TIDMREC
RNS Number : 2665R
Record PLC
16 November 2012
Record plc
PRESS RELEASE
16 November 2012
INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2012
Record plc, the specialist currency manager, today announces its
unaudited results for the six months ended 30 September 2012.
Financial highlights:
-- AuME(1) $32.5bn up 5% during the six months to 30 September
2012
-- Net client inflows during the six months of $1.2bn (six
months to 30 September 2011: net inflow of $1.0bn)
-- Profit before tax was GBP2.7m (six months to 30 September
2011: GBP3.7m)
-- Revenue for the six months to 30 September 2012 fell to
GBP8.7m (six months to 30 September 2011: GBP11.2m)
-- Average management fee rates of 8.9 bps for the six months to
30 September 2012 (six months to 30 September 2011: 11.9 bps)
reflecting changes in product mix
-- Operating costs, before Group Profit Share, reduced by
GBP0.9m to GBP4.7m (six months to 30 September 2011: GBP5.6m)
-- Operating margin 30% (six months to 30 September 2011:
33%)
-- Basic EPS of 0.94 pence (six months to 30 September 2011:
1.26 pence)
-- Subject to business conditions and a satisfactory outlook,
the intention is to recommend a final dividend of 1.50p per share
for the current financial year. No interim dividend will be
paid.
-- Shareholders' equity increased to GBP26.9m (30 September
2011: GBP25.9m) with a cash balance of GBP25.6m (30 September 2011:
GBP19.7m)
(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.
Key Points:
-- Passive hedging AuME increased by 11% since 31 March 2012 -
including three new clients
-- Client numbers grew by 2 to 43 (31 March 2012: 41)
-- First Multi-Strategy Currency for Return mandate
commenced
Commenting on the results, James Wood-Collins, Chief Executive
of Record plc, said:
"The first six months of the year has seen growing AuME and
client numbers, together with a marked increase in Requests for
Proposals for hedging mandates.
"As a result of the loss of historic mandates already announced,
revenue fell to GBP8.7m and as a result the operating margin fell
to 30%. The Group had cash of GBP25.6m and no debt at 30 September
2012.
"Looking to the remainder of the financial year, we are hopeful
that we can secure further hedging mandates, particularly passive
hedging in Switzerland. We continue to be encouraged by the
progress we have made in the US and are well positioned to benefit
from any formal procurement processes that are initiated. The level
of demand for currency mandates in the UK has been more modest and
this level of activity is likely to continue for the rest of the
financial year.
"Overall the business environment for our hedging services
appears to have improved and we are working hard to capitalise on
the opportunities that are presented to us, whilst continuing to
lay the foundations for future growth in demand for return-seeking
currency products."
Analyst briefing
There will be a presentation for analysts at 9.30am on Friday 16
November 2012 in the Copperfield Room, Holborn Bars, 138-142
Holborn, London, EC1N 2NQ. 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 Financial Officer / Chief Operating Officer
MHP Communications +44 20 3128 8100
Nick Denton, John Olsen, Vicky Watkins
Chairman's Statement
In the six months to 30 September 2012, we saw growing AuME and
client numbers. When compared to the same six months of the prior
year, however, we are reporting both lower management fee income
and lower profitability due to the changes in business mix that
have occurred over this period. By contrast, there has been a
noticeable increase in Requests For Proposals (RFPs) over the
period, principally for Passive Hedging, which is encouraging.
Dynamic Hedging continues to be the largest source of income,
generating 67% of revenue for the six months to 30 September 2012.
During this period there have been no changes to the number of
clients for whom we provide this product. In the UK we have seen
very little new business activity for Dynamic Hedging in the
current financial year. In the US we continue to market the product
to potential clients and investment consultants and whilst there is
a good level of engagement, the nature and timing of further client
additions remains uncertain.
Passive Hedging grew again during the period, accounting for 22%
of revenue for the six months to 30 September 2012 (year ended 31
March 2012: 15% of revenue). The Group continues to see demand for
Passive Hedging, particularly in Switzerland.
Currency for Return now covers a range of investment strategies
in currencies, including Carry, Momentum, Value, Emerging Markets
and Multi-Strategy. Further progress is being made in enhancing
this product offering. The external environment remains challenging
for asset managers offering Currency for Return products and a
pre-requisite for additional sales is sustained investment
performance from one or more of these strategies.
We continue to focus on marketing and selling our expertise to
potential clients in the UK, North America and continental Europe,
in particular Switzerland. The UK market remains subdued at the
present time with a low level of formal procurement processes being
initiated. Progress is being made in the US and the Group is now
far better placed with US clients and consultants who look for
currency solutions. Whilst there is a growing level of interest in
currency solutions in the US and Canada, the timing of potential
opportunities is uncertain. In Switzerland the growth in Passive
Hedging mandates in the first six months demonstrates the success
of the Group in this market. The Group is well positioned to gain
additional business from this market.
Assets under Management Equivalents ('AuME') increased to
$32.5bn at 30 September 2012, compared to $30.9bn at 31 March 2012.
The largest component of the growth was net flows, accounting for
$1.2bn. The positive equity market performance accounted for a
$0.9bn increase and movements in exchange rates accounted for a
$0.5bn decrease in AuME.
The financial performance of the Group saw revenue decrease to
GBP8.7m for the six months to 30 September 2012, a fall of 22%
compared to the six months to 30 September 2011. Profit before tax
for the period was GBP2.7m, being 27% lower than for the equivalent
period in the prior year.
As a result of declining profitability, measures have been taken
to reduce costs where appropriate and overall costs (before the
Group Profit Share 'GPS') have fallen to GBP4.7m for the six months
ended 30 September 2012. This represents a reduction of GBP0.9m,
being 16% of the cost base, over the same period in the prior year.
The extent of cost savings that can be implemented is constrained
by our need to maintain an appropriate level of support for
investment processes and client services.
The operating margin, at 30%, was also less than that achieved
in the six months to 30 September 2011 (33%). In addition to the
cost savings indicated above, the cost of the variable element of
remuneration, the GPS which is set at an average of 30% of pre-GPS
operating profit, has fallen in line with operating profit.
