TIDMREC
RNS Number : 0698T
Record PLC
15 November 2013
Record plc
PRESS RELEASE
15 November 2013
INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2013
Record plc, the specialist currency manager, today announces its
unaudited results for the six months ended 30 September 2013.
Financial headlines:
-- AUME(1) increased by 8% to $37.7bn / GBP23.3bn ($34.8bn /
GBP22.9bn at 31 March 2013)
-- Net client inflows during the six months of $1.8bn (six
months to 30 September 2012: net inflow of $1.2bn)
-- Revenue increased 13% to GBP9.9m (six months ended 30
September 2012; GBP8.7m)
-- Profit before tax increased 12% to GBP3.1m (six months ended
30 September 2012: GBP2.7m)
-- Operating margin (underlying)(2) increased to 33% (six months
to 30 September 2012: 31%)
-- Interim dividend of 0.75p per share will be paid on 20
December 2013
-- Basic EPS of 1.20 pence (six months to 30 September 2012:
0.94 pence)
-- Financial position remains strong with shareholders' equity
increased to GBP28.1m (30 September 2012: GBP26.9m)
(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) Underlying figures are stated before consolidating
non-controlling interests.
Key developments:
-- Client numbers increased over the six month period by 2 from
44 to 46
-- 2 new Passive Hedging mandates (AUME: c$12bn) commenced since
30 September 2013
Commenting on the results, James Wood-Collins, Chief Executive
of Record plc, said:
"The first half of the financial year has seen growing AUME and
client numbers, with two further Passive Hedging mandates with
combined AUME of approximately $12bn starting since the period
end.
"We have also seen a welcome growth in revenue and underlying
profit before tax, as the effects of mandate wins and increases in
AUME during the previous financial year have been felt over the
full six months. The clients and AUME added during this financial
year will naturally contribute further to revenue and profitability
in the future.
"We continue to invest in both enhancing each of our product
offerings, and strengthening our middle- and back-office
infrastructure. We expect to reap benefits from these investments
as we proceed through prospective clients' selection processes
generated through our expanded US and Swiss distribution
capability.
"As anticipated, a higher level of new business enquiries and
selection processes has been accompanied by increased competitive
activity. We have taken the decision to recognise this in fee
arrangements with existing clients, as well as with potential new
clients. In doing so we are pursuing growth in volume that would
more than compensate for reduced revenue margins.
"Overall the Group continues to experience a higher level of new
business enquiries than at any period in the years since the
banking crisis and global downturn, and all of the Group's
management and staff are working hard to meet these and to look
after the interests of existing clients."
Analyst briefing
There will be a presentation for analysts at 9.30am on Friday 15
November 2013 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
Steve Cullen - Chief Financial Officer
MHP Communications +44 20 3128 8100
Nick Denton, John Olsen, Vicky Watkins
Chief Executive Officer's statement
In the first half of the financial year, we have seen a welcome
growth in revenue and underlying profit before tax, as the effects
of mandate wins and increases in AUME during the previous financial
year have been felt over the full six months. We have also added
clients and AUME during the period, which will naturally contribute
further to revenue and profitability in the future. The Passive
Hedging mandate announced in June has commenced since the end of
the first half year (AUME $11.6bn), and we continue to experience
an encouraging level of new business enquiries.
Market and performance overview
Major currency market themes over the half year predominantly
relate to the monetary policy background and the outlook for
interest rates.
The prospect of divergent monetary policy amongst major central
banks, which has been largely absent for much of the last three
years, was first raised in May, with US Federal Reserve Chairman
Ben Bernanke mooting a slowing of asset purchases, or "tapering",
to start as early as September. The prospect of a precursor to
interest rate tightening supported the US Dollar throughout the
summer, in particular against emerging market currencies whose
economies were seen as vulnerable to a tightening interest rate
cycle.
When the Federal Open Market Committee elected not to start
tapering at its 18 September meeting, choosing instead to "await
more evidence that progress [in improvement in economic activity
and labour market conditions] will be sustained", markets were
surprised. The appointment of Janet Yellen, widely characterised as
"dovish", as Chairman Bernanke's successor contributed to a view
that the US Dollar rate tightening cycle may be further away than
people had expected, although speculation continues as to when
tapering will commence. The European Central Bank's cut in its
refinancing rate since the end of the period reinforces the
prospect of monetary policy divergence.
Against this backdrop, the US Dollar first strengthened against
both developed and emerging market currencies for much of the
summer, before broadly weakening towards the end of the period.
Currency investment strategies that have become correlated with
"risk-on" investments including the Forward Rate Bias and Emerging
Markets strategies broadly underperformed over much of the summer,
before staging a modest recovery towards the end of the period. In
this environment, Record's approach to implementing Emerging Market
currency portfolios by going short of a diversified basket of
developed market currencies, rather than just the US Dollar, proved
its worth by limiting the extent of the underperformance. Our more
diversifying strategies, Value and Momentum, also proved their
worth, with Value in particular generating positive performance to
offset losses in Forward Rate Bias and Emerging Markets, thereby
reducing the underperformance of the Multi-Strategy product over
the period.
