TIDMREC
RNS Number : 7518J
Record PLC
17 June 2014
PRESS RELEASE
Record plc
17 June 2014
FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2014
Record plc, the specialist currency manager, today announces its
audited results for the year ended 31 March 2014.
Financial headlines:
-- AUME(1) $51.9bn at 31 March 2014 (up 49%)
-- AUME GBP31.1bn at 31 March 2014 (up 36%)
-- Revenue of GBP19.9m (up 7%)
-- Pre-tax profit of GBP6.5m (up 7%)
-- Operating profit margin to 31 March 2014 of 32%, unchanged on
prior year.
-- Financial position remains strong with net assets of GBP32.9m
at 31 March 2014 (2013: GBP32.3m).
-- Basic EPS of 2.48p per share (2013: 1.98p)
-- Proposed final dividend for the year to 31 March 2014 is
0.75p per share, giving a total dividend in respect of the year of
1.50p per share (2013: 1.50p).
Key developments:
-- Client numbers increased to 48 at 31 March 2014 (2013:
44)
-- AUME exceeds $50.0bn for the first time in six years
-- Growing interest in Currency for Return strategies underlined
by first significant external investment into FTSE FRB10 Index Fund
during the year
(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 tangible. To
distinguish this from the AUM of conventional asset managers,
Record uses the concept of Assets under Management Equivalents
("AUME") and by convention this is quoted in US dollars.
Commenting on the results, Neil Record, Chairman of Record plc,
said:
"The Group has continued to build on the foundations for growth
laid in prior years. The benefits from the growth in the "leading"
indicators of AUME and client numbers reported last year have now
flowed through into this year's results, bolstered by further
increases in AUME and client numbers during this year. It's
therefore pleasing now to report increases in "lagging" growth
indicators as well, namely revenue, profits and earnings per share
for the year.
"This growth has been achieved in the context of a continued
shift in business mix towards Hedging and particularly Passive
Hedging services. Whilst these services attract lower fee rates,
Passive Hedging mandates have the advantage of being less sensitive
to investment performance and tend to have greater longevity,
offering greater opportunity to nurture relationships and identify
new business opportunities with the same client.
"Notwithstanding the positive growth in terms of our financial
results and AUME, we continue to do business in a challenging
environment - challenging in terms of varying expectations amongst
current and prospective clients, competitive pressures, and
increased regulatory responsibilities.
"Further growth in mandates and AUME will be required to offset
fully the impact of fee rate reductions undertaken in the financial
year, and the Group is confident that its diversified range of
products is well-positioned to respond to varying client
demand.
"Interest in return-seeking opportunities, particularly 'carry'
opportunities, has begun to re-emerge, driven by the growing
divergence of central banks' policies. This interest has culminated
in the first significant external investment into the Record FTSE
FRB10 Index Fund just prior to year end; growth that the Group
hopes to build on in the current financial year.
"The market in which we operate continues to change and the
importance of maintaining both our flexible approach to clients'
currency-related issues and our superior level of client service
are paramount. This approach has served us well over the last
thirty years and we believe will continue to do so as we adapt to
future market developments and changing client demands."
Analyst briefing
There will be a presentation for analysts at 9.30am on Tuesday
17 June 2014 at 60 Victoria Embankment, London, EC4Y 0JP. 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, Vicky Watkins, Nick Hayns
Consolidated statement of comprehensive income
Year ended 31 March
2014 2013
Note GBP'000 GBP'000
-------------------------------------------- ----- --------- ---------
Revenue 3 19,922 18,552
Cost of sales (86) (221)
-------------------------------------------- ----- --------- ---------
Gross profit 19,836 18,331
Administrative expenses (13,412) (12,343)
Loss on financial instruments held
as part of disposal group - (68)
-------------------------------------------- ----- --------- ---------
Operating profit 4 6,424 5,920
Finance income 113 158
Profit before tax 6,537 6,078
Taxation 6 (1,494) (1,450)
-------------------------------------------- ----- --------- ---------
Profit after tax and total comprehensive
income for the year 5,043 4,628
Profit and total comprehensive income
for the year attributable to:
Non-controlling interests (364) 294
Owners of the parent 5,407 4,334
-------------------------------------------- ----- --------- ---------
Earnings per share for profit attributable
to the equity holders of the Group
during the year (expressed in pence
per share)
Basic earnings per share 7 2.48p 1.98p
Diluted earnings per share 7 2.47p 1.98p
-------------------------------------------- ----- --------- ---------
Consolidated statement of financial position
As at 31 March
Note 2014 2013
GBP'000 GBP'000
---------------------------------------- ----- -------- --------
Non-current assets
Property, plant and equipment 10 86 140
Intangible assets 11 734 963
Investments 12 2,754 -
Deferred tax assets 13 158 5
---------------------------------------- ----- -------- --------
3,732 1,108
Current assets
Trade and other receivables 14 5,646 5,569
Derivative financial assets 15 198 43
Money market instruments with maturity
> 3 months 16 15,488 -
Cash and cash equivalents 16 11,503 29,025
---------------------------------------- ----- -------- --------
Total current assets 32,835 34,637
---------------------------------------- ----- -------- --------
Total assets 36,567 35,745
---------------------------------------- ----- -------- --------
Current liabilities
Trade and other payables 17 (2,706) (2,672)
Corporation tax liabilities 17 (832) (760)
Derivative financial liabilities 15 (122) (25)
---------------------------------------- ----- -------- --------
Total current liabilities (3,660) (3,457)
---------------------------------------- ----- -------- --------
Total net assets 32,907 32,288
---------------------------------------- ----- -------- --------
Equity
Issued share capital 18 55 55
Share premium account 1,838 1,838
Capital redemption reserve 20 20
Retained earnings 27,327 26,729
---------------------------------------- ----- -------- --------
Equity attributable to owners of
the parent 29,240 28,642
Non-controlling interest 20 3,667 3,646
---------------------------------------- ----- -------- --------
Total equity 32,907 32,288
---------------------------------------- ----- -------- --------
Chairman's statement
Overview
The Group has continued to build on the foundations for growth
laid in prior years. The benefits from the growth in the "leading"
indicators of AUME and client numbers reported last year have now
flowed through into this year's underlying results, bolstered by a
49% increase in AUME and a 9% increase in client numbers during
this year. It's therefore pleasing now to report increases in
"lagging" growth indicators as well, namely revenue, profits and
earnings per share for the year.
The market in which we operate has continued to evolve, with
short-term sentiment and risk appetite being driven as much by
political influences as by economic decisions. The most prevalent
market factor affecting the Group's investment performance over the
twelve months to 31 March 2014 has been the increasingly divergent
behaviour amongst central banks, with policies more predicated on
domestic objectives rather than a common global imperative.
Notwithstanding the positive growth in terms of our financial
results and AUME, we continue to do business in a challenging
environment - challenging in terms of varying expectations amongst
current and prospective clients, fee pressures, and increased
regulatory responsibilities.
Financial highlights
The full year effect of increases in AUME and client numbers
reported for last year, plus net inflows of $14.1 billion over the
year, have resulted in an increase in underlying revenues for the
first time in five years. This growth was however diluted somewhat
by the amendment of fee scales for our Dynamic Hedging product
announced mid-year; a consequence of higher levels of business
enquiries and procurement processes being accompanied, inevitably,
by an increase in competitive activity. In recognising this by
aligning existing clients' fees with those being proposed to new
clients, we are pursuing growth in volume that would more than
compensate for reduced revenue margins.
Against this backdrop, total statutory revenues grew by 7% to
GBP19.9 million for the year (2013: GBP18.6 million) achieving an
increase in profit before tax of 7% to GBP6.5 million (2013: GBP6.1
million) and basic earnings per share rose by 25% to 2.48 pence
(2013: 1.98 pence). AUME increased to $51.9 billion (2013: $34.8
billion) including the inflows of $14.1 billion mentioned above,
although the product mix in hedging continues its shift from
Dynamic Hedging to the lower-margin Passive Hedging product, which
now accounts for 73% of total AUME (2013: 63%).
Culture and regulatory change
Our business depends on the relationships built with our clients
and their trust placed in us to provide the best possible service
and solutions to their currency needs. Since establishing Record
over 30 years ago, a culture driven by integrity and of
prioritising clients' best interests has underpinned our position
as one of the leading currency experts in our industry.
This culture, and its continued reinforcement across the firm,
is far more effective than regulation alone. The 2008 financial
crisis and, more recently, allegations of manipulation across the
financial services sector generally, have driven calls for reform
across the industry as a whole. We are committing the necessary
resources to ensure full compliance with regulations as they
evolve, and are also cognisant of our role in helping clients
understand and meet their new regulatory requirements.
Dividend
The Board is recommending a final dividend of 0.75 pence per
share. The total dividend in respect of the year ended 31 March
2014 of 1.50 pence per share is unchanged on the previous year and
in line with our intention as stated in this year's interim report.
The dividend will be payable on 30 July 2014 to shareholders on the
register at 27 June 2014.
For the current financial year, the Board's intention, subject
to business conditions, is to retain the overall dividend payable
at 1.50 pence per share, which the Board would expect to be payable
equally in respect of an interim and final dividend. In setting the
dividend, the Board will be mindful of achieving a level which it
expects to be at least covered by earnings and which allows for
sustainable dividend growth by the business in line with the trend
in profitability.
Group strategy
The Group continues to focus on building long-term relationships
with our clients with a view to generating sustainable growth for
the business. Although the product mix has continued its shift
towards lower margins, the advantage in having more Passive Hedging
clients is in their longevity - consequently the opportunity for us
to nurture relationships and identify new business opportunities
with the same client is far greater. The higher-margin,
return-seeking currency products tend to be more susceptible to
short-term changes in market sentiment, and we have the diversified
product suite ready to react and take advantage of any such
opportunities as they arise.
Outlook
We continue to engage with a number of potential clients on a
wide variety of currency-related issues, including both hedging and
return-seeking strategies.
Growing divergence of central banks' policies has led to the
re-emergence of interest in return-seeking and in particular
"carry" opportunities - interest which has recently culminated in
the first significant external investment into the Record Currency
- FTSE FRB10 Index Fund just prior to year end and growth that we
hope to continue to build on in the current financial year.
The market in which we operate continues to change and the
importance of maintaining both our flexible approach to clients'
currency-related issues and our superior level of client service
are paramount. This approach has served us well over the last
thirty years and we believe will continue to do so as we adapt to
future market developments and changing client demands.