Shareholder funds increased to GBP26.9m at the period end,
versus GBP25.9m at the end of the comparable period in the prior
year. The Group has no debt and cash balances increased to
GBP25.6m, compared with GBP19.7m at 30 September 2011, principally
due to the consolidation of the cash positions within the seed
capital funds that had previously been categorised as assets held
for sale. The Group has a regulatory capital surplus and has cash
reserves equivalent to approximately two years' operating costs and
no debt.
As indicated in the Report and Accounts for the year ended 31
March 2012, the Group will not pay an interim dividend for the six
months ended 30 September 2012. However, subject to business
performance, the Board's intention is to retain the overall
dividend payable at 1.50p per share for the current financial
year.
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 continued to
reflect fluctuating bouts of risk appetite and risk aversion, as
the 'risk-on risk-off' phenomenon discussed in previous reports has
continued to manifest itself. One of the Group's attributes is that
its products are not uniformly sensitive to risk appetite, with
hedging products in particular offering alternative risk
sensitivity.
During the period, US-based Dynamic Hedging clients experienced
first US Dollar strength as markets feared a worsening of the
Eurozone crisis over the early part of the summer, followed by US
Dollar weakness as markets took comfort from measures put in place
by the European Central Bank, and the Federal Reserve commenced a
further round of quantitative easing. These programmes responded as
expected by providing partial offsets to both currency losses in
the earlier part of the period and currency gains in the later
part, resulting in modest underperformance over the period. The
lack of longer-term trends continues to make it challenging to
generate consistent outperformance.
UK-based Dynamic Hedging clients experienced relatively high
levels of volatility in Sterling currency pairs over the period,
with little clear directional movement. Investment performance over
the period was broadly flat, with modest gains in most months being
offset by somewhat larger losses in other months during the
period.
Within Currency for Return products, the performance of Forward
Rate Bias and Emerging Market strategies, as risk premia, has
tended to reflect falling then rising risk appetite across the
period. The FTSE Currency FRB10 Index underperformed in April and
May, before recovering strongly through June and July in particular
to generate a positive return over the period. This is attributable
in part to the equal weighting given to more risk sensitive
currencies such as the Australian Dollar, Canadian Dollar and
Norwegian Krone. This equal weighting explains much of the
underperformance of Record's established Active Forward Rate Bias
product, which has a lower allocation to these more risk sensitive
and less liquid currencies, as well as in-built risk management
costs.
Record's Emerging Market strategy showed similar
underperformance in April and May before somewhat recovering later
in the period, although not sufficiently to generate positive
performance over the period. This strategy reaches the third
anniversary of its 'live' track record in the second half of the
financial year.
The first half of the financial year saw the launch of Record's
first Multi-Strategy currency mandate, which represents an
important strategic step for the Group. This mandate combines
Record's Active FRB, Emerging Market, Value and Momentum
strategies. The few months of performance since launch are
insufficient to judge, but Record is enthusiastic about this
product's long-term appeal due to its combination of FRB and
Emerging Market as risk premia, with Value and Momentum as risk
diversifiers, which together are expected to offer investors a more
diversified and less volatile opportunity to invest in Currency for
Return.
As previously announced, this period also saw the closure of the
Euro Stress Fund, due to Record's recognition that Eurozone stress
has been more evident in markets other than currency, and we
believe this may persist. Record will continue to explore tactical
and non-systematic investment strategies to complement our
longer-standing more systematic approaches.
Group strategy and outlook
With risk aversion continuing to be a theme of financial
markets, hedging products continue to be the most likely source of
new revenue for the Group in the short term. The Group continues to
actively market its hedging products particularly in North America,
the UK and Switzerland. There has been a marked increase in the
number of formal RFPs, particularly for Passive Hedging from
Switzerland, in the first half of the financial year and it is
hoped that this level of activity will continue.
The product suite of Currency for Return products is now largely
complete with the addition of Value, Momentum and a Multi-Strategy
offering. It is encouraging to have secured our first
Multi-Strategy mandate. Whilst we continue to market these products
to clients, demand remains subdued as risk aversion appears to be a
prevailing theme. Those products that are able to build compelling
three-year track records have the greatest chance of success, with
the Emerging Market strategy reaching a three year 'live' history
in the second half of the financial year.
Hedging is likely to provide short-term growth opportunities
with medium-term growth being built on the success of our Currency
for Return products.
Neil Record
Chairman
15 November 2012
Interim Management Review
Business overview
The six months ended 30 September 2012 has seen AuME growth,
principally in Passive Hedging. Dynamic Hedging has remained stable
in the period and Currency for Return has seen a reduction in AuME
as a result of the closure of the Forward Rate Bias Alpha pooled
fund. Both Currency Momentum and Currency Value strategies began in
the period as part of a Multi-Strategy Currency for Return
mandate.
Income for the first half of the financial year has fallen
compared to the preceding six months despite increasing AuME as the
product mix has moved from the higher income Dynamic Hedging and
Currency for Return products towards the lower income Passive
Hedging product. Costs have also fallen compared to the preceding
six months as a result of cost control measures implemented since
November 2011.
In October 2012 the Group completed its key infrastructure
development project, which was the implementation of a new middle
and back office system. This will improve both Record's capability
to deploy new products and portfolios in a cost effective manner,
and improve levels of client service.
The Group generated revenue of GBP8.7m and pre-tax profit of
GBP2.7m for the six months ended 30 September 2012. As indicated in
the Annual Report and Accounts for 31 March 2012, there will be no
interim dividend in the current financial year. The Board's
intention, subject to business conditions, remains to propose a
final dividend of 1.50p per share, unchanged on the overall
dividend paid in respect of the year ended 31 March 2012.
Investment performance
Record's Dynamic Hedging product seeks to allow our clients to
benefit from foreign currency strength while protecting them from
foreign currency weakness. It performs best when currency movements
exhibit trends over periods of 12 months or longer.
From the US perspective the Dollar strengthened significantly in
the first quarter of the financial year before giving back this
appreciation in the second quarter to finish the half year weaker.
Returns from Dynamic Hedging mirrored this, with the cost of
varying hedge ratios in the absence of pronounced trends preventing
outperformance.
From the UK perspective, international equity hedging clients
saw overall strengthening of Sterling with the exception of the
month of May when the US Dollar outperformed Sterling. The product
generated returns which marginally outperformed a 50% hedged
benchmark.