Financial highlights
The financial performance of the Group has improved steadily, in
line with growth in AUME. Revenue increased to GBP9.9m, an increase
of 13% over revenue for the six months ended 30 September 2012
(GBP8.7m). In conjunction with a maintained focus on cost control,
this resulted in a corresponding increase in "underlying" operating
profit margin to 33%, increased from 31% for the previous two six
month periods. Profit before tax increased by 12% to GBP3.1m
compared to GBP2.7m for the six months ended 30 September 2012.
Shareholders' funds increased to GBP28.1m against GBP26.9m for the
comparable period in the prior year.
Asset flows
AUME increased by 8% through the half year to $37.7bn. This was
due principally to further wins in both Dynamic and Passive Hedging
mandates driving net inflows of $1.8bn. External factors (e.g.
equity and other market movements and the impact of exchange rates
over the period) also contributed $1.1bn. Since the end of the
first half year, Passive Hedging mandates totalling $12bn in AUME
have also started.
Products and distribution
This period has seen a continuation of the key product and
distribution themes on which we have focussed in recent years, and
in particular, we have continued to grow our Swiss Passive Hedging
business. This success is attributed to our approach as an
independent expert, offering significant opportunities to save
costs compared to a hedging benchmark, as well as a service
tailored to each client's specific requirements.
In the United States, we have seen an increase in new business
enquiries, albeit from a low base, as the experience and prospect
of a strengthening US Dollar has encouraged more investors to
explore ways to mitigate their exposure to weakening foreign
currencies. These enquiries, which often consider combinations of
hedging (whether passive or dynamic) and return-seeking currency
strategies, are still concentrated on 'early adopters' rather than
representing mainstream participation.
In the United Kingdom and Canada, both important markets for the
Group, we continue to commit resources to identifying and pursuing
those new business opportunities that do arise, as well as
maintaining our high levels of service for existing clients.
More broadly, both the experience of the last five years, and
the nature of many current new business approaches, have confirmed
the value to Record in being a capable, experienced and credible
provider of both hedging services, passive and dynamic, as well as
return-seeking currency strategies. We now have a little over a
year's experience of running a live Multi-Strategy mandate, and are
increasingly confident that this transparent and disciplined
approach to generating returns in currency markets will continue to
prove its worth.
Dividend
An interim dividend of 0.75p per share will be paid on 20
December 2013 to shareholders on the register at 29 November
2013.
The Board's intention for the financial year, subject to
business conditions, is to maintain the overall dividend at 1.50p
per share. In setting the dividend, the Board will be mindful of
achieving a level which it expects to be covered by earnings.
Outlook
We continue to expect to reap the benefits of the investments
made over the last three years, in particular in developing our US
distribution as well as each of our product offerings, and in
continuing to strengthen our middle- and back-office
infrastructure, as we proceed through prospective clients'
selection processes.
In markets where this process is more advanced, including the
UK, Switzerland and more recently the US, we have seen competitive
fee pressures emerge as market activity has grown, and we expect
this to continue. We announced an amendment to fee scales applied
to existing Dynamic Hedging mandates on 7 November 2013, to align
existing clients' fees with those being proposed to potential new
clients. Whilst the immediate effect of this decision is a
reduction in annualised management fees of approximately GBP2.6m
(and a corresponding reduction in pre-tax profits of approximately
GBP1.8m), we are pursuing growth in volume that would more than
compensate for reduced revenue margins going forward.
The Group's approach, as far as possible, in seeking to preserve
revenue margins going forward will be to continue to differentiate
its services through product enhancement, bespoke applications, and
a high level of service. All of these constrain to some extent the
economies of scale and operating leverage that can be captured from
continued growth.
Overall the Group continues to experience a higher level of new
business enquiries than at any period in the years since the
banking crisis and global downturn, and all of the Group's
management and staff are working hard to meet these and to look
after the interests of existing clients. On behalf of the Board, I
would like to thank them for their continued commitment.
James Wood-Collins
Chief Executive Officer
14 November 2013
Interim management review
Business review
The business has grown in terms of AUME, client numbers and
underlying operating profit margin when compared to the six month
period ended 30 September 2012.
Since the year end, AUME has grown by 8% and client numbers have
increased by two. This growth in AUME reflects Dynamic Hedging
increasing by 9% to $12.0bn and Passive Hedging growing by 4% to
$22.9bn.
Revenues generated from management fees have increased to
GBP10.3m, an increase of 18% over the comparable period last year
(six months ended 30 September 2012: GBP8.8m) and an increase of
11% over the final six months of the year ended 31 March 2013
(GBP9.3m). When compared to the corresponding period last year,
underlying profit before tax has increased by 21% and underlying
profit margin has increased from 31% to 33%.
The blended average fee rate has been maintained throughout the
six month period.
The Group's balance sheet remains strong, with no external debt
and shareholders' funds at GBP28.1m at the end of the period.
Product investment performance
During the period, US-based Dynamic Hedging clients experienced
an overall weakening of the US Dollar against developed
counterparts, particularly towards the end of the period as the
Federal Reserve surprised markets by deciding not to taper its
asset purchases. These programmes responded as expected, making
cumulative losses over the period which partially offset currency
gains in the underlying portfolio. The systematic lowering of hedge
ratios over the period helped to reduce the extent of hedging
underperformance, particularly towards the end of the period.