I would also like to take this opportunity to thank all of the
Group's management and staff for their continued hard work and
commitment throughout the year.
Neil Record
Chairman
Chief Executive Officer's statement
It is gratifying to report that in the financial year to 31
March 2014 the Group has achieved growth in client numbers, AUME,
revenues and profits. This growth has been achieved in the context
of a continued shift in business mix towards Hedging and
particularly Passive Hedging services, which whilst attracting
lower revenue margins, have historically been less sensitive to
investment performance, and client mandates typically
longer-lived.
Further growth in mandates and AUME will be required to offset
fully the impact of fee rate reductions undertaken in the financial
year, and the Group is confident that its diversified range of
products is well-positioned to respond to varying client
demand.
Market overview
The most prevalent market factor affecting the Group's
investment performance over the twelve months to 31 March 2014 has
been increasingly divergent behaviour amongst central banks.
Broadly since 2009, developed market central banks, in particular
those of Japan, the United States, the Eurozone, the United Kingdom
and Switzerland had pursued exceptionally loose monetary policy.
Since the start of the financial year, central banks have been
pursuing different policies more predicated on domestic objectives
rather than a common global imperative, and this difference in
behaviour is being felt in currency markets.
In brief, Japan continues firmly in the easing camp, the
Eurozone and Switzerland more biased towards looser monetary
policy, and the United States and the United Kingdom more clearly
on a path towards tightening.
Since the middle of 2013, the FX market itself has attracted new
and in some cases undesired attention. Much of this attention has
focussed on FX benchmark or "fix" rates, which are now the subject
of multiple regulatory investigations around the world. To be
clear, Record has no connection with any of these investigations.
Overall, it should be emphasised that the FX market serves its
users tremendously well, as a continuous round-the-clock market
offering deep liquidity in a wide range of currency pairs,
including for very large transactions, and at exceptionally low
costs. Record's status as an independent and expert manager acting
only on its clients' behalf enables us to navigate this market
solely in our clients' best interests.
Investment performance
The performance of our Dynamic Hedging product depends on how
foreign currencies change in value relative to the base currency of
a client. During the last year, mandates for our US and UK-based
Dynamic Hedging clients performed as expected in terms of allowing
clients to benefit from periods of strengthening foreign
currencies, whilst being protected against periods of weakening
foreign currencies. Overall, UK-based Dynamic Hedging programmes
generated positive returns from hedging, in turn helping to offset
clients' losses from foreign currency exposure. Conversely,
US-based Dynamic Hedging programmes generated modest negative
returns, allowing clients' gains from foreign currency exposure to
be largely preserved.
Amongst Currency for Return products in the year, the Active FRB
product saw negative returns as relatively low interest rate
currencies strengthened, while higher interest rate currencies were
relatively weak. Similarly, the Forward Rate Bias Index product
also produced negative returns as low interest rate currencies
appreciated. Record's Emerging Market Currency Fund generated
negative returns over the period as emerging market currencies
depreciated against a basket of developed market currencies. More
detailed performance data is provided in the operating review.
Record's live Multi-Strategy mandate, a combination of Forward
Rate Bias, Emerging Market, Momentum and Value strategies,
delivered modest positive performance over the period, led by
returns in the Value and Momentum strategies.
Asset flows and financial performance
AUME increased significantly through the year by 49%, to $51.9
billion. This increase was driven by several new Hedging mandates,
modestly offset by client losses, driving net inflows of $14.1
billion. External factors (e.g. equity and other market movements
and the impact of exchange rates over the period) also contributed
+$3.0 billion. Since the year-end, Record has announced the
termination of a Dynamic Hedging mandate of approximately $600
million.
This growth in AUME has led to an increase in underlying(1)
revenues of 11%, to GBP20.3 million. A continued focus on cost
control has seen the Group increase its underlying operating profit
margin to 33%, leading to growth in underlying profit before tax of
19%, to GBP6.9 million, and in basic earnings per share of 25%, to
2.48 pence per share.
(1)The underlying results are those before consolidating the
seed funds in full, and reflect internal management reporting of
the revenues and costs driving future cashflows of the
business.
Strategic progress
During the financial year the Group has built on the foundations
for growth established in prior years, and has continued to engage
with more prospective clients, to enhance its service offering, and
to strengthen further its infrastructure to manage client-specific
mandates in a robust and operationally efficient environment.
Engagement with prospective clients and their investment
consultants continues to focus on the Group's core markets of North
America, continental Europe and in particular Switzerland, and the
United Kingdom.
In the United States, long-term growth in international asset
allocations driven by the adoption of global benchmarks, combined
with the expectation of a strengthening US Dollar, brought about a
marked increase in interest in hedging from the summer of 2013.
This higher level of interest was accompanied by increased
competitive activity, and the Group took the decision in November
2013 to recognise this by reducing fee scales for existing clients,
as well as for potential new clients.
Since the start of 2014, the absence of pronounced US Dollar
appreciation has caused some of this interest to diminish, although
this could return quickly with US Dollar strength. It remains the
case that many US investors have greater exposure now to foreign
currencies than has been the case historically, and this supports
greater interest in currency management strategies to which the
Group is well positioned to respond.
In Switzerland, Record achieved considerable growth in Passive
Hedging mandates, as a result of the Group's long and respected
presence in the market, investors' focus on hedging implementation,
and Record's high service level offering. The client relationships
built on Passive Hedging also provide an opportunity to discuss
other Record products.
In the United Kingdom, the Group continues to engage with
prospective clients on both Passive and Dynamic Hedging, and has
seen early signs of renewed interest in Currency for Return
strategies, including Forward Rate Bias strategies. These
strategies tend to perform well both in anticipation of interest
rate divergence as well as in established divergent environments
with larger interest rate differentials to harvest. Client interest
is drawn to transparent, low-geared and lower fee strategies, which
Record is ideally placed to meet with the FTSE FRB10 Index
Fund.
With respect to enhancing Record's products and services, we
have continued to develop the service offering in Hedging products,
to gain more experience in managing the Multi-Strategy portfolio,
which will mark its second anniversary in July 2014, and to explore
further product development. Such enhancements are essential to
continue to meet clients' requirements.
The Group has also continued to invest further in its
operational infrastructure, in terms of systems, processes and most
of all people. Over thirty years, Record has built a client-centric
operating model - all Hedging mandates, and unfunded Currency for
Return mandates, are run as bespoke segregated mandates, with each
client's individual parameters, exposures and trades recorded and
managed uniquely for that client. It is this model that enables us
to run highly operational risk-sensitive Hedging mandates, in
particular in Passive Hedging, robustly and efficiently, and on
terms that are attractive to the client. This client-centric model
is wholly different from the fund-oriented operational approach
that many alternative investment managers have put in place, and is
a model in which Record will continue to invest.
Outlook
After five years of declining revenues and profits, the progress
made in the twelve months to 31 March 2014 demonstrates the Group's
ability to grow client relationships and AUME through both
long-established and new products. Across our core markets of North
America, continental Europe and the United Kingdom, growing
interest in currency management strategies, whether Hedging,
Currency for Return, or a combination, augurs well for future
growth.
Competitive pressures continue to be felt across our markets.
The Group's responses to these pressures include continually
enhancing the service levels and client features in respect of some
products, such as Passive Hedging, whilst recognising fee pressures
and reducing fees to remain competitive in others. At all times the
Group will remain focussed on its principal objectives of offering
services and products that are designed to meet our clients'
currency objectives and to do so at good value, that allow the
Group to maintain its position as an unconflicted expert agent,
acting solely in its clients' best interests, and for which the
Group will be properly remunerated.
Within those parameters, there are numerous opportunities for
both existing and new products, with both long-established and new
clients, and all of the Group's staff are wholly focused on making
the most of these opportunities.
James Wood-Collins
Chief Executive Officer
Key Performance Indicators
The Board and Executive Committee use a number of key
performance indicators (KPIs) to monitor the performance of the
Group. A three-year history of these KPIs is shown below.
KPIs 2014 2013 2012 2011 2010
---------------------- ----------- ----------- ----------- ----------- -----------
AUME at 31 March $51.9bn $34.8bn $30.9bn $31.4bn $34.0bn
- US Dollars
Client numbers at
31 March 48 44 41 46 93
Average management
fee rates achieved 8 9 11 14 15
Underlying operating
profit margin 33% 31% 32% 44% 49%
Basic EPS 2.48 pence 1.98 pence 2.23 pence 4.03 pence 5.39 pence
---------------------- ----------- ----------- ----------- ----------- -----------
How we performed this year
-- Net AUME inflows for the year were $14.1bn and AUME ended the
year at $51.9bn, the highest closing level of AUME for six
years.
-- Client numbers at the end of the year stood at 48, the
highest for four years.
-- Fees for Dynamic Hedging were reduced during the year to
align existing clients' fees with those being proposed to potential
new clients. Fee rates on other products were broadly
maintained.
-- Underlying profit margin increased from 31% to 33%.
-- EPS increased by 25% due to growth in revenue and firm cost
control during the year.
Business review
Market review
The most prevalent market factor affecting the Group's
investment performance over the twelve months to 31 March 2014 has
been increasingly divergent behaviour amongst central banks. This
divergence is in contrast to the high degree of policy convergence,
in particular amongst the central banks of Japan, the United
States, the Eurozone, the United Kingdom and Switzerland
(henceforth referred to as the "G5"), that had been largely
observed since 2009 as a uniform policy response to the banking
crisis and subsequent recessions.
As well as commenting on this divergence and its impact on
exchange rates and on Record's products, this section will also
address the functioning of the FX market itself, which has come
under new and frequently unwelcome scrutiny since the middle of
2013.
Central bank policy
Broadly since 2009, developed market central banks, in
particular those of the G5 have pursued exceptionally loose
monetary policy. This has consisted of a range of policies
including close-to-zero policy interest rates, "forward guidance"
on the anticipated path interest rates may take in the future, and
further growth in the base money supply through asset purchases
(known as "quantitative easing").
During the year to 31 March 2014, it has become evident that
different central banks are now starting to pursue different
policies with respect to stopping, slowing, continuing, increasing
or indeed starting these unconventional monetary policy tactics,
and furthermore that this difference in behaviour is being felt in
currency markets.