The Currency for Return products had mixed results in the first
half of the financial year. 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. Overall performance for the FRB Alpha strategy
during the period was negative, as positive returns achieved in the
first three months were offset by underperformance in the second
quarter due to the costs of the embedded risk control
mechanism.
The FTSE FRB10 Index Fund outperformed during the period as the
low interest rate developed-world currencies underperformed, with
high commodity prices, improving sentiment and US quantitative
easing, all providing a platform for positive returns from the
strategy. For the Emerging Market (EM) Currency Fund investment
performance was negative over the period with losses during the
first half of the period and gains made towards the end of the
period.
A new Multi-Strategy Currency for Return product was launched at
the end of July. It includes four independent return streams:
Forward Rate Bias, Emerging Markets, and the new Record Value and
Momentum strategies. These return streams have characteristically
shown risk diversification, with FRB and Emerging Markets as risk
premia, and Value and Momentum as risk diversifiers.
The Euro Stress Fund, which underperformed over the period, was
closed in September. The ECB's announcement of a "fully effective
backstop" through unlimited bond purchases, supportive verdicts
from the German Constitutional Court and the Dutch electorate, and
the resumption of QE 3 by the Federal Reserve brought about a rally
in risk assets and the Euro itself. While we continue to share
widespread doubts about the ultimate viability of the single
currency, coordinated actions within the Eurozone have arrested
immediate concerns of further decline, and lessened the opportunity
to capitalise on such concerns through currency markets.
Returns of Record Umbrella Currency Funds and comparable indices
for the six months to 30 September 2012
Gearing Half year Volatility
return since inception
p.a.
-------------------------------- -------- ---------- -----------------
Fund name
-------------------------------- -------- ---------- -----------------
FTSE FRB10 Index Fund(1) 1.8 1.99% 8.28%
-------------------------------- -------- ---------- -----------------
Emerging Market Currency
Fund(2) 1 -1.79% 8.72%
-------------------------------- -------- ---------- -----------------
Record Alpha composite(3) -0.71% 2.74%
-------------------------------- -------- ---------- -----------------
Indices
-------------------------------- -------- ---------- -----------------
FTSE Currency FRB 5 GBP Excess
return 0.13% 5.79%
-------------------------------- -------- ---------- -----------------
FTSE Currency FRB 10 GBP
Excess return 1.06% 4.74%(4)
-------------------------------- -------- ---------- -----------------
(1) FTSE FRB10 Index Fund return data is since inception in
December 2010.
(2) Emerging Market Currency Fund return data is since inception
in December 2010.
(3) The Record Alpha composite comprises 2 accounts and $0.37bn
of assets.
(4) Inception date is 31 December 1987.
Distribution
Sales and marketing activities are organised to ensure that our
resources are being deployed where there is the greatest likelihood
of success. Sales and marketing are primarily focussed on the UK,
North America and Switzerland with additional activity in
continental Europe. From time to time the Group receives enquiries
outside of these geographical locations and responds to those
enquiries that are commercially attractive.
The UK market has been subdued in the first six months of the
current financial year with very little activity in Passive
Hedging, Dynamic Hedging or Currency for Return. It is not
envisaged that the situation will improve in the second half of the
financial year.
Activity in North America has mainly involved educating
potential clients and the consultant community on the Group's
products. The US sales executive has now been with the Group for
sixteen months, during which time he has met a large number of
potential clients and investment consultants. This has led to more
detailed engagement with a number of potential clients and
consultants, principally for either Dynamic Hedging or a
combination of Dynamic Hedging and a Multi-Strategy offering.
Whilst it is difficult to predict when, or even if, individual
clients may look to adopt either currency hedging or return-seeking
strategies, we continue to believe that mandates can be secured
over the medium term. The scale of the US institutional investment
market, and its current low rate of adoption of currency management
strategies, makes this market potentially transformational for
Record in the future, although achievement of this is uncertain at
present.
Switzerland continues to be a market where the Group has
experienced a good level of recent sales success. The Swiss market
has a propensity toward Passive Hedging and the Group is seen as
having a good reputation with a number of 'marquee' clients and is
also particularly well regarded for its Passive Hedging offering.
The Group now has a sales representative based in Switzerland to
build on the success that has been achieved in this market.
Product development
With the launch of Currency Momentum and Currency Value,
together with the Multi-Strategy offering, the suite of Currency
for Return products has now been substantially redeveloped over the
last three years. Demonstrating investable track records for these
products is seen as a pre-cursor to attracting meaningful assets
under management. Both the Emerging Market product and the FTSE
FRB10 Index Fund reach these milestones later this year and next
year respectively.
In addition to developments in Currency for Return products, we
continue to monitor developments in the currency markets and are
constantly looking at opportunities to enhance our hedging product
offerings.
Client development
Client numbers increased to 43 at 30 September 2012 (41 at 31
March 2012).
30 September 30 September 31 March 2012
2012 2011
--------------------------- ------------- ------------- --------------
Dynamic Hedging 9 11 9
Passive Hedging 25 22 22
Currency for Return 11 17 14
Other Currency Management
services 2 - 1
Adjustment for clients
with > 1 product (4) (7) (5)
--------------------------- ------------- ------------- --------------
Total 43 43 41
--------------------------- ------------- ------------- --------------
AuME analysis
As previously noted, the Group's AuME was $32.5bn at 30
September 2012, an increase of $1.6bn during the six month
period.
AuME movement in the six months to 30 September 2012
$bn
-------------------------------- ------
AuME at 31 March 2012 30.9
Net client inflows 1.2
Equity and other market impact 0.9
Foreign exchange impact (0.5)
-------------------------------- ------
AuME at 30 September 2012 32.5
-------------------------------- ------
Net client flows
During the six months to 30 September 2012 net client inflows
were $1.2bn, principally due to increases in Passive Hedging offset
by reductions in pooled Currency for Return mandates.
Equity and other market performance
Record's AuME is affected by movements in equity and other
market levels because substantially all the Passive and Dynamic
Hedging, and some of the Currency for Return mandates, are linked
to equity and other market levels. Market performance increased
AuME in the six months to 30 September 2012 by $0.9bn.