UK-based Dynamic Hedging clients experienced a mix of modest
positive and negative returns in the first five months of the
period, with a larger positive return in September as Sterling
appreciated against the US Dollar and other developed currencies,
as the hedge ratios were systematically increased. As a result,
cumulative performance over the period was positive.
Within Currency for Return products, the Forward Rate Bias and
Emerging Market strategies, both risk premia, performed negatively
over the period.
The FTSE Currency FRB10 Index outperformed in April, before
negative returns in May, June and August, and flat performance in
July. Strong positive returns in September were not enough to
offset these losses, and cumulative performance over the period was
negative. This is attributable in part to the equal weighting given
to more risk-sensitive currencies such as the Australian Dollar and
New Zealand Dollar - currencies which contributed substantially to
the strong performance in September, but also to the losses in the
preceding months. This equal weighting explains why 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, was substantially smaller than that of the index.
Record's Emerging Market strategy showed a similar performance
profile over the period as risk-averse sentiments in these markets
prevailed. The positive returns in April and September bookended
four months of negative performance in between, generating an
overall underperformance over the six month period. Despite this,
the cumulative performance of this strategy since its inception
over three years ago has been positive.
The Multi-Strategy product, which combines Record's Active FRB,
Emerging Market, Value and Momentum strategies, also underperformed
over the period, but to a lesser extent than either the FRB or the
Emerging Market strategies, as positive performance from both Value
and Momentum offset losses from these risk premia.
Half year returns of Currency for Return products for the six
months to 30 September 2013
Fund Name Gearing Half Year Return Volatility since inception
% % p.a.
----------------------------- -------- ----------------- ---------------------------
FTSE FRB 10 Index Fund(1) 1.8 (5.70%) 7.92%
Emerging Market Currency(2) 1.0 (3.87%) 7.56%
Index / composite returns Half Year Return Volatility since inception
% % p.a.
----------------------------- -------- ----------------- ---------------------------
Alpha composite(3) (1.76%) 2.67%
FTSE Currency FRB10
GBP Excess return (3.22%) 4.71%
Record Multi-Strategy(4) (0.61%) 2.12%
----------------------------- -------- ----------------- ---------------------------
(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) An investment return track record generated by the
aggregation of all standard segregated track records for Record's
Active Forward Rate Bias Currency for Return product. The Currency
Alpha composite is asset weighted, based on AUME for each
account.
(4) Multi-Strategy return data is since inception in August
2012.
AUME development
The Group has seen an aggregate increase in AUME of $2.9bn (+8%)
to finish the period at AUME of $37.7bn compared with $34.8bn at
the end of the previous financial year.
AUME movement in the six months ended 30 September 2013
$bn
--------------------------- ------
AUME at 1 April 2013 34.8
Net client inflows 1.8
Equity market impact (0.4)
Foreign exchange impact 1.5
--------------------------- ------
AUME at 30 September 2013 37.7
--------------------------- ------
Net client flows and numbers
During the six months to 30 September 2013 net client inflows
were $1.8bn, predominantly due to the impact of new Hedging
mandates which started in the period. There were net inflows of
+$1.4bn in Dynamic Hedging and +$0.2bn in Passive Hedging. Client
numbers increased by 5% (from 44 to 46) in the six month period to
30 September 2013 (43 clients at 30 September 2012).
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 reduced AUME
in the six months to 30 September 2013 by $0.4bn.
Forex
The foreign exchange impact of expressing non-US$ AUME in US$
had an impact on AUME. 80% of the Group's AUME is non-US$
denominated and expressing this in US$ increased AUME for the
period by $1.5bn.
Product mix
Product mix continues on a stable path. Hedging represents 93%
of total AUME, marginally lower than the 95% reported at 30
September 2012 and also at 31 March 2013. Dynamic Hedging
represents $12.0bn and 32% of total AUME, having grown from $9.9bn
(30%) at 30 September 2012 and $11.0bn (32%) at 31 March 2013.
Passive Hedging represents $22.9bn (61%) of AUME, down from 65% at
30 September 2012 and 63% at 31 March 2013.
AUME composition by product
30 Sep 13 30 Sep 12 31 Mar 13
------------ ------------ ------------
$bn % $bn % $bn %
------------------------ ----- ----- ----- ----- ----- -----
Dynamic Hedging(1) 12.0 32% 9.9 30% 11.0 32%
Passive Hedging 22.9 61% 21.0 65% 22.1 63%
Currency for Return(1) 2.6 7% 1.5 5% 1.6 5%
Cash 0.2 -% 0.1 -% 0.1 -%
------------------------ ----- ----- ----- ----- ----- -----
Total 37.7 100% 32.5 100% 34.8 100%
------------------------ ----- ----- ----- ----- ----- -----
(1) Part of the AUME relating to a bespoke hybrid hedging and
return-seeking mandate has been reclassified, resulting in a
restatement to the AUME data provided in the quarterly trading
update released on 18 October 2013. Consequently $1bn of AUME
previously categorised under Dynamic Hedging has been reclassified
as Currency for Return AUME, ensuring consistency of approach
between AUME classification and the analysis of management
fees.