At the outset of the financial year, currency markets were
focussed on Japan, and in particular the 3-4 April 2013 meeting of
the Bank of Japan's monetary policy committee under new Governor
Haruhiko Kuroda. At this meeting Governor Kuroda surprised markets
by announcing a "new phase of monetary easing", intended to target
a 2% inflation rate through aggressively increasing asset
purchases, and in effect targeting a doubling of the monetary base
by the end of 2014. This firmly pinned the Bank of Japan's colours
to the "more easing" mast. Predictably the Japanese Yen continued
its depreciation course that had started in September 2012.
By contrast, on 22 May 2013, Chairman Ben Bernanke mooted
slowing the $85 billion per month rate of asset purchases then
being pursued by the US Federal Reserve, immediately adding
"tapering" to the financial lexicon. This rapidly gave rise to
speculation that the Federal Reserve would start to slow asset
purchases from the September 2013 meeting of its Open Market
Committee, and that interest rate tightening would follow
thereafter. Policy divergence had therefore opened up, most clearly
between the US and Japan.
This perception of tightening from the Federal Reserve had the
predictable effect of supporting the US Dollar throughout the
summer, in particular against emerging market currencies with
sizeable current account deficits whose economies were seen as
vulnerable to a tightening rate cycle. When in September 2013 the
Federal Reserve elected not to start tapering, choosing instead to
"await more evidence that progress will be sustained", markets were
surprised, but the December 2013 decision to reduce asset purchases
by $10 billion re-affirmed prior expectations. The Federal Reserve
has continued to reduce further the rate of asset purchases at
subsequent meetings, illustrating that whilst interest rates
continue to be exceptionally low and the monetary base continues to
expand, the direction of travel for the Federal Reserve continues
towards tightening rather than easing.
The European Central Bank and the Bank of England have also
moved towards monetary policy being dictated by domestic policy
objectives, rather than a common global policy imperative. The
European Central Bank had steadfastly resisted the most
unconventional forms of monetary policy such as quantitative
easing, cleaving instead to more orthodox policies. President Mario
Draghi's July 2012 commitment "to do whatever it takes to preserve
the Euro" continued to serve its reassuring function throughout
much of this financial year, although towards the end of the
financial year and subsequently speculation has grown that the risk
of deflation in the Eurozone is sufficiently high for asset
purchases or more traditional forms of easing (such as negative
deposit rates) to return to the agenda. The European Central Bank
is therefore more likely on an easing rather than tightening
path.
In the United Kingdom, incoming Bank of England Governor Mark
Carney sought initially to rely on forward guidance, by
establishing in August 2013 a firm link between the unemployment
rate and interest rates increases. This link did not survive a
faster-than-expected fall in unemployment, with forward guidance
amended in February 2014 to a more judgemental and therefore
discretionary determination of interest rates. While rates continue
to be exceptionally low, and the Bank of England has preserved its
discretion in when rates will be increased, the direction of travel
appears to be in favour of tightening, with perhaps greater risk
that this will take place sooner rather than later, particularly if
concerns grow of a house price bubble.
To complete the G5, the Swiss National Bank has preserved its
policy of capping the value of the Swiss Franc versus the Euro,
thereby limiting the scope for monetary policy divergence compared
to that of the Eurozone. In summary therefore, Japan continues
firmly in the easing camp, the Eurozone and Switzerland more biased
towards looser monetary policy, and the United States and the
United Kingdom more clearly on a path towards tightening.
In general rising interest rates and interest rate expectations
for one currency are positive for the performance of that currency.
The effects of interest rate and rate expectations on Record's
currency management services are complex, but some conclusions can
be drawn.
With respect to the hedging services that now comprise the large
majority of Record's AUME, the long-established arguments in favour
of hedging currency risk are in theory neutral to the interest rate
outlook and indeed short-term currency performance, as the
objective of hedging is principally to reduce the volatility
contributed by long-term unrewarded currency risk. Nonetheless
experience has shown that the expectation of a strengthening base
currency, and hence the risk of losses caused by depreciating
exposure currencies, can be a powerful catalyst to encourage
investors to consider hedging.
The expectation of a strengthening US Dollar, fuelled by the
prospect of interest rate tightening, and combined with
international asset allocations that have grown significantly in
recent years, is believed to account for much of the growth in
interest in hedging that Record saw, starting from the summer of
2013. Since the start of 2014, the absence of pronounced US Dollar
appreciation, attributable in part to a more nuanced expectation of
US interest rate tightening, has caused some of this interest to
diminish, although this could return quickly with US Dollar
strength. It remains the case that many US investors have greater
exposure now to foreign currencies than has been the case
historically, and this supports greater interest in currency
management strategies.
With respect to return-seeking currency strategies, the most
obvious beneficiary of monetary policy divergence, and hence
anticipated interest rate divergence, are the forward rate bias or
"carry trade" strategies. These strategies tend to perform well
both in anticipation of interest rate divergence, as this is
reflected in currency spot price movements, as well as in
established divergent environments with larger interest rate
differentials to harvest. This more supportive environment is
believed to account for the nascent although growing interest that
Record has seen in forward rate bias strategies in the latter part
of 2013 and early part of 2014.
Emerging market currency strategies have suffered to some
extent, in particular from the expectation of US interest rate
tightening and a slowdown in their own GDP growth. This does not
though diminish the long-term case predicated on the convergence in
productivity between emerging and developed economies, and many
emerging market economies continue to offer attractive interest
rate premiums, now at multi-year highs. The long-term investment
case for emerging market currency strategies therefore continues to
be strong.
Momentum and value strategies are less evidently directly
affected by developed market interest rates. As a generalisation,
reduced participation by central banks in capital markets should
allow these strategies better to assert themselves in the market
circumstances to which they are best suited, although changing
market expectations can prove costly to momentum strategies in
particular.
The FX market
Since the middle of 2013, the FX market has attracted new and in
some cases undesired attention. Much of this attention has focussed
on FX benchmark or "fix" rates, which are now the subject of
multiple regulatory investigations around the world. To be clear,
Record has no connection with any of these investigations.
By way of background, benchmark rates, amongst which the best
known are WM/Reuters rates, were established for valuation and
reporting, including importantly in indices, and not originally for
outright trading. These rates are calculated based on actual trades
in a one minute window. Banks now offer a facility to clients to
commit in advance to transacting at WM/Reuters spot rates. This
extension of an after-the-fact benchmark rate, to a rate at which a
bank will commit in advance, is a fundamental change in the
benchmark's purpose.
As a specialist currency manager, Record has an obligation to
achieve best execution for its clients and has no bias towards
using WM/Reuters rates, only doing so if it better suits our
client's objective. This is only a small minority of our trading
activity, on average less than 5%.
Overall it should be emphasised that the FX market serves its
users tremendously well, as a continuous round-the-clock market
offering deep liquidity in a wide range of currency pairs,
including for very large transactions, and at exceptionally low
costs.
Operating review
Product investment performance
Our hedging products are predominantly systematic in nature. The
effectiveness of each of the client mandates is assessed regularly
and adjustments are made when necessary in order to respond to
changing market conditions or to bring the risk profile of the
hedging mandate in line with the client's risk tolerance.
The performance of our Dynamic Hedging product depends on how
the foreign currencies change in value relative to the base
currency of a client. During the last year, mandates for our US and
UK-based Dynamic Hedging clients performed as expected in terms of
allowing clients to benefit from periods of strengthening foreign
currencies, whilst being protected against periods of weakening
foreign currencies.
UK investors saw losses from currency over the year as Sterling
strengthened, leading to lower base valuations for foreign currency
investments. UK-based Dynamic Hedging programmes systematically
increased hedge ratios over the year in response to Sterling
strength; this resulted in positive returns from hedging, in turn
helping to offset losses from foreign currency exposure.
Conversely, US investors saw gains from currency on
international exposures when valuing positions in US Dollars, as
foreign currencies strengthened against the US Dollar. Record's
Dynamic Hedging product reduced hedge ratios over the year in
response to this US Dollar weakness. As a result, the negative
returns from hedging were controlled, allowing gains from foreign
currency exposure to be largely preserved.
Record had a number of "live" Currency for Return products in
the year. The Active Forward Rate Bias (FRB), and Emerging Market
products are active and return seeking in nature, though exploit
different market phenomena. The other return seeking products are
more passive in nature: the Record Currency - FTSE FRB10 Index
Fund, a strategy that tracks the FTSE Currency FRB10 index, and the
Momentum and Value strategies. Active FRB, Emerging Market,
Momentum and Value also comprise a version of the Currency
Multi-Strategy product.
For the Active FRB product, the core investment process - the
Trend/Forward Rate Bias strategy - aims to buy selected developed
market higher interest rate currencies and sell selected lower
interest rate currencies and to manage these positions with a view
to controlling downside risk. Historically this investment approach
has shown positive returns due to the existence of the Forward Rate
Bias and trending movements in selected currency pairs. The year
saw negative returns as relatively low interest rate currencies,
notably the Swiss Franc and Euro, strengthened, while higher
interest-rate currencies such as the Australian Dollar were
relatively weak. A complementary investment process - the Range
Trading strategy - generated a positive return as selected currency
pairs tended to mean revert, partially offsetting the
underperformance of the Trend/Forward Rate Bias strategy.
Similarly, the Forward Rate Bias Index product produced negative
returns as low interest rate currencies appreciated. Record remains
committed to our belief that over time currency and in particular
the FRB can be a persistent and uncorrelated source of returns for
investors, and that the FRB will continue to generate long-term
returns.
Record's Emerging Market Currency Fund generated negative
returns over the period as emerging market currencies depreciated
against a basket of developed market currencies. Concerns over US
tapering and possible interest rate rises led to a selloff in
emerging market bonds, which impacted demand for EM currencies. The
strengthening of the Euro and Sterling over the course of the year
also had an adverse effect on the strategy's performance.
Record's only live Multi-Strategy mandate, a combination of
Forward Rate Bias, Emerging Market, Momentum and Value strategies,
delivered modest positive performance over the period. Gains were
led by returns in the Value and Momentum strategies, although these
were partially offset by negative returns from the Emerging Markets
strand and, to a lesser extent, the FRB strand.
Returns data for Currency for Return strategies
Fund Name Gearing Annual Return Return Volatility
% since inception since inception
% p.a. % p.a.
----------------------------- -------- -------------- ----------------- -----------------
FTSE FRB 10 Index Fund(1) 1.8 -3.94% 3.33% 7.68%
Emerging Market Currency
Fund(2) 1 -2.95% 0.53% 7.37%
Index /composite returns(3) Annual Return Return Volatility
% since inception since inception
% p.a. % p.a.