Foreign exchange
The foreign exchange effect of expressing non-US$ AuME in US$
had a small impact on AuME. 80% of the Group's AuME is non-US$
denominated and expressing this in US$ decreased AuME for the
period by $0.5bn.
Product mix
The factors determining the movements in AuME also impact its
composition. At 30 September 2012 Currency for Return represented
5% of total AuME. This is down from 10% at 30 September 2011 and
down from 6% at 31 March 2012. Dynamic Hedging represented $9.9bn
and 30% of total AuME at 30 September 2012, down from 38% at 30
September 2011 and unchanged AuME from 31 March 2012. Passive
Hedging represented $21.0bn and 65% of total AuME at 30 September
2012, up from 51% at 30 September 2011 and 61% at 31 March
2012.
AuME by product expressed in US Dollars ($bn)
As at 30 September As at 30 September As at 31 March
2012 2011 2012
Dynamic Hedging 9.9 30% 11.1 38% 9.9 32%
Passive Hedging 21.0 65% 14.7 51% 18.9 61%
Currency for Return 1.5 5% 2.8 10% 1.8 6%
Cash and other 0.1 0% 0.3 1% 0.3 1%
--------------------- ---------- --------- ---------- --------- -------- -------
Total 32.5 100% 28.9 100% 30.9 100%
--------------------- ---------- --------- ---------- --------- -------- -------
AuME by product expressed in Sterling (GBPbn)
As at 30 September As at 30 September As at 31 March
2012 2011 2012
Dynamic Hedging 6.1 30% 7.2 38% 6.2 32%
Passive Hedging 13.0 65% 9.4 51% 11.8 61%
Currency for Return 0.9 5% 1.8 10% 1.1 6%
Cash and other 0.1 0% 0.2 1% 0.2 1%
--------------------- ---------- --------- ---------- --------- -------- -------
Total 20.1 100% 18.6 100% 19.3 100%
--------------------- ---------- --------- ---------- --------- -------- -------
The AuME composition has remained largely unchanged in terms of
the underlying base currencies. Swiss Franc was the base currency
for 49% of total AuME at 30 September 2012 (31 March 2012: 47%), US
Dollar was the base currency for 20% of total AuME at 30 September
2012 (31 March 2012: 21%), and Sterling was the base currency for
26% of total AuME at 30 September 2012 (31 March 2012: 28%).
AuME by base currency and product
Dynamic Hedging Passive Hedging Currency for
Return
--------------------------- -------------------- -------------------- ------------------
Base currency (billions) 30 Sep 31 Mar 30 Sep 31 Mar 30 Sep 31 Mar
12 12 12 12 12 12
Sterling GBP 1.8 GBP 1.7 GBP 3.3 GBP 3.4 - GBP 0.2
US Dollar USD 5.8 USD 5.9 USD 0.2 - USD 0.6 USD 0.7
Swiss Franc CHF 1.2 CHF 1.2 CHF 13.1 CHF 11.6 CHF 0.6 CHF 0.5
Euro - - EUR 1.2 EUR 0.6 - -
Canadian Dollar - - - - CAD 0.3 CAD 0.2
--------------------------- --------- --------- --------- --------- -------- --------
Total USD 9.9 USD 9.9 USD 21.0 USD 18.9 USD 1.5 USD 1.8
--------------------------- --------- --------- --------- --------- -------- --------
AuME by client type ($bn)
As at 30 September As at 30 September As at 31 March
2012 2011 2012
Government & public
funds 21.7 67% 18.4 64% 20.8 67%
Corporate 7.3 22% 6.9 24% 6.4 21%
Foundations & investment
funds 3.5 11% 3.6 12% 3.7 12%
-------------------------- ---------- --------- ---------- --------- -------- -------
Total 32.5 100% 28.9 100% 30.9 100%
-------------------------- ---------- --------- ---------- --------- -------- -------
AuME by client location ($bn)
As at 30 September As at 30 September As at 31 March
2012 2011 2012
UK 8.6 26% 8.5 29% 8.7 28%
Europe (excluding
UK) 18.2 56% 12.9 45% 16.5 54%
North America 5.7 18% 7.5 26% 5.7 18%
------------------- ---------- --------- ---------- --------- -------- -------
Total 32.5 100% 28.9 100% 30.9 100%
------------------- ---------- --------- ---------- --------- -------- -------
Revenue
Management fee income for the six months to 30 September 2012
was GBP8.8m, which was 22% lower than for the six months to 30
September 2011 (GBP11.3m). For the six months to 30 September 2012,
Dynamic Hedging and Currency for Return products generated lower
management fees whilst Passive Hedging generated higher management
fees than over the same period last year. In the six months to 30
September 2012 Dynamic Hedging generated 67% of management fee
income, with Currency for Return generating 11%. The reduction in
Dynamic Hedging management fee income is primarily due to the loss
of the second largest Dynamic Hedging client from November
2011.
Revenue by product (GBPm)
Six months Six months Year ended
ended 30 September ended 30 September 31 March 2012
2012 2011
----------------------- -------------------- -------------------- ---------------
Management fees
Dynamic Hedging 5.9 7.4 13.5
Passive Hedging 1.9 1.5 3.0
Currency for Return 1.0 2.4 3.9
Total management fees 8.8 11.3 20.4
----------------------- -------------------- -------------------- ---------------
Other income (0.1) (0.1) 0.1
Total revenue 8.7 11.2 20.5
----------------------- -------------------- -------------------- ---------------
Other Group activities include consultancy and gains / losses on
derivative financial instruments.
The average fee rate achieved for Dynamic Hedging decreased to
19.0bps (six months to 30 September 2011: 20.2bps) whilst average
fee rates for Passive Hedging were broadly unchanged at 3.0bps.
Average management fee rates by product - (bps)(1)
Six months Six months Year ended
ended 30 September ended 30 September 31 March 2012
2012 2011
----------------------- -------------------- -------------------- ---------------
Dynamic Hedging 19.0 20.2 20.0
Passive Hedging 3.0 3.1 3.1
Currency for Return 21.4 24.5 23.8
----------------------- -------------------- -------------------- ---------------
Composite average fee
rate 8.9 11.9 11.2
----------------------- -------------------- -------------------- ---------------
(1) bps = basis points = 1/100(th) of 1 percentage point
Expenditure
Total expenditure in the six months to 30 September 2012 fell by
GBP1.4m to GBP6.0m from GBP7.4m in the six months to 30 September
2011. The reduction was mainly attributable to a number of cost
reduction initiatives focussed on personnel and non-personnel costs
(reductions of GBP0.2m and GBP0.7m respectively) and also to the
falling cost of the Group Profit Share (GPS) scheme which was 30%
of pre-GPS operating profit in the period (reduction of
GBP0.4m).