AUME composition by base currency and product
Dynamic Hedging Passive Hedging Currency for Return
------------------- ---------------------- ---------------------- ---------------------
Base Currency 30 Sep 31 Mar 30 Sep 31 Mar 30 Sep 31 Mar
13 13 13 13 13 13
------------------- ---------- ---------- ---------- ---------- ---------- ---------
Sterling GBP 2.8bn GBP 1.8bn GBP 3.2bn GBP 3.6bn - -
US Dollar USD 5.8bn USD 6.5bn USD 0.2bn USD 0.1bn USD 1.5bn USD 0.6bn
Swiss Franc CHF 1.5bn CHF 1.4bn CHF 13.6bn CHF 14.1bn CHF 0.7bn CHF 0.6bn
Euro - - EUR 1.9bn EUR 1.4bn - -
Canadian Dollar - - - - CAD 0.3bn CAD 0.3bn
Total AUME (US USD 12.0bn USD 11.0bn USD 22.9bn USD 22.1bn USD 2.6bn USD 1.6bn
Dollars)
------------------- ---------- ---------- ---------- ---------- ---------- ---------
Revenue
Management fee income for the six months to 30 September 2013
was GBP10.3m, an increase of 18% over the six months ended 30
September 2012 (GBP8.8m) driven by growth in Hedging and Currency
for Return products.
In the six months ended 30 September 2013 Dynamic Hedging
generated 63% (six months ended 30 September 2012: 67%) of
management fee income, Passive Hedging generated 23% and Currency
for Return 14% (six months ended 30 September 2012: 22% and 12%
respectively).
Revenue analysis (GBPm)
Six months ended Six months ended Year ended 31
30 September 30 September March 2013
2013 2012
----------------------- ----------------- ----------------- --------------
Management fees
Dynamic Hedging 6.6 5.9 11.9
Passive Hedging 2.3 1.9 4.1
Currency for Return 1.4 1.0 2.1
----------------------- ----------------- ----------------- --------------
Total management fees 10.3 8.8 18.1
----------------------- ----------------- ----------------- --------------
Other income (0.4) (0.1) 0.5
----------------------- ----------------- ----------------- --------------
Total revenue 9.9 8.7 18.6
----------------------- ----------------- ----------------- --------------
Other income principally consists of gains / (losses) made on
forward foreign exchange contracts employed by the funds seeded by
the group, which are consolidated in full. It also includes gains /
(losses) on hedging revenues denominated in currencies other than
Sterling, and other foreign exchange gains / (losses).
The blended average management fee rate remained constant at
9bps. Whilst management fee rates for both Hedging products were
unchanged, management fee rates for Currency for Return fell as
AUME growth from increases to existing mandates attracted a lower
marginal rate.
Average management fee rates by product (bps)
Six months ended Six months ended Year ended 31
30 September 2013 30 September 2012 March 2013
--------------------- ------------------- ------------------- --------------
Dynamic Hedging 18 19 18
Passive Hedging 3 3 3
Currency for Return 18 21 22
--------------------- ------------------- ------------------- --------------
Weighted average 9 9 9
--------------------- ------------------- ------------------- --------------
Expenditure
Expenditure analysis (GBPm)
Six months ended Six months ended Year ended 31
30 September 2013 30 September 2012 March 2013
------------------------------- ------------------- ------------------- --------------
Personnel costs 3.3 3.0 6.0
Non-personnel costs 2.1 1.7 3.9
------------------------------- ------------------- ------------------- --------------
Administrative expenditure
excluding Group Profit
Share 5.4 4.7 9.9
Group Profit Share (GPS) 1.4 1.2 2.4
------------------------------- ------------------- ------------------- --------------
Total administrative
expenditure 6.8 5.9 12.3
Loss on financial instruments
held as part of disposal
group - 0.1 0.1
------------------------------- ------------------- ------------------- --------------
Total expenditure 6.8 6.0 12.4
------------------------------- ------------------- ------------------- --------------
Expenditure
The total expenditure in the six months to 30 September 2013
increased to GBP6.8m, an increase of GBP0.8m over the six months to
30 September 2012 (GBP6.0m). Administrative expenditure excluding
Group Profit Share (GPS) for the six months ended 30 September 2013
(GBP5.4m) has increased by GBP0.7m over the six months ended 30
September 2012 as a result of increases to both personnel and
non-personnel costs.
Group Profit Share (GPS) Scheme
The cost of the GPS scheme has increased to GBP1.4m, an increase
of GBP0.2m over the six months to 30 September 2012 (GBP1.2m). This
reflects the increase in operating profit for the six month period
and continues to be calculated at 30% of pre-GPS underlying
operating profit in the period.
Operating margins
The operating profit for the six months ended 30 September 2013
of GBP3.0m was 13% higher than the six month period ended 30
September 2012 (GBP2.6m). Operating profit margin for the six
months ended 30 September 2013 was 30%, equal to that for the six
months ended 30 September 2012 on a fully consolidated basis.
Management also consider "underlying" operating profit.
Underlying operating profit excludes the impact of the income and
expenditure attributable to non-controlling interests i.e. gains
and losses attributable to other investors in the seed funds which
are consolidated into the Group's financial statements on a
line-by-line basis under IFRS. The underlying operating margin for
the six month period ending 30 September 2013 was 33% (six months
to 30 September 2012: 31% and 12 months to 31 March 2013: 31%).