----------------------------- -------- -------------- ----------------- -----------------
Alpha composite(4) -1.04% 0.18% 2.67%
FTSE Currency FRB10 GBP
Excess return(5) -2.34% 2.58% 4.69%
Currency value(6) 3.74% 1.99% 2.77%
Currency momentum(7) 2.81% 3.17% 3.38%
Record Multi Strategy(8) 0.29% 2.29% 2.00%
----------------------------- -------- -------------- ----------------- -----------------
Gearing
The Currency for Return product group allows clients to pick the
level of exposure they desire in their currency programmes. The
pooled funds have historically offered clients a range of gearing
and target volatility levels. The segregated mandates allow clients
to individually pick the level of gearing.
It should be emphasised that in this case "gearing" refers to
the multiple of the maximum size of the aggregate forward contracts
in the currency programme, to the pooled fund's net assets or the
segregated mandate size. This is limited by the willingness of
counterparty banks to take exposure to the pooled fund or
segregated client. Gearing in this context does not involve
borrowing.
(1) FTSE FRB10 Index Fund return data is since inception in
December 2010, GBP base.
(2) Emerging Market Currency Fund return data is since inception
in December 2010, GBP base.
(3) All index/composite returns are shown on a gearing 1
basis
(4) Alpha Composite data is since January 2003, USD base.
(5) FTSE Currency FRB10 GBP Excess return data is since December
1987, GBP base.
(6) Currency value return data is since inception in July 2012,
CAD base.
(7) Currency momentum return data is since inception in July
2012, CAD base.
(8) Record Multi Strategy return data is since inception in July
2012, CAD base.
AUME development
The Group has seen an aggregate increase in AUME of $17.1bn
(+49%) to finish the year at AUME of $51.9bn compared with $34.8bn
at the end of the previous year.
AUME development ($bn)
Opening AuME Net client Markets FX effect Closing AuME
at 1 April flows at 31 March
2013 2014
------------- ----------- -------- ---------- -------------
34.8 +14.1 +0.4 +2.6 51.9
------------- ----------- -------- ---------- -------------
AUME movements result both from factors within Record's control
and external factors outside its control. External factors include
exchange rates and the underlying asset value (usually equities) on
which many segregated mandates are based. External factors
accounted for a net increase of $3.0bn in AUME during the year,
made up of:
(i) an increase of $0.4bn related to movements in global stock
and other markets as many mandate sizes are linked to such
markets;
(ii) an increase of $2.6bn due to changes in exchange rates over
the period, which affects the conversion of non-US Dollar mandate
sizes into US Dollar AUME. This movement does not have an
equivalent impact on the Sterling value of fee income.
The Group has seen net inflows of $14.1bn from clients. Inflows
from both new and existing clients totalled $18.4bn, and were
offset by outflows of $4.3bn.
When expressed in Sterling, AUME increased by GBP8.2bn (+36%) to
finish the year at GBP31.1bn (2013: GBP22.9bn). The split of AUME
at the year end by base currency was 19% in Sterling, 60% in Swiss
Francs, 15% in US Dollars, 5% in Euros and 1% in Canadian
Dollars.
Dynamic Hedging AUME increased by 3% to $11.3bn (2013: $11.0bn),
due to the combination of net inflows of $0.3bn, and growth in both
the value of the underlying assets of $0.5bn plus the impact of
movements in exchange rates of $0.5bn. These latter two movements
were offset by the reclassification of a bespoke hybrid hedging and
return-seeking mandate of $1bn from Dynamic Hedging to Currency for
Return during the year.
Since the year end, the Group has announced the loss of a
dynamic hedging programme with AUME totalling approximately $0.6
billion.
Passive Hedging AUME increased to $37.9bn, a 71% increase in the
year (2013: +17%), principally due to the combination of two
factors: net inflows of $13.7bn, in addition to movements in
exchange rates of $2.1bn.
Record's Currency for Return AUME was reported at $2.4bn (2013:
$1.6bn) due principally to the mid-year reclassification of a
bespoke hybrid hedging and return-seeking mandate, resulting in a
reclassification of $1bn from Dynamic Hedging to Currency for
Return. Included in the Currency for Return mandates are a small
number of mandates for emerging market currencies totalling $0.8bn
(2013: $0.8bn) and a single multi-strategy mandate of $0.3bn.
Product mix
Whilst there were gains in AUME in all of Record's core
products, the largest gains were made in Passive Hedging which has
had a notable effect on product mix. As a result, Passive Hedging
now represents 73% (2013: 63%) of total AUME and Dynamic Hedging
22% (2013: 32%).
The consequence of this shift in the Hedging products is that
together Currency for Return and Dynamic Hedging represented 27% of
AUME (2013: 37%) being higher margin products compared to Passive
Hedging now representing almost three quarters (73%) of total
AUME.
At 31 March 2014 Record had 48 clients compared to 44 clients at
the end of the prior year, a net gain of 4 clients over the
year.
AUME composition by 31 Mar 14 31 Mar 13
product (US Dollars)
-------------- --------------
US $bn % US $bn %
----------------------- ------- ----- ------- -----
Dynamic Hedging 11.3 22% 11.0 32%
Passive Hedging 37.9 73% 22.1 63%
Currency for Return 2.4 5% 1.6 5%
Cash 0.3 -% 0.1 -%
----------------------- ------- ----- ------- -----
Total 51.9 100% 34.8 100%
----------------------- ------- ----- ------- -----
AUME composition by product and base currency
Dynamic Hedging Passive Hedging Currency for Return
------------------- -------------------- ---------------------- ---------------------
Base Currency 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar
14 13 14 13 14 13
------------------- --------- --------- ---------- ---------- ---------- ---------
Sterling GBP 2.3bn GBP 1.8bn GBP 3.6bn GBP 3.6bn - -
US Dollar USD 5.9bn USD 6.5bn USD 0.2bn USD 0.1bn USD 1.5bn USD 0.6bn
Swiss Franc CHF 1.4bn CHF 1.4bn CHF 25.7bn CHF 14.1bn CHF 0.6bn CHF 1.5bn
Euro - - EUR 1.9bn EUR 1.4bn - -
Canadian Dollar - - - - CAD 0.3bn CAD 0.3bn
------------------- --------- --------- ---------- ---------- ---------- ---------
Infrastructure development
The Group has continued the development of its IT infrastructure
during the year with implementation of a system upgrade to its key
middle and back office system. This system, originally implemented
in full during the previous financial year, is proving to be both
flexible and robust. Greater flexibility in terms of the ability to
employ new instruments and manage more bespoke products enhances
our overall product offering to clients. The system also enhances
our capability in ensuring adherence to new regulatory reporting
requirements for both the Group and on behalf of our clients.
Financial review
Group revenue for the financial year was GBP19.9m, an increase
of 7% year on year. The increase reflects the growth in management
fees of 12% from GBP18.1m to GBP20.3m offset partly by losses on
financial instruments employed by the seed funds and consolidated
under IFRS.
The overall growth in management fees reflects both a full
year's revenue from increases in client numbers and AUME reported
last year, bolstered by part year effects of further mandate wins
and AUME during this year. The shift in product mix towards the
lower-margin Passive Hedging product continued during the year and
average fee rates were further reduced by the amendment announced
to Dynamic Hedging fee rates offered mid-year to both potential and
existing clients.
Total expenditure increased by 8% to GBP13.4m. The increase was
due to an increase of GBP0.5m in the Group Profit Share cost which
is determined by operating profit, and increases in non-personnel
costs of GBP0.5m.
Profit before tax increased by 7% to GBP6.5m.
Profit and loss (GBPm) - Year ended 2014 2013
31 March
------------------------------------- ------------- -------------
Revenue 19.9 18.6
------------------------------------- ------------- -------------
Cost of sales (0.1) (0.3)
------------------------------------- ------------- -------------
Gross profit 19.8 18.3
------------------------------------- ------------- -------------
Personnel (excluding Group Profit
Share Scheme) (6.1) (6.0)
Non-personnel cost (4.4) (3.9)
Loss on financial instruments held
as part of disposal group - (0.1)
------------------------------------- ------------- -------------
Total expenditure (excl. Group
Profit Share Scheme) (10.5) (10.0)
------------------------------------- ------------- -------------
Group Profit Share Scheme (2.9) (2.4)
------------------------------------- ------------- -------------
Operating profit 6.4 5.9
% 32% 32%
------------------------------------- ------------- -------------
Net interest received 0.1 0.2
------------------------------------- ------------- -------------
Profit before tax 6.5 6.1
------------------------------------- ------------- -------------
Tax (1.5) (1.5)
------------------------------------- ------------- -------------
Profit after tax 5.0 4.6
------------------------------------- ------------- -------------
Revenue
Record's revenue is principally management fees earned from the
provision of currency management services.
Revenue analysis (GBPm) 2014 2013
------------------------- ------ -----
Management fees 20.3 18.1
Other income (0.4) 0.5
------------------------- ------ -----
Total 19.9 18.6
------------------------- ------ -----
Record charges fees to its clients based upon the AUME of the
product provided. Both Passive and Dynamic Hedging typically have
management fee only arrangements, although some Dynamic Hedging
programmes have a performance fee element. Record has historically
offered both management fee only, and management fee plus
performance fee structures on Currency for Return mandates. Higher
performance fee rates usually accompany lower management fee rates
and vice versa.
Management fees and performance fees are normally invoiced on a
quarterly basis, although Record invoices management fees for some
of its larger clients on a monthly basis.
Management fees
Management fee income earned during the year was GBP20.3m, an
increase of 12% on the previous period (2013: GBP18.1m). Management
fees from Passive Hedging grew to GBP5.7m for the year representing
28% of total fees. Dynamic Hedging fees are unchanged year on year
at GBP11.9m, as additional revenues from new clients have been
offset by fee reductions given in the period. Management fees
earned from our Currency for Return products increased, primarily
from increased participation from existing clients.
Management fees by product (GBPm) 2014 2013
----------------------------------- ----- -----
Dynamic Hedging 11.9 11.9
Passive Hedging 5.7 4.1
Currency for Return 2.7 2.1
----------------------------------- ----- -----
Total 20.3 18.1
----------------------------------- ----- -----
During the year ended 31 March 2014, there has been an increase
in new business enquiries and procurement processes, which has been
accompanied by an increase in competitive activity. In order for
the Group's Dynamic Hedging product to remain competitive for both
new and existing clients, the decision was taken to decrease the
fee rates on the Dynamic Hedging product during the year. The
resulting reduction in margins on this product is intended to be
more than compensated for by growth in volume in the
longer-term.