Under the GPS scheme rules, the intention is to purchase shares
in the market following the announcement of interim and full year
financial results in order to meet mandatory and elective share
awards.
Expenditure analysis (GBPm)
Six months Six months Year ended
ended 30 September ended 30 September 31 March 2012
2012 2011
---------------------------- -------------------- -------------------- ---------------
Personnel costs 3.0 3.2 6.4
Non-personnel costs 1.7 2.4 4.2
---------------------------- -------------------- -------------------- ---------------
Administrative expenditure
excluding Group Profit
Share 4.7 5.6 10.6
Group Profit Share
(GPS) 1.2 1.6 2.8
---------------------------- -------------------- -------------------- ---------------
Total administrative
expenditure 5.9 7.2 13.4
Loss on financial
instruments held as
part of disposal group 0.1 0.2 0.3
---------------------------- -------------------- -------------------- ---------------
Total expenditure 6.0 7.4 13.7
---------------------------- -------------------- -------------------- ---------------
Operating margins
The operating profit for the six months to 30 September 2012 of
GBP2.6m (six months ended 30 September 2011: GBP3.7m) reflects the
lower management fee income in the period mitigated by both the
impact of the Group's cost reduction programme which has reduced
personnel costs by 6% and non-personnel costs by 29%, and the lower
cost of the GPS scheme. The operating margin of 30% compares with
33% operating margin for the same period in 2011.
Operating cash flow
The Group generated GBP2.4m of cash flow from operating
activities after tax during the six months ended 30 September 2012
(six months ended 30 September 2011: GBP0.5m). Taxation paid during
the period was GBP0.9m compared with GBP1.8m for the six months to
30 September 2011. On 1 August 2012 the Group paid a final dividend
of 0.75p per share in respect of the period ended 31 March 2012.
This equated to a distribution to shareholders of GBP1.6m (six
months ended 30 September 2011: GBP5.7m).
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
GBP26.9m at 30 September 2012 (30 September 2011: GBP25.9m).
Dividends
As indicated in the Annual Report for the year ended 31 March
2012, the Group does not intend to pay an interim dividend in the
current financial year. The Board's intention remains to recommend
a final dividend of 1.50p per share for the financial year ending
31 March 2013 subject to satisfactory business conditions in the
second half of the financial year.
Principal risks and uncertainties
The principal risks and uncertainties documented in the Annual
Report and Accounts for the year ended 31 March 2012 are still
relevant to Record.
The risk associated with account concentration has remained
throughout the six months to 30 September 2012. The proportion of
revenue generated from the largest client was 32% at 30 September
2012 (31 March 2012: 29%). The proportion of revenue generated from
the largest five clients was 66% at 30 September 2012 (31 March
2012: 60%) and for the largest ten clients was 86% at 30 September
2012 (31 March 2012: 81%).
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
15 November 2012 15 November 2012
Independent review report to Record plc (the "Company")
Introduction
We have reviewed the condensed set of financial statements in
the half-yearly financial report of Record plc for the six months
ended 30 September 2012 which comprises the consolidated statement
of comprehensive income, the consolidated statement of financial
position, the consolidated statement of cash flows, the
consolidated statement of changes in equity and the related notes.
We have read the other information contained in the half yearly
financial report 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's members, as a body,
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'. Our review
work has been undertaken so that we might state to the Company's
members those matters we are required to state to them in an
independent 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 and the Company's members as a
body, 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 International Financial
Reporting Standards 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'. 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 2012 is not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial
Services Authority.
Grant Thornton UK LLP
Auditor
London
15 November 2012
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sep 30 Sep 31 Mar
12 11 12
Note GBP'000 GBP'000 GBP'000
------------------------------------------ ----- ------------ ------------ ---------
Revenue 3 8,714 11,167 20,535
Cost of sales (136) (123) (252)
------------------------------------------ ----- ------------ ------------ ---------
Gross profit 8,578 11,044 20,283
Administrative expenses (5,864) (7,188) (13,430)
Loss on financial instruments
held as part of disposal group 8 (67) (191) (299)
------------------------------------------ ----- ------------ ------------ ---------
Operating profit 2,647 3,665 6,554
Finance income 80 84 155
Profit before tax 2,727 3,749 6,709
Taxation (725) (1,043) (1,803)
------------------------------------------ ----- ------------ ------------ ---------
Profit after tax and total comprehensive
income for the period 2,002 2,706 4,906
Total comprehensive income for
the period attributable to:
Non-controlling interests (69) (75) (7)
Owners of the parent 2,071 2,781 4,913
------------------------------------------ ----- ------------ ------------ ---------
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 0.94p 1.26p 2.23p
Diluted earnings per share 4 0.94p 1.26p 2.23p
------------------------------------------ ----- ------------ ------------ ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note Unaudited Unaudited Audited
as at as at as at
30 Sep 12 30 Sep 11 31 Mar 12
GBP'000 GBP'000 GBP'000
---------------------------------- ----- ----------- ----------- -----------
Non-current assets
Property, plant and equipment 167 201 183
Intangible assets 1,078 1,138 1,140
Deferred tax assets - 62 -
---------------------------------- ----- ----------- ----------- -----------
1,245 1,401 1,323
Current assets
Trade and other receivables 5,919 6,237 5,070
Derivative financial assets 7 75 - 33
Cash and cash equivalents 25,575 19,659 24,572
---------------------------------- ----- ----------- ----------- -----------
31,569 25,896 29,675
Current assets held for
sale (disposal group) 8 - 4,444 1,075
---------------------------------- ----- ----------- ----------- -----------
Total current assets 31,569 30,340 30,750
---------------------------------- ----- ----------- ----------- -----------
Total assets 32,814 31,741 32,073