Cash flow
The Group generated GBP2.1m of cash flow from operating
activities after tax during the six month period ended 30 September
2013 (six months ended 30 September 2012: GBP2.4m). Taxation paid
during the period was GBP0.7m compared to GBP0.9m for the six
months ended 30 September 2012. On 31 July 2013 the Group paid a
final dividend of 1.5p per share in respect of the year ended 31
March 2013. This equated to a distribution of GBP3.3m (six months
ended 30 September 2012: GBP1.6m).
Dividends
The Group will pay an interim dividend of 0.75p per share in
respect of the six months ended 30 September 2013. The dividend
will be paid on 20 December 2013 to shareholders on the register on
29 November 2013.
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 2014. The dividend policy will be further reviewed
at the year end.
Capital management
The Board's intention 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 and shareholders' funds were GBP28.1m at 30
September 2013 (30 September 2012: GBP26.9m).
The dividend payment on 20 December will equate to a
distribution of GBP1.6m, following which the business will retain
cash and money market instruments on the balance sheet which are
significantly in excess of financial resource requirements required
for regulatory purposes.
Principal risks and uncertainties
The principal risks and uncertainties documented in the Annual
Report and Accounts for the year ended 31 March 2013 are still
relevant to Record.
Account concentration risk has continued during the six months
to 30 September 2013. The proportion of management fee income
generated from the largest client was 28% at 30 September 2013. For
the same period, the proportion of income generated from the
largest five clients was 67% and from the largest ten clients was
84%.
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 Steve Cullen
Chairman Chief Financial Officer
14 November 2013 14 November 2013
Independent review report to the members of Record plc
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 2013 which comprises the consolidated statement
of comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity, the
consolidated statement of cash flows 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 Conduct 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 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 2013 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
Conduct Authority.
GRANT THORNTON UK LLP
AUDITOR
London
14 November 2013
Consolidated statement of comprehensive income
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sep 30 Sep 12 31 Mar
13 13
Note GBP'000 GBP'000 GBP'000
------------------------------------------ ----- ------------ ------------ ---------
Revenue 3 9,872 8,714 18,552
Cost of sales (100) (136) (221)
------------------------------------------ ----- ------------ ------------ ---------
Gross profit 9,772 8,578 18,331
Administrative expenses (6,769) (5,864) (12,343)
Loss on financial instruments
held as part of disposal group - (67) (68)
------------------------------------------ ----- ------------ ------------ ---------
Operating profit 3,003 2,647 5,920
Finance income 50 80 158
Profit before tax 3,053 2,727 6,078
Taxation (781) (725) (1,450)
------------------------------------------ ----- ------------ ------------ ---------
Profit after tax and total comprehensive
income for the period 2,272 2,002 4,628
Profit after tax and total comprehensive
income for the period attributable
to:
Non-controlling interests (333) (69) 294
Owners of the parent 2,605 2,071 4,334
------------------------------------------ ----- ------------ ------------ ---------
Earnings per share for profit
attributable to the equity holders
of the Group during the period
Basic earnings per share 4 1.20p 0.94p 1.98p
Diluted earnings per share 4 1.19p 0.94p 1.98p
------------------------------------------ ----- ------------ ------------ ---------
Consolidated statement of financial position
Note Unaudited Unaudited Audited
as at as at 30 as at
30 Sep Sep 12 31 Mar
13 13
GBP'000 GBP'000 GBP'000
---------------------------------------- ----- ---------- ---------- --------
Non-current assets
Property, plant and equipment 111 167 140
Intangible assets 848 1,078 963
Investments 6 1,635 - -
Deferred tax assets 5 - 5
---------------------------------------- ----- ---------- ---------- --------
Total non-current assets 2,599 1,245 1,108
---------------------------------------- ----- ---------- ---------- --------
Current assets
Trade and other receivables 5,596 5,919 5,569
Derivative financial assets 173 75 43
Money market instruments with maturity
> 3 months 7 12,154 - -
Cash and cash equivalents 7 15,531 25,575 29,025
---------------------------------------- ----- ---------- ---------- --------
Total current assets 33,454 31,569 34,637
---------------------------------------- ----- ---------- ---------- --------
Total assets 36,053 32,814 35,745
---------------------------------------- ----- ---------- ---------- --------
Current liabilities
Trade and other payables (2,413) (2,814) (2,672)
Corporation tax liabilities (800) (679) (760)
Derivative financial liabilities (74) - (25)
---------------------------------------- ----- ---------- ---------- --------
Total current liabilities (3,287) (3,493) (3,457)
---------------------------------------- ----- ---------- ---------- --------
Deferred tax liabilities - (29) -
---------------------------------------- ----- ---------- ---------- --------
Total net assets 32,766 29,292 32,288
---------------------------------------- ----- ---------- ---------- --------
Equity
Issued share capital 8 55 55 55
Share premium account 1,838 1,809 1,838
Capital redemption reserve 20 20 20
Retained earnings 26,227 25,053 26,729
---------------------------------------- ----- ---------- ---------- --------
Equity attributable to owners of
the parent 28,140 26,937 28,642