Passive Hedging fee rates have remained steady through the
period whilst Currency for Return rates have fallen slightly
reflecting a change in mix of strategies employed as opposed to a
change in actual fee rates for this product.
Average management fee rates by product 2014 2013
- (bps)
----------------------------------------- ----- -----
Dynamic Hedging 16 18
Passive Hedging 3 3
Currency for Return 17 22
----------------------------------------- ----- -----
Performance fees
Historically, performance fees have been earned from some
Currency for Return and Dynamic Hedging mandates. There are two
active mandates that incorporate a performance fee component which
are both Dynamic Hedging mandates. There was no performance fee
earned in the year (2013: GBPnil).
Other income
Other income is principally from gains made on forward foreign
exchange contracts employed by the funds seeded by the Group. It
also includes gains/losses on hedging revenues denominated in
currencies other than Sterling, and other foreign exchange
gains/losses.
Expenditure
Operating Expenditure
The total operating expenditure of the Group was GBP13.4m, an
increase of GBP1.0m (8%) during the year ended 31 March 2014.
Non-personnel costs increased by GBP0.5m to GBP4.4m, as a result of
costs linked to senior recruitment, training, consultancy and a
full year of amortisation of our recently developed mid- and
back-office system. Personnel costs rose marginally by GBP0.1m, to
GBP6.1m.
Group Profit Share Scheme
The Group operates a Group Profit Share Scheme such that a
long-term average of 30% of operating profit before Group Profit
Share (GPS) is made available to be awarded to employees. The
Remuneration Committee has agreed that for the year ended 31 March
2014, the Group Profit Share Scheme is 30% of pre-GPS operating
profit. This represents GBP2.9m, an increase of GBP0.5m from the
previous financial year. Directors and senior management in Record
are required to take a proportion of this remuneration in the form
of shares which are subject to lock-up arrangements under the
scheme rules.
Under the scheme rules, the intention is to purchase these
shares in the market following the announcement of interim and full
year financial results.
Operating margin
The operating profit for the year ended 31 March 2014 of GBP6.4m
was 8% higher than the operating profit for the previous financial
year (2013: GBP5.9m). Consolidated operating margin remained at 32%
year on year. Underlying operating margin increased to 33% (2013:
31%), excluding the effect of consolidating the seed funds.
Cash flow
The Group's year end cash position was GBP11.5m (2013:
GBP29.0m). The cash generated from operating activities before tax
was GBP6.7m (2013: GBP7.2m), with GBP1.6m paid in taxation and
GBP4.9m paid in dividends. The Group also seeded a new sub-fund
under the Dublin-based Record Umbrella Fund structure with GBP1m of
own cash. At the year end, the Group held money market instruments
with maturities between 3 and 12 months, worth GBP15.5m (2013:
GBPnil). These instruments are managed as cash by the group but are
not classified as cash under IFRS rules (see the financial
statements for more details).
Cash held by the Record Currency - FTSE FRB10 Index fund, which
was previously included in the consolidated Group's cash balance
was deconsolidated during the period as a result of the fund
obtaining sufficient external investment such that the Group was no
longer required to consolidate the fund on a line-by-line basis.
The impact of this deconsolidation was an adjustment to cash of
-GBP1.9m.
Dividends
Shareholders received an interim dividend of 0.75p per share
paid on 20 December 2013. The Board recommends paying a final
dividend of 0.75p per share, equivalent to GBP1.6m. This would take
the overall dividend to 1.50p per share (dividend paid in respect
of year ended 31 March 2013: 1.50p per share).
Subject to shareholder approval, the dividend will be paid on 30
July 2014 to shareholders on the register on 27 June 2014, the
ex-dividend date being 25 June 2014. The dividend cover in the year
was 1.7 (2013: 1.3).
Financial stability and Capital management
The Group's financial position remains strong. Consolidated net
assets stood at GBP32.9m (2013: GBP32.3m) at the end of the year
represented predominantly by assets managed as cash of GBP27.0m
(2013: GBP29.0m).
The Board's policy is to retain capital (being equivalent to
shareholders' funds) within the business sufficient to meet
continuing obligations, to sustain future growth and to provide a
buffer against adverse market conditions. To this end the Group
maintains a financial model to assist it in forecasting future
capital requirements over a four-year time horizon under various
scenarios. Shareholders' funds were GBP29.2m at 31 March 2014
(2013: GBP28.6m). The Group has no debt.
Consolidated statement of comprehensive income
Year ended 31 March
2014 2013
Note GBP'000 GBP'000
-------------------------------------------- ----- --------- ---------
Revenue 3 19,922 18,552
Cost of sales (86) (221)
-------------------------------------------- ----- --------- ---------
Gross profit 19,836 18,331
Administrative expenses (13,412) (12,343)
Loss on financial instruments held
as part of disposal group - (68)
-------------------------------------------- ----- --------- ---------
Operating profit 4 6,424 5,920
Finance income 113 158
Profit before tax 6,537 6,078
Taxation 6 (1,494) (1,450)
-------------------------------------------- ----- --------- ---------
Profit after tax and total comprehensive
income for the year 5,043 4,628
Profit and total comprehensive income
for the year attributable to:
Non-controlling interests (364) 294
Owners of the parent 5,407 4,334
-------------------------------------------- ----- --------- ---------
Earnings per share for profit attributable
to the equity holders of the Group
during the year (expressed in pence
per share)
Basic earnings per share 7 2.48p 1.98p
Diluted earnings per share 7 2.47p 1.98p
-------------------------------------------- ----- --------- ---------
Consolidated statement of financial position
As at 31 March
Note 2014 2013
GBP'000 GBP'000
---------------------------------------- ----- -------- --------
Non-current assets
Property, plant and equipment 10 86 140
Intangible assets 11 734 963
Investments 12 2,754 -
Deferred tax assets 13 158 5
---------------------------------------- ----- -------- --------
3,732 1,108
Current assets
Trade and other receivables 14 5,646 5,569
Derivative financial assets 15 198 43
Money market instruments with maturity
> 3 months 16 15,488 -
Cash and cash equivalents 16 11,503 29,025
---------------------------------------- ----- -------- --------
Total current assets 32,835 34,637
---------------------------------------- ----- -------- --------
Total assets 36,567 35,745
---------------------------------------- ----- -------- --------
Current liabilities
Trade and other payables 17 (2,706) (2,672)
Corporation tax liabilities 17 (832) (760)
Derivative financial liabilities 15 (122) (25)
---------------------------------------- ----- -------- --------
Total current liabilities (3,660) (3,457)
---------------------------------------- ----- -------- --------
Total net assets 32,907 32,288
---------------------------------------- ----- -------- --------
Equity
Issued share capital 18 55 55
Share premium account 1,838 1,838
Capital redemption reserve 20 20
Retained earnings 27,327 26,729
---------------------------------------- ----- -------- --------
Equity attributable to owners of
the parent 29,240 28,642
Non-controlling interest 20 3,667 3,646
---------------------------------------- ----- -------- --------
Total equity 32,907 32,288
---------------------------------------- ----- -------- --------
Consolidated statement of changes in equity
Year ended 31 March 2014
Called Share Capital Retained Total Non-controlling Total equity
up share premium redemption earnings attributable interest
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
2013 55 1,838 20 26,729 28,642 3,646 32,288
Profit and total
comprehensive
income for the
year - - - 5,407 5,407 (364) 5,043
Dividends paid - - - (4,898) (4,898) - (4,898)
Own shares
purchased
by EBT - - - (171) (171) - (171)
Release of
shares
held by EBT - - - 104 104 - 104
Issue of units
in funds to
non-controlling
interests - - - - - 1,198 1,198
Divestment of
non-controlling
interest - - - - - (813) (813)
Share option
reserve
movement - - - 156 156 - 156
As at 31 March
2014 55 1,838 20 27,327 29,240 3,667 32,907
----------------- ---------- ------------- ------------ ---------- ------------- ---------------- -------------
Year ended 31 March 2013
Called Share Capital Retained Total Non-controlling Total equity
up share premium redemption earnings attributable interest
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
year - - - 4,334 4,334 294 4,628
Dividends paid - - - (1,645) (1,645) - (1,645)
Own shares
purchased
by EBT - - - (686) (686) - (686)
Release of
shares
held by EBT - 29 - 197 226 - 226
Issue of units
in funds to
non-controlling
interests - - - - - 1,089 1,089
Share option
reserve
movement - - - 60 60 - 60
As at 31 March
2013 55 1,838 20 26,729 28,642 3,646 32,288
----------------- ---------- ------------- ------------ ---------- ------------- ---------------- -------------
Consolidated statement of cash flows
Year ended 31 March
Note 2014 2013
GBP'000 GBP'000
--------------------------------------------- ----- --------- --------
Operating profit 6,424 5,920
Adjustments for:
Profit on disposal of property, (1) -
plant and equipment
Depreciation of property, plant
and equipment 10 79 106
Amortisation of intangible assets 11 229 177
Share option expense 156 60
Release of shares previously held
by EBT - 226
--------------------------------------------- ----- --------- --------
6,887 6,489
Changes in working capital
Increase in receivables (68) (485)
Increase in payables 29 173
(Increase) / decrease in other financial
assets (231) 1,065
Increase / (decrease) in other financial
liabilities 121 (23)
--------------------------------------------- ----- --------- --------
CASH INFLOW FROM OPERATING ACTIVITIES 6,738 7,219
Corporation taxes paid (1,571) (1,610)
--------------------------------------------- ----- --------- --------
NET CASH INFLOW FROM OPERATING ACTIVITIES 5,167 5,609
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds on disposal of property, 1 -
plant and equipment
Purchase of property, plant and
equipment (25) (63)
Purchase of securities (1,114) -
Purchase of money market instruments (15,488) -
with maturity > 3 months
Decrease in cash due to accounting
treatment of funds previously consolidated
on line by line basis 16 (1,877) -
Interest received 102 149
--------------------------------------------- ----- --------- --------
NET CASH (OUTFLOW) / INFLOW FROM
INVESTING ACTIVITIES (18,401) 86
CASH FLOW FROM FINANCING ACTIVITIES
Cash inflow from issue of units
in funds 677 1,089
Exercise of share options 104 -
Purchase of own shares (171) (686)
Dividends paid to equity shareholders (4,898) (1,645)
--------------------------------------------- ----- --------- --------
CASH OUTFLOW FROM FINANCING ACTIVITIES (4,288) (1,242)
--------------------------------------------- ----- --------- --------
NET (DECREASE) / INCREASE IN CASH
AND CASH EQUIVALENTS IN THE YEAR (17,522) 4,453
--------------------------------------------- ----- --------- --------
Cash and cash equivalents at the
beginning of the year 29,025 24,572
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR 11,503 29,025
--------------------------------------------- ----- --------- --------
Closing cash and cash equivalents consists
of:
Cash 1,476 1,863
Cash equivalents 10,027 27,162
-------------------------------------------- ------- -------
Cash and cash equivalents 11,503 29,025
-------------------------------------------- ------- -------
Company statement of financial position
As at 31 March
Note 2014 2013
GBP'000 GBP'000
----------------------------- ----- -------- --------