---------------------------------- ----- ----------- ----------- -----------
Current liabilities
Trade and other payables (2,814) (3,215) (2,494)
Corporation tax liabilities (679) (1,043) (900)
Derivative financial liabilities 7 - (78) (48)
---------------------------------- ----- ----------- ----------- -----------
(3,493) (4,336) (3,442)
---------------------------------- ----- ----------- ----------- -----------
Deferred tax liabilities (29) - (15)
---------------------------------- ----- ----------- ----------- -----------
Total net assets 29,292 27,405 28,616
---------------------------------- ----- ----------- ----------- -----------
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 25,053 24,031 24,469
---------------------------------- ----- ----------- ----------- -----------
Equity attributable to owners
of the parent 26,937 25,915 26,353
Non-controlling interests 12 2,355 1,490 2,263
---------------------------------- ----- ----------- ----------- -----------
Total equity 29,292 27,405 28,616
---------------------------------- ----- ----------- ----------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 September 2011
Called Share premium Capital Retained Non-controlling Total equity
up share account redemption earnings interests
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)
Share-based payments - - - 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
------------------------------ ---------- -------------- ------------ ---------- ---------------- -------------
Six months ended 31 March 2012
Called Capital
up share Share premium redemption Retained Non-controlling
capital account reserve earnings interests Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- -------------- ------------ ---------- ---------------- -------------
As at 30 September
2011 55 1,809 20 24,031 1,490 27,405
Dividends paid - - - (1,645) - (1,645)
Own shares held
by EBT - - - (75) - (75)
Share-based payments - - - 26 - 26
Issue of units
in funds to non-controlling
interests - - - - 705 705
------------------------------ ---------- -------------- ------------ ---------- ---------------- -------------
Transactions
with owners - - - (1,694) 705 (989)
Profit for the
period - - - 2,132 68 2,200
As at 31 March
2012 55 1,809 20 24,469 2,263 28,616
------------------------------ ---------- -------------- ------------ ---------- ---------------- -------------
Six months ended 30 September 2012
Called Share premium Capital Retained Non-controlling Total equity
up share account redemption earnings interests
capital reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- -------------- ------------ ---------- ---------------- -------------
As at 31 March
2012 55 1,809 20 24,469 2,263 28,616
Dividends paid - - - (1,645) - (1,645)
Share-based payments - - - 134 - 134
Employee share
options - - - 24 - 24
Issue of units
in funds to non-controlling
interests - - - - 161 161
------------------------------ ---------- -------------- ------------ ---------- ---------------- -------------
Transactions
with owners - - - (1,487) 161 (1,326)
Profit for the
period - - - 2,071 (69) 2,002
As at 30 September
2012 55 1,809 20 25,053 2,355 29,292
------------------------------ ---------- -------------- ------------ ---------- ---------------- -------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sep 30 Sep 31 Mar
12 11 12
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------ ------------ --------
Profit after tax 2,002 2,706 4,906
Adjustments for:
Corporation tax 725 1,043 1,803
Finance income (80) (84) (155)
Depreciation of property, plant
and equipment 50 41 96
Amortisation of intangible assets 62 - 10
Share-based payments expense 158 173 199
--------------------------------------- ------------ ------------ --------
2,917 3,879 6,859
Changes in working capital
(Increase) / Decrease in receivables (851) 651 1,831
Increase / (Decrease) in payables 320 (874) (1,594)
Decrease / (Increase) in other
financial assets 1,033 (1,422) (2,082)
(Decrease) / Increase in other
financial liabilities (48) 66 35
--------------------------------------- ------------ ------------ --------
CASH INFLOW FROM OPERATING ACTIVITIES 3,371 2,300 5,049
Corporation taxes paid (932) (1,829) (2,656)
--------------------------------------- ------------ ------------ --------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 2,439 471 2,393
INVESTING ACTIVITIES
Purchase of property, plant and
equipment (34) (15) (52)
Purchase of intangible assets - (53) (65)
Interest received 82 100 158
--------------------------------------- ------------ ------------ --------
NET CASH INFLOW FROM INVESTING
ACTIVITIES 48 32 41
FINANCING ACTIVITIES
Cash inflow from issue of units
in funds 161 613 1,318
Purchase of treasury shares - (459) (534)
Dividends paid to equity shareholders (1,645) (5,726) (7,371)
--------------------------------------- ------------ ------------ --------
NET CASH OUTFLOW FROM FINANCING
ACTIVITIES (1,484) (5,572) (6,587)
NET INCREASE / (DECREASE) IN CASH
AND CASH EQUIVALENTS IN THE PERIOD
(prior to increase in cash due
to accounting treatment of assets
previously presented as disposal
group) 1,003 (5,069) (4,153)
Increase in cash due to accounting
treatment of assets previously
presented as disposal group - - 3,997
--------------------------------------- ------------ ------------ --------
NET INCREASE / (DECREASE) IN CASH
AND CASH EQUIVALENTS IN THE PERIOD 1,003 (5,069) (156)
Cash and cash equivalents at the
beginning of the period 24,572 24,728 24,728
--------------------------------------- ------------ ------------ --------
CASH AND CASH EQUIVALENTS AT THE
END OF THE PERIOD 25,575 19,659 24,572
--------------------------------------- ------------ ------------ --------
Closing cash and cash equivalents
consists of:
Cash 5,075 2,256 4,669
Cash equivalents 20,500 17,403 19,903
----------------------------------- ------- ------- -------
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 2012 (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 2012.
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.
Other Group activities include consultancy and gains / losses on
derivative financial instruments.
Revenue by product type
Six months Six months Year ended
ended ended 31 Mar
30 Sep 12 30 Sep 11 12
GBP'000 GBP'000 GBP'000
----------------------------- ----------- ----------- -----------
Management fees
Dynamic Hedging 5,855 7,373 13,536
Passive Hedging 1,888 1,454 2,989
Currency for Return 1,010 2,452 3,911
Total management fee income 8,753 11,279 20,436
Other Group activities (39) (112) 99
----------------------------- ----------- ----------- -----------
Total revenue 8,714 11,167 20,535
----------------------------- ----------- ----------- -----------
(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 turnover originated in the UK.