Non-controlling interests 10 4,626 2,355 3,646
---------------------------------------- ----- ---------- ---------- --------
Total equity 32,766 29,292 32,288
---------------------------------------- ----- ---------- ---------- --------
Consolidated statement of changes in equity
Six months ended 30 September 2012
Unaudited Note Called up Share Capital Retained Total Non-controlling Total
share premium redemption earnings attributable interests equity
capital account reserve to equity
holders of
the parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----- ---------- ---------- ----------- ---------- ------------- ---------------- ----------
As at 1 April
2012 55 1,809 20 24,469 26,353 2,263 28,616
Profit and total
comprehensive
income for the
period - - - 2,071 2,071 (69) 2,002
Dividends paid 5 - - - (1,645) (1,645) - (1,645)
Release of
shares held by
EBT - - - 134 134 - 134
Issue of units
in funds to
non-controlling
interests - - - - - 161 161
Share option
reserve
movement - - - 24 24 - 24
As at 30
September 2012 55 1,809 20 25,053 26,937 2,355 29,292
----------------- ----- ---------- ---------- ----------- ---------- ------------- ---------------- ----------
Six months ended 31 March 2013
Unaudited Note Called Share Capital Retained Total Non-controlling Total
up share premium redemption earnings attributable interests equity
capital account reserve to equity
holders of
the parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------ --------- ---------- ----------- ---------- ------------- ---------------- ----------
As at 30 September 2012 55 1,809 20 25,053 26,937 2,355 29,292
Profit and total
comprehensive income
for the period - - - 2,263 2,263 363 2,626
Own shares purchased by
EBT - - - (685) (685) - (685)
Release of shares held
by EBT - 29 - 62 91 - 91
Issue of units in funds
to non-controlling
interests - - - - - 928 928
Share option reserve
movement - - - 36 36 - 36
As at 31 March 2013 55 1,838 20 26,729 28,642 3,646 32,288
------------------------- --------- ---------- ----------- ---------- ------------- ---------------- ----------
Six months ended 30 September 2013
Unaudited Note Called up Share Capital Retained Total Non-controlling Total
share premium redemption earnings attributable interests equity
capital account reserve to equity
holders of
the parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----- ---------- ---------- ----------- ---------- ------------- ---------------- ----------
As at 31 March
2013 55 1,838 20 26,729 28,642 3,646 32,288
Profit and total
comprehensive
income for the
period - - - 2,605 2,605 (333) 2,272
Dividends paid 5 - - - (3,264) (3,264) - (3,264)
Release of
shares held by
EBT - - - 104 104 - 104
Issue of units
in funds to
non-controlling
interests - - - - - 1,313 1,313
Share option
reserve
movement - - - 53 53 - 53
As at 30
September 2013 55 1,838 20 26,227 28,140 4,626 32,766
----------------- ----- ---------- ---------- ----------- ---------- ------------- ---------------- ----------
Consolidated statement of cash flows
Note Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sep 13 30 Sep 31 Mar
12 13
GBP'000 GBP'000 GBP'000
------------------------------------------- ----- ------------ ------------ --------
Operating profit 3,003 2,647 5,920
Adjustments for:
Profit on disposal of property, (1) - -
plant and equipment
Depreciation of property, plant
and equipment 41 50 106
Amortisation of intangible assets 115 62 177
Share option expense 53 24 60
Share settled transactions - 134 226
------------------------------------------- ----- ------------ ------------ --------
3,211 2,917 6,489
Changes in working capital
Increase in receivables (47) (851) (485)
(Decrease) / Increase in payables (259) 320 173
(Increase) / Decrease in other financial
assets (130) 1,033 1,065
Increase / (Decrease) in other financial
liabilities 49 (48) (23)
------------------------------------------- ----- ------------ ------------ --------
CASH INFLOW FROM OPERATING ACTIVITIES 2,824 3,371 7,219
Corporation taxes paid (740) (932) (1,610)
------------------------------------------- ----- ------------ ------------ --------
NET CASH INFLOW FROM OPERATING ACTIVITIES 2,084 2,439 5,609
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and
equipment (13) (34) (63)
Purchase of securities (1,114) - -
Purchase of money market instruments
with maturity > 3 months 7 (12,154) - -
Interest received 70 82 149
------------------------------------------- ----- ------------ ------------ --------
NET CASH (OUTFLOW) / INFLOW FROM
INVESTING ACTIVITIES (13,211) 48 86
CASH FLOW FROM FINANCING ACTIVITIES
Cash inflow from issue of units
in funds 793 161 1,089
Cash inflow from exercise of share 104 - -
options
Purchase of own shares - - (686)
Dividends paid to equity shareholders 5 (3,264) (1,645) (1,645)
------------------------------------------- ----- ------------ ------------ --------
CASH OUTFLOW FROM FINANCING ACTIVITIES (2,367) (1,484) (1,242)
------------------------------------------- ----- ------------ ------------ --------
NET (DECREASE) / INCREASE IN CASH
AND CASH EQUIVALENTS IN THE PERIOD (13,494) 1,003 4,453
------------------------------------------- ----- ------------ ------------ --------
Cash and cash equivalents at the
beginning of the period 29,025 24,572 24,572
CASH AND CASH EQUIVALENTS AT THE
END OF THE PERIOD 7 15,531 25,575 29,025
------------------------------------------- ----- ------------ ------------ --------
Closing cash and cash equivalents consists
of:
Cash 2,645 5,075 1,863
Cash equivalents 12,886 20,500 27,162
-------------------------------------------- ------- ------- -------
Cash and cash equivalents 15,531 25,575 29,025
-------------------------------------------- ------- ------- -------
Notes to the financial statements for the six months ended 30
September 2013
These financial statements exclude disclosures that are
immaterial and judged to be unnecessary to understand our results
and financial position.