Non-current assets
Investments 12 3,378 2,364
----------------------------- ----- -------- --------
3,378 2,364
Current assets
Trade and other receivables 14 146 1,663
Cash and cash equivalents 16 34 1,001
----------------------------- ----- -------- --------
Total current assets 180 2,664
----------------------------- ----- -------- --------
Total assets 3,558 5,028
----------------------------- ----- -------- --------
Current liabilities
Trade and other payables 17 (452) (1,717)
Corporation tax liabilities 17 - (25)
----------------------------- ----- -------- --------
Total current liabilities (452) (1,742)
----------------------------- ----- -------- --------
Total net assets 3,106 3,286
----------------------------- ----- -------- --------
Equity
Issued share capital 18 55 55
Share premium account 1,809 1,809
Capital redemption reserve 20 20
Retained earnings 1,222 1,402
----------------------------- ----- -------- --------
Total equity 3,106 3,286
----------------------------- ----- -------- --------
Company statement of changes in equity
Year ended 31 March 2014
Called Share premium Capital Retained Total shareholders'
up share account redemption earnings equity
capital reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- -------------- ------------ ---------- --------------------
As at 1 April
2013 55 1,809 20 1,402 3,286
Profit and total
comprehensive
income for the
year - - - 4,562 4,562
Dividends paid - - - (4,898) (4,898)
Share option reserve
movement - - - 156 156
---------------------- ---------- -------------- ------------ ---------- --------------------
As at 31 March
2014 55 1,809 20 1,222 3,106
---------------------- ---------- -------------- ------------ ---------- --------------------
Year ended 31 March 2013
Called Share premium Capital Retained Total shareholders'
up share account redemption earnings equity
capital reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- -------------- ------------ ---------- --------------------
As at 1 April
2012 55 1,809 20 1,443 3,327
Profit and total
comprehensive
income for the
year - - - 1,544 1,544
Dividends paid - - - (1,645) (1,645)
Share option reserve
movement - - - 60 60
---------------------- ---------- -------------- ------------ ---------- --------------------
As at 31 March
2013 55 1,809 20 1,402 3,286
---------------------- ---------- -------------- ------------ ---------- --------------------
Company statement of cash flows
Year ended 31 March
2014 2013
GBP'000 GBP'000
-------------------------------------------- -------- --------
Operating (loss) / profit (345) 90
Changes in working capital
Decrease / (increase) in receivables 1,515 (468)
(Decrease) / increase in payables (1,265) 769
(Increase) / decrease in other financial
assets (858) 763
-------------------------------------------- -------- --------
CASH (OUTFLOW) / INFLOW FROM OPERATING
ACTIVITIES (953) 1,154
Corporation taxes paid (24) -
-------------------------------------------- -------- --------
NET CASH (OUTFLOW) / INFLOW FROM OPERATING
ACTIVITIES (977) 1,154
CASH FLOW FROM INVESTING ACTIVITIES
Dividends received 4,900 1,465
Interest received 8 11
-------------------------------------------- -------- --------
NET CASH INFLOW FROM INVESTING ACTIVITIES 4,908 1,476
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid to equity shareholders (4,898) (1,645)
-------------------------------------------- -------- --------
CASH OUTFLOW FROM FINANCING ACTIVITIES (4,898) (1,645)
-------------------------------------------- -------- --------
NET (DECREASE) / INCREASE IN CASH AND
CASH EQUIVALENTS IN THE YEAR (967) 985
Cash and cash equivalents at the beginning
of the year 1,001 16
-------------------------------------------- -------- --------
CASH AND CASH EQUIVALENTS AT THE END
OF THE YEAR 34 1,001
-------------------------------------------- -------- --------
Closing cash and cash equivalents consists
of:
Cash 34 1
Cash equivalents - 1,000
-------------------------------------------- --- ------
Cash and cash equivalents 34 1,001
-------------------------------------------- --- ------
Notes to the financial statements for the year ended 31 March
2014
These financial statements exclude disclosures that are both
immaterial and judged to be unnecessary to understand our results
and financial position.
1. Accounting policies
In order to increase the clarity of the notes to the financial
statements accounting policy descriptions appear at the beginning
of the note to which they relate.
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out in the notes
below. These policies have been consistently applied to all the
periods presented unless otherwise stated.
(a) Accounting convention
Basis of preparation
The Group and Company have prepared their financial statements
under International Financial Reporting Standards (IFRSs) as
adopted by the European Union. IFRSs comprise standards and
interpretations approved by the International Accounting Standards
Board (IASB) and the International Financial Reporting
Interpretations Committee (IFRIC) as adopted in the European Union
as at 31 March 2014. The financial statements have been prepared on
a historical cost basis, modified to include fair valuation of
derivative financial instruments.
The Directors are satisfied that the Company and the Group are
going concerns. For this reason the financial statements have been
prepared on a going concern basis.
The preparation of financial statements in accordance with the
recognition and measurement principles with IFRSs requires
management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets
and liabilities, income and expenses. The bases for management
judgements, estimates and assumptions are discussed further in note
2.
Impact of new accounting standards
A number of amendments to existing standards and interpretations
have been issued, some of which were mandatory for periods
beginning 1 April 2013, with the remaining becoming effective in
future periods. The new standards and amendments to existing
standards effective for the year to 31 March 2014 have not had a
material impact on the financial statements of Record plc, but the
application of IFRS 13 has resulted in additional disclosures for
financial instruments (refer to note 22).
New standards and interpretations
IFRS 9 "Financial Instruments" has yet to be endorsed by the EU
and replaces the classification and measurement models for
financial instruments in IAS 39 with two classification categories
amortised cost and fair value. No other standards or
interpretations issued but not yet effective are expected to have a
material impact on the Group's financial statements.
(b) Basis of 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 31 March 2014. 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 interest of the other shareholders'
non-controlling interests is stated within equity at the
non-controlling interests' proportion of the fair value of the
recognised assets and liabilities.
An Employee Benefit Trust has been established for the purposes
of satisfying certain share-based awards. The Group has 'de facto'
control over this special purpose entity. This trust is fully
consolidated within the accounts.
The Group has investments in three funds. These funds are held
by Record plc and represent seed capital investments by the Group.
If the Group is in a position to be able to control a fund by
virtue of holding a majority of units in the fund, then the fund is
consolidated within the Group accounts. Such funds are consolidated
either on a line by line basis, or if it meets the definition of a
disposal group held for sale it is classified and accounted for on
that basis. In the case that the Group does not control a fund for
the complete reporting period, then the fund is consolidated only
for the part of the reporting period for which the Group has
control over the entity.
The accounts of subsidiary undertakings, which are prepared
using uniform accounting policies, are coterminous with those of
the Company apart from those of the seeded funds which have
accounting reference dates of 30 September. The consolidated
accounts incorporate the financial performance of the seeded funds
in the year ended 31 March 2014 and the financial position of the
seeded funds as at 31 March 2014.
The Company is taking advantage of the exemption under the
Companies Act 2006 s408(1) not to present its individual statement
of comprehensive income and related notes that form part of the
financial statements. The Group total comprehensive income for the
year includes a profit of GBP4,561,908 attributable to the Company
(2013: GBP1,543,196).
All intra-Group transactions, balances, income, expenses and
dividends are eliminated on consolidation.
(c) Foreign currencies
The financial statements are presented in Sterling (GBP), which
is also the functional currency of the parent company. Foreign
currency transactions are translated into the functional currency
of the parent company using the exchange rates prevailing at the
dates of the transactions (spot exchange rate). Foreign exchange
gains and losses resulting from the settlement of such transactions
and from the re-measurement of monetary items at year end exchange
rates are recognised in profit or loss.
(d) Financial instruments
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of the
financial instrument. Financial assets are derecognised when the
contractual rights to the cash flows from the financial assets
expire, or when the financial asset and all substantial risks and
rewards are transferred. A financial liability is derecognised when
it is extinguished, discharged, cancelled or expires.
(e) Impairment of assets
The Group assesses whether there is any indication that any of
its assets have been impaired at least annually. If such an
indication exists, the asset's recoverable amount is estimated and
compared to its carrying value.
An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. Impairment
losses are recognised in profit or loss.
(f) Provisions and contingent liabilities
Provisions are recognised when present obligations as a result
of a past event will probably lead to an outflow of economic
resources from the Group and amounts can be estimated reliably.
Timing or amount of the outflow may still be uncertain. A present
obligation arises from the presence of a legal or constructive
commitment that has resulted from past events.
Provisions are measured at the estimated expenditure required to
settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and
uncertainties associated with the present obligation. Provisions
are discounted to their present values, where the time value of
money is material. Any reimbursement that the Group can be
virtually certain to collect from a third party with respect to the
obligation is recognised as a separate asset. However, this asset
may not exceed the amount of the related provision.
All provisions are reviewed at each reporting date and adjusted
to reflect the current best estimate. In those cases where the
possible outflow of economic resources as a result of present
obligations is considered improbable or remote, no liability is
recognised.
2. Critical accounting estimates and judgements
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in
the period of the revision and future periods if the revision
affects both current and future periods. Note 19 covers the
assumptions made in calculating the fair value of share options
offered by the Group to its employees. The Directors have judged
that the Group does not bear substantially all the risks and
rewards of ownership of its leasehold premises and therefore
accounts for the leases as operating leases as described in note
23.
3. Revenue
Revenue recognition
Revenue is recognised in profit or loss when the amount of
revenue can be measured reliably; it is probable that economic
benefits will flow to the entity; the stage of completion can be
measured reliably; and the costs incurred and costs to complete the
transaction can be measured reliably also.