Revenue by geographical region
Six months Six months Year ended
ended ended 31 Mar
30 Sep 12 30 Sep 11 12
GBP'000 GBP'000 GBP'000
----------------------------- ----------- ----------- -----------
UK 2,334 3,061 5,627
US 3,280 5,206 8,886
Switzerland 2,670 2,710 5,288
Other 469 302 635
----------------------------- ----------- ----------- -----------
Total management fee income 8,753 11,279 20,436
Other Group activities (39) (112) 99
----------------------------- ----------- ----------- -----------
Total revenue 8,714 11,167 20,535
----------------------------- ----------- ----------- -----------
Other Group activities form less than 1% of the total revenue.
This is not considered significant and they are not analysed by
geographical region.
(c) Major clients
During the six months ended 30 September 2012, two clients each
contributed more than 10% of the Group's revenue for the six month
period, being GBP2.8m (32%) and GBP0.9m (11%) respectively.
4. 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 financial
period 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 12
30 Sep 12 30 Sep 11
----------------------------------- ------------ ------------ ------------
Weighted average number of shares
used in calculation of basic
earnings per share 219,382,105 220,683,191 220,100,209
Effect of dilutive potential
ordinary shares - share options 158,695 113,523 240,779
----------------------------------- ------------ ------------ ------------
Weighted average number of shares
used in calculation of diluted
earnings per share 219,540,800 220,796,714 220,340,988
----------------------------------- ------------ ------------ ------------
pence pence pence
----------------------------------- ------------ ------------ ------------
Basic earnings per share 0.94 1.26 2.23
Diluted earnings per share 0.94 1.26 2.23
----------------------------------- ------------ ------------ ------------
The potential dilutive shares relate to the share options
granted in respect of the Group's Share Schemes. There were share
options and deferred share awards in place at the beginning of the
period over 2,028,432 shares. During the period options were
exercised, or share awards vested, over 128,432 shares. The Group
did not grant any new share options with a potentially dilutive
effect during the period.
5. Dividends
The dividends paid by the Group during the six months ended 30
September 2012 in respect of the year ended 31 March 2012 totalled
GBP1,645,143 (0.75p per share). The dividends paid during the year
ended 31 March 2012 totalled GBP7,371,007 (3.34p per share) of
which GBP1,645,143 (0.75p per share) was the interim dividend paid
in respect of the year ended 31 March 2012 and GBP5,725,864 (2.59p
per share) was the final dividend paid in respect of the year ended
31 March 2011. The dividends paid by the Group during the six
months ended 30 September 2011 totalled GBP5,725,864 (2.59p per
share) in respect of the year ended 31 March 2011.
6. Investments
Record plc is the ultimate parent company of the Record Group
and has seven subsidiary undertakings that are listed below.
Particulars of subsidiary undertakings:
Name Nature of Business
------------------------------------ -----------------------------------
Record Currency Management Limited Currency management services
------------------------------------ -----------------------------------
Record Group Services Limited Management services to other Group
undertakings
------------------------------------ -----------------------------------
Record Currency Management (Jersey) Fund management company
Limited
------------------------------------ -----------------------------------
Record Currency Management (US) Service company
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.
Record Currency Management (US) Inc. is incorporated in Delaware,
USA and Record Currency Management (Jersey) Limited is incorporated
in Jersey. All other subsidiaries are incorporated in England and
Wales.
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
The Group holds derivative financial instruments for two
purposes. The Group uses forward exchange contracts to reduce the
risk associated with sales denominated in foreign currencies, and
also in order to achieve a return within its seeded investment
funds. The instruments are recognised at fair value. The fair value
of the contracts was calculated using the market forward contract
rates prevailing at the period end date. The net gain or loss on
forward foreign exchange contracts at fair value is included in
other income.
Derivative financial assets As at As at As at
30 Sep 12 30 Sep 11 31 Mar 12
GBP'000 GBP'000 GBP'000
------------------------------------ ----------- ----------- -----------
Forward foreign exchange contracts
held to hedge cash flow 33 - 33
Forward foreign exchange contracts 42 - -
held for trading
------------------------------------ ----------- ----------- -----------
Total derivative financial assets 75 - 33
------------------------------------ ----------- ----------- -----------
Derivative financial liabilities As at As at As at
30 Sep 12 30 Sep 11 31 Mar 12
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------ ----------- -----------
Forward foreign exchange contracts - (78) -
held to hedge cash flow
Forward foreign exchange contracts
held for trading - - (48)
---------------------------------------- ------------ ----------- -----------
Total derivative financial liabilities - (78) (48)
---------------------------------------- ------------ ----------- -----------
Derivative financial instruments held to hedge cash flow
At 30 September 2012 there were outstanding contracts with a
principal value of GBP2,940,315 (31 March 2012: GBP2,685,811; 30
September 2011: GBP3,627,750) for the sale of foreign currencies in
the normal course of business.
The net gain or loss on forward foreign exchange contracts held
to hedge cash flow is as follows:
Derivative financial instruments Six months Six months Year
held to hedge cash flow ended ended ended
30 Sep 12 30 Sep 11 31 Mar 12
GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- -----------
Net gain / (loss) on forward
foreign exchange contracts at
fair value through profit or
loss 49 (19) 68
---------------------------------- ----------- ----------- -----------
Derivative financial instruments held for trading
Two of the funds seeded by Record (the Record Currency FTSE
FRB10 Index Fund and the Record Currency Emerging Market Currency
Fund), use forward exchange contracts in order to achieve a return.
The Record Currency - Euro Stress Fund used a variety of
instruments including forward foreign exchange contracts in order
to achieve a return. The forward foreign exchange contracts held by
the Record Currency FTSE FRB10 Index Fund and the Record Currency
Emerging Market Currency Fund are classified as financial assets
held for trading. At 30 September 2012 there were outstanding
contracts with a principal value of GBP9,253,711 (31 March 2012:
GBP9,112,251; 30 September 2011 all outstanding contracts held by
the Record Currency FTSE FRB10 Index Fund and the Record Currency
Emerging Market Currency Fund were presented within Current assets
held for sale). The instruments held by the Record Currency - Euro
Stress Fund have been presented within Current assets held for sale
(see note 8).
