invested into these funds, and as such have a
non-controlling interest in the accounts of Record Group.
Mark to market value of external holding in seeded funds
consolidated into the accounts of Record Group
As at 30 As at 30 As at 31
Sep 11 Sep 10 Mar 11
GBP'000 GBP'000 GBP'000
--------------------------------- --------- --------- ---------
Record Currency FTSE FRB10
Index Fund 485 - 510
Record Currency Emerging Market
Currency Fund 821 - 442
Record Currency Euro Stress 184 - -
Fund
Total 1,490 - 952
--------------------------------- --------- --------- ---------
13. Related parties transactions
The related parties transactions during the period are
consistent with the categories disclosed in the Annual Report for
the year ended 31 March 2011.
The compensation given to key management personnel is as
follows:
Six months Six months Year ended
ended ended 31 Mar 11
30 Sep 11 30 Sep 10
GBP'000 GBP'000 GBP'000
------------------------------ ----------- ----------- -----------
Short-term employee benefits 1,960 2,583 4,953
Post-employment benefits 170 144 296
Share-based payments 670 883 1,654
Dividends 2,924 657 2,907
------------------------------ ----------- ----------- -----------
5,724 4,267 9,810
------------------------------ ----------- ----------- -----------
14. Post reporting date events
No adjusting or significant non-adjusting events have occurred
between the reporting date and the date of authorisation. However,
in November 2011, Record was notified that its second largest
Dynamic Hedging client was terminating its mandate.
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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