Management fees are accrued on a daily basis based upon the
assets under management equivalents (AUME). The Group is entitled
to earn performance fees from some clients where the performance of
the clients' mandates exceeds defined benchmarks by an agreed level
of outperformance over a set time period. Performance fees are
recognised at the end of each contractual performance period as
this is the first point at which the fee amount can be estimated
reliably and it is probable that the fee will be received.
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 Group provides Directors 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.
Revenue attributable to the non-controlling interests' (NCI)
holding in seed funds and other income arises mainly from gains /
losses on derivative financial instruments. No performance fees
were earned in either of the reported periods.
Revenue by product type 2014 2013
GBP'000 GBP'000
------------------------------------- -------- --------
Management fees
Dynamic Hedging 11,872 11,834
Passive Hedging 5,728 4,093
Currency for Return 2,671 2,134
Total management fee income 20,271 18,061
------------------------------------- -------- --------
Revenue attributable to NCI holding
in seed funds (344) 454
Other income (5) 37
------------------------------------- -------- --------
Total revenue 19,922 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 2014 2013
GBP'000 GBP'000
------------------------------------- -------- --------
Management fee income
UK 5,141 4,628
US 5,769 6,631
Switzerland 6,893 5,688
Other 2,468 1,114
------------------------------------- -------- --------
Total management fee income 20,271 18,061
------------------------------------- -------- --------
Revenue attributable to NCI holding
in seed funds (344) 454
Other income (5) 37
------------------------------------- -------- --------
Total revenue 19,922 18,552
------------------------------------- -------- --------
Revenue attributable to NCI holding in seed funds and other
income are not analysed by geographical region.
All of the Group's tangible non-current assets are located in
the UK.
(c) Major clients
During the year ended 31 March 2014, two clients individually
accounted for more than 10% of the Group's revenue during the year.
The two largest clients generated revenues of GBP4.9m and GBP2.4m
in the period (2013: two largest clients generated revenues of
GBP5.6m and GBP2.0m).
4. Operating profit
Operating profit for the year is stated after
charging/(crediting):
2014 2013
GBP'000 GBP'000
------------------------------------------------ -------- --------
Staff costs 8,911 8,311
Depreciation of property, plant and
equipment 80 106
Amortisation of intangibles 230 177
Auditor fees
Fees payable to the Group's auditor
for the audit of the Company's annual
accounts 36 34
The audit of the Group's subsidiaries,
pursuant to legislation 39 42
Other services pursuant to legislation 62 58
Other services relating to taxation 12 10
Operating lease rentals: Land and buildings 231 227
(Gains) / losses on forward FX contracts
held to hedge cash flow (173) 82
Other exchange losses / (gains) 326 (102)
------------------------------------------------ -------- --------
5. Staff costs
The average number of employees, including Directors, employed
by the Group during the year was:
2014 2013
------------------------------------ ----- -----
Client Team 10 8
Research 10 9
Portfolio Management 9 8
Trading 5 5
Operations 4 4
Reporting Services 6 8
Systems 4 4
Finance, Human Resources and Legal 6 7
Administration 1 1
Compliance 2 1
Corporate 9 9
------------------------------------ ----- -----
Annual average 66 64
------------------------------------ ----- -----
The aggregate costs of the above employees, including Directors,
were as follows:
2014 2013
GBP'000 GBP'000
-------------------------------- -------- --------
Wages and salaries 6,273 5,987
Social security costs 905 815
Pension costs 412 450
Other employment benefit costs 1,321 1,059
-------------------------------- -------- --------
Aggregate staff costs 8,911 8,311
-------------------------------- -------- --------
Other employment benefit costs include share-based payments,
share option costs, and costs relating to the Record plc Share
Incentive Plan.
6. Taxation - Group
Current tax is the tax currently payable based on taxable profit
for the year. Current income tax assets and/or liabilities comprise
those obligations to, or claims from, fiscal authorities relating
to the current or prior reporting periods, that are unpaid at the
reporting date. Current tax is payable on taxable profit, which
differs from profit or loss in the financial statements.
Calculation of current tax is based on tax rates and tax laws that
have been enacted or substantively enacted by the end of the
reporting period.
The total charge for the year can be reconciled to the
accounting profit as follows:
2014 2013
GBP'000 GBP'000
--------------------------------------------- -------- --------
Profit before taxation 6,537 6,078
--------------------------------------------- -------- --------
Taxation at the standard rate of tax
in the UK of 23% (2013: 24%) 1,504 1,459
Tax effects of:
Other disallowable expenses and non-taxable
income 68 17
Capital allowances for the period lower
than depreciation 24 6
Lower tax rates on subsidiary undertakings (42) 24
Adjustments recognised in current year
in relation to the current tax of prior
years (18) 24
Other temporary differences (42) (80)
--------------------------------------------- -------- --------
Total tax expense 1,494 1,450
--------------------------------------------- -------- --------
The standard rate of corporation tax in the UK for the year was
23% (2013: 24%). A full corporation tax computation is prepared at
the year end. The actual charge as a percentage of the profit
before tax may differ from the underlying tax rate. Differences
typically arise as a result of capital allowances differing from
depreciation charged, and certain types of expenditure not being
deductible for tax purposes, other differences may also arise.
The tax charge for the year ended 31 March 2014 was GBP1,493,615
(2013: GBP1,450,457) which was 22.9% of profit before tax (2013:
23.9%).
7. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the financial year attributable to equity holders of the parent
by the weighted average number of ordinary shares in issue during
the year.
Diluted earnings per share is calculated as for the basic
earnings per share with a further adjustment to the weighted
average number of ordinary shares to reflect the effects of all
potential dilution.
There is no difference between the profit for the financial year
attributable to equity holders of the parent used in the basic and
diluted earnings per share calculations.
2014 2013
---------------------------------------- ------------ ------------
Weighted average number of shares used
in calculation of basic earnings per
share 217,778,666 218,867,407
Effect of potential dilutive ordinary
shares - share options 893,900 273,830
---------------------------------------- ------------ ------------
Weighted average number of shares used
in calculation of diluted earnings
per share 218,672,566 219,141,237
---------------------------------------- ------------ ------------
pence pence
---------------------------------------- ------------ ------------
Basic earnings per share 2.48 1.98
Diluted earnings per share 2.47 1.98
---------------------------------------- ------------ ------------
The potential dilutive shares relate to the share options
granted in respect of the Group's Share Scheme (see note 19). There
were share options and deferred share awards in place at the
beginning of the period over 4,120,000 shares. During the year
325,000 options were exercised, and a further 400,000 share options
were forfeited. The Group granted 3,560,000 share options with a
potentially dilutive effect during the year.
8. Dividends
Interim and special dividends are recognised when paid and final
dividends when approved by shareholders.
The dividends paid by the Group during the year ended 31 March
2014 totalled GBP4,897,875 (2.25p per share) which comprised a
final dividend in respect of the year ended 31 March 2013 of
GBP3,263,625 (1.5p per share) and an interim dividend for the year
ended 31 March 2014 of GBP1,634,250 (0.75p per share). The
dividends paid during the year ended 31 March 2013 totalled
GBP1,645,143 (0.75p per share) being the final dividend paid in
respect of the year ended 31 March 2012.
The final dividend proposed in respect of the year ended 31
March 2014 is 0.75p per share.
9. Retirement benefit obligations
The Group operates defined contribution pension plans for the
benefit of employees. The Group makes contributions to
independently administered plans, such contributions being
recognised as an expense when they fall due. The assets of the
schemes are held separately from those of the Group in
independently administered funds.
The Group is not exposed to the particular risks associated with
the operation of Defined Benefit plans and has no legal or
constructive obligation to make any further payments to the plans
other than the contributions due.
The pension cost charge represents contributions payable by the
Group to the funds and amounted to GBP412,357 (2013:
GBP449,915).
10. Property, plant and equipment - Group
All property, plant and equipment assets are stated at cost less
accumulated depreciation. Depreciation of property, plant and
equipment is provided to write off the cost, less residual value,
on a straight line basis over the estimated useful life.
-- Leasehold improvements - period from acquisition to the
earlier of the lease termination date and the next rent review
date
-- Computer equipment - 2-5 years
-- Fixtures and fittings - 4 years
Residual values, remaining useful economic lives and
depreciation methods are reviewed annually and adjusted if
appropriate. Gains or losses on disposal are included in profit or
loss.
The Group's property, plant and equipment comprise leasehold
improvements, computer equipment, and fixtures and fittings. The
carrying amount can be analysed as follows:
Leasehold Computer Fixtures Total
improvements equipment and fittings
2014 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------------- ----------- -------------- --------
Cost
At 1 April 2013 534 721 270 1,525
Additions - 22 3 25
Disposals - (22) (1) (23)
At 31 March 2014 534 721 272 1,527
------------------ -------------- ----------- -------------- --------
Depreciation
At 1 April 2013 534 582 269 1,385
Charge for the
year - 77 2 79
Disposals - (22) (1) (23)
------------------ -------------- ----------- -------------- --------
At 31 March 2014 534 637 270 1,441
------------------ -------------- ----------- -------------- --------
Net book amounts
At 31 March 2014 - 84 2 86
------------------ -------------- ----------- -------------- --------
At 1 April 2013 - 139 1 140
------------------ -------------- ----------- -------------- --------
Leasehold Computer Fixtures Total
improvements equipment and fittings
2013 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------------- ----------- -------------- --------
Cost
At 1 April 2012 534 716 269 1,519
Additions - 62 1 63
Disposals - (57) - (57)
At 31 March 2013 534 721 270 1,525
------------------ -------------- ----------- -------------- --------
Depreciation
At 1 April 2012 534 537 265 1,336
Charge for the
year - 102 4 106
Disposals - (57) - (57)
------------------ -------------- ----------- -------------- --------
At 31 March 2013 534 582 269 1,385
------------------ -------------- ----------- -------------- --------
Net book amounts
At 31 March 2013 - 139 1 140
------------------ -------------- ----------- -------------- --------
At 1 April 2012 - 179 4 183
------------------ -------------- ----------- -------------- --------
11. Intangible assets
Intangible assets are shown at historical cost less accumulated
amortisation and impairment losses. Amortisation is charged to
profit or loss on a straight-line basis over the estimated useful
lives of the intangible assets unless such lives are indefinite.
Amortisation is included within operating expenses in the statement
of comprehensive income. Intangible assets are amortised from the
date they are available for use. Useful lives are as follows:
-- Software - 5 years
Amortisation periods and methods are reviewed annually and
adjusted if appropriate.