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 2013 (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.
Going concern
The Directors are satisfied that the Group has adequate
resources with which to continue to operate for the foreseeable
future, and therefore these financial statements have been prepared
on a going concern basis.
Consolidation
The consolidated financial information contained within the
financial statements incorporates financial statements of the
Company and entities controlled by the Company (its subsidiaries)
drawn up to 30 September 2013. Control is achieved where the
Company has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities.
Where the Group controls an entity, but does not own all the share
capital of that entity, the interests of the other shareholders is
stated within equity as a non-controlling interest, being the share
of changes in equity since the date of consolidation.
An Employee Benefit Trust has been established for the purposes
of satisfying certain share-based awards. The Group has "de facto"
control over this entity. This trust is fully consolidated within
the accounts.
The Group has investments in a number of funds where it is
currently in a position to be able to control those funds. These
fund investments are held by Record plc and represent seed capital
investments by the Group. The funds are consolidated on a line by
line basis.
2. Critical accounting estimates and judgements
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 2013.
3. Revenue
Segmental analysis
The Executive Committee (comprising the Executive Directors
together with two senior managers) which is the entity's Chief
Operating Decision Maker, considers 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 Group provides management with
revenue information disaggregated by product, whilst operating
costs, assets and liabilities are presented on an aggregated basis.
This reflects the unified basis on which the products are marketed,
delivered and supported.
(a) Product revenues
The Group has split its currency management revenues by product.
Other Group activities principally includes gains / losses on
derivative financial instruments and also includes consultancy. No
performance fee was earned in the reported periods.
Revenue by product type
Six months Six months Year
ended ended ended
30 Sep 13 30 Sep 12 31 Mar
13
GBP'000 GBP'000 GBP'000
----------------------------- ----------- ----------- --------
Management fees
Dynamic Hedging 6,558 5,855 11,834
Passive Hedging 2,357 1,888 4,093
Currency for Return 1,425 1,010 2,134
Total management fee income 10,340 8,753 18,061
Other Group activities (468) (39) 491
----------------------------- ----------- ----------- --------
Total revenue 9,872 8,714 18,552
----------------------------- ----------- ----------- --------
(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
30 Sep 30 Sep 12 31 Mar
13 13
GBP'000 GBP'000 GBP'000
----------------------------- ----------- ----------- --------
Management fee income
UK 2,662 2,334 4,628
US 3,422 3,280 6,631
Switzerland 3,542 2,670 5,688
Other 714 469 1,114
----------------------------- ----------- ----------- --------
Total management fee income 10,340 8,753 18,061
Other Group activities (468) (39) 491
----------------------------- ----------- ----------- --------
Total revenue 9,872 8,714 18,552
----------------------------- ----------- ----------- --------
Other Group activities are not analysed by geographical
region.
(c) Major clients
During the six months ended 30 September 2013, three clients
individually accounted for more than 10% of the Group's revenue
during the period. The three largest clients generated revenues of
GBP2.9m, GBP1.2m and GBP1.1m in the period.
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
30 Sep 13 30 Sep 12 31 Mar 13
------------------------------------------ ------------ ------------ ------------
Weighted average number of shares
used in calculation of basic earnings
per share 217,670,894 219,382,105 218,867,407
Effect of dilutive potential ordinary
shares - share options 612,263 158,695 273,830
------------------------------------------ ------------ ------------ ------------
Weighted average number of shares
used in calculation of diluted earnings
per share 218,283,157 219,540,800 219,141,237
------------------------------------------ ------------ ------------ ------------
pence pence pence
------------------------------------------ ------------ ------------ ------------
Basic earnings per share 1.20 0.94 1.98
Diluted earnings per share 1.19 0.94 1.98
------------------------------------------ ------------ ------------ ------------
The potential dilutive shares relate to the share options
granted in respect of the Group's Share Scheme. At the beginning of
the period, there were share options in place over 4,120,000
shares. During the six months ended 30 September 2013 options were
exercised over 325,000 shares, and options over 400,000 shares were
forfeited. The Group granted 2,160,000 share options with a
potentially dilutive effect during the period.
5. Dividends
The dividends paid during the six months ended 30 September 2013
totalled GBP3,263,625 (1.50p per share), which was the final
dividend paid in respect of the year ended 31 March 2013. No
dividend was paid in the six months ended 31 March 2013. The
dividend paid by the Group during the six months ended 30 September
2012 totalled GBP1,645,143 (0.75p per share), which was the final
dividend paid in respect of the year ended 31 March 2012.
The interim dividend proposed in respect of the six months ended
30 September 2013 is 0.75p per share.
6. Investments
The Group holds certain securities through its seeded fund
vehicles. As at 30 September 2013, the Group held US government
treasury inflation protected securities (TIPS), with a fair value
of GBP1,634,760 (31 March 2013: nil; 30 September 2012: nil). These
securities are designated as fair value through profit and loss and
the fair value is determined by reference to quoted market prices.