The net gain or loss on forward foreign exchange contracts held
for trading is as follows:
Derivative financial instruments Six months Six months Year
held for trading ended ended ended
30 Sep 12 30 Sep 11 31 Mar 12
GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- -----------
Net (loss) or gain on forward
foreign exchange contracts at
fair value through profit or
loss (61) - 197
---------------------------------- ----------- ----------- -----------
8. Current assets held for sale (disposal group)
From time to time, the Group injects capital into funds operated
by the Group to trial new products (seed capital). If the Group is
able to exercise control over such a seeded fund by holding a
majority interest (whether the majority interest is held by Record
plc alone, or by combining the interests of Record plc and its
Directors), then such funds are considered to be under control of
the Group and as such the fund is accounted for as a subsidiary of
the Group in accordance with SIC-12 and IAS 27.
The Group consolidates the assets of its subsidiaries on a line
by line basis, but where the Group is actively seeking to reduce
its holding in the seeded funds within twelve months of its initial
investment in the fund, 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 as it is
considered highly probable that the funds will not remain under the
control of the Group one year after the original investment was
made.
If the Group still retains control of the funds after this time,
the Group considers whether an extension of the one year period is
applicable. If no extension to the period is applicable, then the
funds will cease to be classified as held for sale and will be
consolidated in full, on a line by line basis.
In December 2010, the Group invested GBP1,000,000 in the Record
Currency FTSE FRB10 Index Fund and a further GBP1,000,000 in the
Record Currency Emerging Market Currency Fund, and these were
accounted for as a disposal group held for sale on the above basis.
In both cases, the Group still retained control over each of the
funds twelve months after the original investment. Consequently,
from 31 December 2011, both funds ceased to be classified as held
for sale and are now consolidated in full, on a line by line
basis.
In May 2011, the Group invested GBP1,000,000 in the Record
Currency - Euro Stress Fund, the only other investor in the fund
was Neil Record, a Director of Record plc. During the six months
ended 30 September 2012 the Group decided to liquidate the fund.
The Group classified its investment in the fund as a disposal group
held for sale from its inception through to its liquidation.
As at As at As at
30 Sep 12 30 Sep 11 31 Mar 12
GBP'000 GBP'000 GBP'000
---------------------------------- ------------ ----------- -----------
Seed capital classified as being
a disposal group held for sale - 4,444 1,075
---------------------------------- ------------ ----------- -----------
The underlying assets of the funds are cash deposits, and
forward foreign exchange contracts with tenors of three months or
shorter which are accounted for as derivatives measured at fair
value through profit or loss under IAS 39.
The net loss on financial instruments held as part of a disposal
group is as follows:
Six months Six months Year
ended ended ended
30 Sep 12 30 Sep 11 31 Mar 12
GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- -----------
Net loss on financial instruments
held as part of disposal group 67 191 299
----------------------------------- ----------- ----------- -----------
The net loss on financial instruments held as part of disposal
group includes a loss of GBP10,236 attributable to non-controlling
interests (six months ended 30 September 2011: loss of GBP74,720;
31 March 2012: loss of GBP7,406).
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
12 11 12
--------------------- ---------------------- ---------------------- ----------------------
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 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
Adjustment for own shares held by EBT - (500,000)
As at 31 March 2012 55 219,352,368
Adjustment for own shares held by EBT - 128,432
As at 30 September 2012 55 219,480,800
--------------------------------------- -------- ------------
10. Share-based payments
During the six months ended 30 September 2012 the Group has
managed the following share-based compensation plans:
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.
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 are 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 were available to the
employee after the vesting period for nil consideration upon
exercise. The shares vested equally on the second, third and fourth
anniversary of appointment. The vesting of the shares was subject
to certain good leaver provisions. The rights to acquire the shares
were issued under nil cost option agreements. The final 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 prior 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 the previous financial year, options were issued to
5 such individuals over a total of 2,000,000 shares using both
schemes, 100,000 of which had lapsed prior to the end of that year.
These options were granted at market price and will vest over 4
years, subject to employment and performance conditions. Of the
remaining 1,900,000 options still held, 325,000 had vested but were
not exercised during the period. No further grants of options were
made during the period.
Share-based payment transactions with cash alternatives
Deferred share awards granted under 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, which takes 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 created to hold
shares acquired to meet obligations for share awards made to
employees under the Record plc share-based compensation plans.
During the period nil cost options were exercised over a total of
128,432 shares. The EBT continues to hold 1,900,000 shares at 30
September 2012 (31 March 2012: 2,028,432; 30 September 2011:
1,528,432). The holding of the EBT comprises own shares that have
not vested unconditionally to employees of the Group or shares that
have vested but have not yet been exercised. 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
Three Directors of Record plc and three external investors have
purchased units in the two funds currently seeded by Record plc,
i.e. the Record Currency FTSE FRB10 Index Fund, the Record Currency
Emerging Market Currency Fund, and previously, also the Record
Currency - Euro Stress Fund. The mark to market value of these
units represents the only non-controlling interests in the
Group.
The two existing funds are considered to be under control of the
Group through majority interests. The Record Currency - Euro Stress
Fund was considered to be under control of the Group throughout its
existence.
Mark to market value of external holding in seeded funds
consolidated into the accounts of the Record Group
As at 30 As at 30 As at 31
Sep 12 Sep 11 Mar 12
GBP'000 GBP'000 GBP'000
--------------------------------- --------- --------- ---------
Record Currency FTSE FRB10
Index Fund 821 485 528
Record Currency Emerging Market
Currency Fund 1,534 821 1,572
Record Currency Euro Stress
Fund - 184 163
Total 2,355 1,490 2,263
--------------------------------- --------- --------- ---------
13. Related party transactions
The related party transactions during the period are consistent
with the categories disclosed in the Annual Report for the year
ended 31 March 2012.
The compensation given to key management personnel is as
follows:
Six months Six months Year
ended ended ended
30 Sep 12 30 Sep 11 31 Mar 12
GBP'000 GBP'000 GBP'000
------------------------------ ----------- ----------- -----------
Short-term employee benefits 1,757 1,960 4,007
Post-employment benefits 147 170 342
Share-based payments 424 670 1,057
Dividends 863 2,924 3,792
------------------------------ ----------- ----------- -----------
3,191 5,724 9,198
------------------------------ ----------- ----------- -----------
14. Post reporting date events
No adjusting or significant non-adjusting events have occurred
between the reporting date and the date of authorisation.
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
IR GGGMGGUPPGQA
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