In the year end risk disclosures, these securities will be
classified as a Level 1 investment.
7. Cash management
The Group's cash management strategy employs a variety of
treasury management instruments including cash, money market
deposits and treasury bills with maturities of up to 1 year. Whilst
the Group manages and considers all of these instruments as cash,
which are subject to its own internal cash management process, not
all of these instruments are classified as cash or cash equivalents
under IFRS.
IFRS defines cash and cash equivalents as cash in hand, on
demand and collateral deposits held with banks, and other
short-term highly liquid investments that are readily convertible
to a known amount of cash and are subject to an insignificant risk
of changes in value. Moreover, instruments can only generally be
classified as cash and cash equivalents where they are held for the
purpose of meeting short-term cash commitments rather than for
investment or other purposes.
In the Group's judgement, bank deposits and treasury bills with
maturities in excess of 3 months do not meet the definition of
short-term or highly liquid and are held for purposes other than
meeting short-term commitments. In accordance with IFRS, these
instruments are not categorised as cash or cash equivalents and are
disclosed as money market instruments with maturities > 3
months.
The table below summarises the instruments managed by the Group
as cash, and their IFRS classification:-
As at As at As at
30 Sep 30 Sep 12 31 Mar
13 13
GBP'000 GBP'000 GBP'000
------------------------------------------- -------- ----------- --------
Bank deposits with maturities > 3 months 11,655 - -
Treasury bills with maturity > 3 months 499 - -
Money market instruments with maturities 12,154 - -
> 3 months
------------------------------------------- -------- ----------- --------
Cash 2,645 5,075 1,863
Bank deposits with maturities <= 3 months 12,886 20,500 27,162
------------------------------------------- -------- ----------- --------
Cash and cash equivalents 15,531 25,575 29,025
------------------------------------------- -------- ----------- --------
Total assets managed as cash by the Group 27,685 25,575 29,025
------------------------------------------- -------- ----------- --------
The IFRS classification of these instruments has a material
impact on the cash flow statement which indicates a GBP12,154,198
cash outflow as a result of purchasing money market instruments
with maturities greater than 3 months.
8. 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.
Unaudited Unaudited Audited
as at 30 Sep 13 as at 30 Sep 12 as at 31 Mar 13
--------------------------- ---------------------- ---------------------- ----------------------
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
------------------------------------- -------- ------------
Ordinary shares of 0.025p each 55 221,380,800
Adjustment for net purchases by EBT - (2,028,432)
As at 31 March 2012 55 219,352,368
Adjustment for net sales by EBT - 128,432
------------------------------------- -------- ------------
As at 30 September 2012 55 219,480,800
Adjustment for net purchases by EBT - (1,905,808)
------------------------------------- -------- ------------
As at 31 March 2013 55 217,574,992
Adjustment for net sales by EBT - 325,000
As at 30 September 2013 55 217,899,992
------------------------------------- -------- ------------
The Record plc Employee Benefit Trust (EBT) was formed to hold
shares acquired under the Record plc share-based compensation
plans. A total of 3,480,808 (31 March 2013: 3,805,808; 30 September
2012: 1,900,000) ordinary shares were held in the EBT at the
reporting date. The holding of the EBT comprises own shares that
have not vested unconditionally to employees of the Group. Own
shares are recorded at cost and are deducted from retained
earnings.
Neither the purchase nor sale of own shares leads to a gain or
loss being recognised in the Group statement of comprehensive
income, any such gains or losses are recognised directly in
equity.
9. Seeded funds
The Group has investments in a number of funds where it is
currently in a position to be able to control those funds. These
fund investments are held by Record plc and represent seed capital
investments by the Group. Other investors may also subscribe into
these funds, and their holdings represent non-controlling interests
in the Group.
As at As at As at
30 Sep 30 Sep 31 Mar
13 12 13
GBP'000 GBP'000 GBP'000
--------------------------------------------- -------- -------- --------
Net asset value of Group holding in seeded
funds 3,055 2,071 2,215
Net asset value of other holdings in seeded
funds 4,626 2,355 3,646
--------------------------------------------- -------- -------- --------
Net asset value of seeded funds 7,681 4,426 5,861
--------------------------------------------- -------- -------- --------
The funds are consolidated into the Group's financial statements
on a line by line basis.
10. Non-controlling interest
Three Directors of Record plc and seven other investors have
purchased units in the funds currently seeded by Record plc. The
mark to market value of these holdings represents the only
non-controlling interests in the Group.
11. Related parties transactions
Transactions or balances between Group entities have been
eliminated on consolidation and in accordance with IAS 24, are not
disclosed in this note.
The compensation given to key management personnel is as
follows:
Six months Six months Year
ended ended ended
30 Sep 13 30 Sep 12 31 Mar 13
GBP'000 GBP'000 GBP'000
------------------------------ ----------- ----------- -----------
Short-term employee benefits 1,991 1,757 3,435
Post-employment benefits 136 147 289
Share-based payments 543 424 901
Dividends 1,758 863 863
------------------------------ ----------- ----------- -----------
4,428 3,191 5,488
------------------------------ ----------- ----------- -----------
12. 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
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