The Group's intangible assets comprise the capitalised cost of
software development only. The carrying amounts can be analysed as
follows:
Software Total
2014 GBP'000 GBP'000
--------------------- --------- --------
Cost
At 1 April 2013 1,150 1,150
Additions - -
Disposals - -
At 31 March 2014 1,150 1,150
--------------------- --------- --------
Amortisation
At 1 April 2013 187 187
Charge for the year 229 229
Disposals - -
--------------------- --------- --------
At 31 March 2014 416 416
--------------------- --------- --------
Net book amounts
At 31 March 2014 734 734
--------------------- --------- --------
At 1 April 2013 963 963
--------------------- --------- --------
Software Total
2013 GBP'000 GBP'000
--------------------- --------- --------
Cost
At 1 April 2012 1,150 1,150
Additions - -
Disposals - -
At 31 March 2013 1,150 1,150
--------------------- --------- --------
Amortisation
At 1 April 2012 10 10
Charge for the year 177 177
Disposals - -
--------------------- --------- --------
At 31 March 2013 187 187
--------------------- --------- --------
Net book amounts
At 31 March 2013 963 963
--------------------- --------- --------
At 1 April 2012 1,140 1,140
--------------------- --------- --------
Intangible assets are comprised of the capitalised development
costs of the Group's middle and back office system which was
completed in June 2012 and has an estimated useful economic life of
five years. The annual contractual commitment for the maintenance
and support of software is GBP136,071 (2013: GBP132,494). All
amortisation charges are included within administrative
expenses.
12. Investments
Group
The Group holds certain securities through its seeded fund
vehicles. These securities are designated as fair value through
profit and loss and the fair value is determined by reference to
quoted market prices. Investments in funds which are not
consolidated on a line by line basis are designated as fair value
through profit or loss.
Investments 2014 2013
GBP'000 GBP'000
--------------------------------- -------- --------
Record Currency FTSE FRB10 Index 1,120 -
Fund
US government treasury inflation 1,634 -
protected securities ("TIPS")
2,754 -
--------------------------------- -------- --------
The Record Currency - FTSE FRB10 Index Fund was consolidated
into the Group accounts on a line by line basis until 28 February
2014. After this date the Group ceased to control the fund as a
result of a significant investment in the fund by an external
investor. There was no gain or loss arising on the transaction. The
Group ceased to consolidate the fund from this time, and its own
investment in the fund is now measured at fair value.
Company
Investments in subsidiaries are shown at cost less impairment
losses. The capitalised investment in respect of share-based
payments offered by subsidiaries is equal to the cumulative fair
value of the amounts payable to employees recognised as an expense
by the subsidiary. Investments in funds are measured at fair value
through profit or loss.
2014 2013
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Investment in subsidiaries (at cost)
Record Currency Management Limited 10 10
Record Group Services Limited 10 10
Record Portfolio Management Limited 10 10
Record Currency Management (US) Inc. - -
Record Currency Management (Jersey) Limited - 25
Record Fund Management Limited - -
N P Record Trustees Limited - -
-------------------------------------------------- -------- --------
Total investment in subsidiaries (at cost) 30 55
-------------------------------------------------- -------- --------
Capitalised investment in respect of share-based
payments
Record Currency Management (US) Inc. 66 49
Record Group Services Limited 184 46
-------------------------------------------------- -------- --------
Total capitalised investment in respect of
share-based payments 250 95
-------------------------------------------------- -------- --------
Total investment in subsidiaries 280 150
-------------------------------------------------- -------- --------
Particulars of subsidiary undertakings
Name Nature of Business
------------------------------- -----------------------------------
Record Currency Management Currency management services (FCA
Limited registered)
------------------------------- -----------------------------------
Record Group Services Limited Management services to other Group
undertakings
------------------------------- -----------------------------------
Record Portfolio Management Dormant
Limited
------------------------------- -----------------------------------
Record Currency Management US advisory and service company
(US) Inc. (SEC and CFTC registered)
------------------------------- -----------------------------------
Record Currency Management Dissolved 21 November 2013
(Jersey) Limited
------------------------------- -----------------------------------
Record Fund Management Limited Dormant
------------------------------- -----------------------------------
N P Record Trustees Limited Dormant Trust company
------------------------------- -----------------------------------
The Group'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,
Record Currency Management (Jersey) Limited was incorporated in
Jersey until dissolution in November 2013, and all other
subsidiaries are registered in England and Wales.
Investment in funds
In December 2010, the Company invested in the Record Currency -
FTSE FRB10 Index Fund and the Record Currency Emerging Market
Currency Fund. Initially, these were both accounted for as a
disposal group held for sale. In both cases, the Group still
retained control over each of the funds twelve months after making
the original investment. Consequently both funds ceased to be
classified as held for sale and were consolidated in full, on a
line by line basis.
The Group has retained control of the Record Currency - Emerging
Market Currency Fund through the period, and it remains
consolidated in full, on a line by line basis in the Group's
accounts. The Group ceased to control the Record Currency - FTSE
FRB10 Index Fund from 1 March 2014 and no longer consolidates this
fund on a line by line basis.
The Company made a further investment in the Record Currency -
Global Alpha Fund in May 2013. This fund is consolidated in full,
on a line by line basis.
All three fund investments are presented in investments in the
Company statement of financial position.
Investment in funds 2014 2013
GBP'000 GBP'000
------------------------------------- -------- --------
Record Currency - FTSE FRB10 Index
Fund 1,120 1,166
Record Currency - Emerging Market
Currency Fund 1,017 1,048
Record Currency - Global Alpha Fund 961 -
------------------------------------- -------- --------
3,098 2,214
------------------------------------- -------- --------
13. Deferred taxation - Group
Deferred tax is the future tax consequences of temporary
differences between the carrying amounts and tax bases of assets
and liabilities shown on the statement of financial position. The
amount of deferred tax provided is based on the expected manner of
recovery or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. The carrying amount of the
deferred tax assets are reviewed at each statement of financial
position date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the asset to be recovered.
A deferred tax liability is generally recognised for all taxable
temporary differences.
Deferred tax assets or liabilities arising on goodwill are not
recognised but are however recognised on separately identifiable
intangible assets. Deferred tax arising on the initial recognition
of an asset or liability, other than a business combination, that
at the time of the transaction affects neither the accounting nor
taxable profit or loss, is not recognised.
2014 2013
GBP'000 GBP'000
------------------------------------- -------- --------
Profit and loss account movement
arising during the year 153 20
------------------------------------- -------- --------
Asset / (Liability) brought forward 5 (15)
------------------------------------- -------- --------
Asset carried forward 158 5
------------------------------------- -------- --------
The provision for deferred taxation consists of the tax effect
of temporary differences in respect of:
2014 2013
GBP'000 GBP'000
------------------------------------ -------- --------
Deferred tax allowance on unvested
share options 159 30
Excess of taxation allowances over
depreciation on fixed assets (1) (25)
------------------------------------ -------- --------
158 5
------------------------------------ -------- --------
At the year end the Group had deferred tax assets of GBP157,908
(2013: GBP5,316). At the year end there were share options not
exercised with an intrinsic value for tax purposes of GBP755,687
(2013: GBP143,094). On exercise the Group will be entitled to a
corporation tax deduction in respect of the difference between the
exercise price and the strike price. There is no unprovided
deferred taxation.
14. Trade and other receivables
Trade and other receivables are stated at their original invoice
value, as the interest that would be recognised from discounting
future cash receipts over the short credit period is not considered
to be material. Individual receivables are considered for
impairment when they are past due or when other objective evidence
is received that a specific counterparty will default. Impairment
of trade receivables is presented within "other expenses".
Group Company
------------------------------------ ------------------ ------------------
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------- -------- -------- --------
Trade receivables 4,431 4,825 - -
Amounts due from Group undertaking - - 146 1,661
Accrued income 518 - - -
Other receivables 51 40 - 2
Prepayments 646 704 - -
------------------------------------ -------- -------- -------- --------
5,646 5,569 146 1,663
------------------------------------ -------- -------- -------- --------
All amounts are short-term. The Directors consider that the
carrying amount of trade and other receivables approximates to
their fair value. All of the Group's trade and other receivables
have been reviewed for indicators of impairment; no such indicators
were noted. The Group has not renegotiated the terms of any of
receivables in the year ended 31 March 2014. The carrying amount of
receivables whose terms have been renegotiated, that would
otherwise be past due or impaired is GBPnil (2013: nil).
15. Derivative financial assets and liabilities
Derivative financial instruments are initially recognised at
cost on the date on which the contract is first entered into unless
the fair value at acquisition is different to cost, in which case
fair value is recognised. Subsequently they are measured at fair
value with gains and losses recognised in profit or loss.
Transaction costs are immediately recognised in profit or loss. The
fair values of derivative financial instruments are determined by
reference to active market transactions.
The Group holds derivative financial instruments for two
purposes. The Group uses forward foreign exchange contracts to
reduce the risk associated with sales denominated in foreign
currencies, and additionally uses both foreign exchange options and
forward foreign exchange contracts in order to achieve a return
within its seeded investment funds. The instruments are recognised
at fair value. The fair value of the contracts is calculated using
the market rates prevailing at the period end date. The net gain or
loss on instruments is included within revenue.
Derivative financial assets 2014 2013
GBP'000 GBP'000
------------------------------------ -------- --------
Forward foreign exchange contracts 7 -
held to hedge cash flow
Forward foreign exchange contracts
held for trading 153 43
Foreign exchange options held for 38 -
trading
------------------------------------ -------- --------
Total derivative financial assets 198 43
------------------------------------ -------- --------
Derivative financial liabilities 2014 2013
GBP'000 GBP'000
----------------------------------------- -------- --------
Forward foreign exchange contracts
held to hedge cash flow (3) (25)
Forward foreign exchange contracts (33) -
held for trading
Short foreign exchange option positions (86) -
held for trading
----------------------------------------- -------- --------
Total derivative financial liabilities (122) (25)
----------------------------------------- -------- --------
Derivative financial instruments held to hedge cash flow
At 31 March 2014 there were outstanding contracts with a
principal value of GBP3,198,193 (31 March 2013: GBP2,875,764) for
the sale of foreign currencies in the normal course of business.
The fair value of the contracts is calculated using the market
forward contract rates prevailing at 31 March 2014. The Group does
not apply hedge accounting.
The net gain or loss on forward foreign exchange contracts held
to hedge cash flow is as follows:
Derivative financial instruments 2014 2013
held to hedge cash flow
GBP'000 GBP'000
-------------------------------------- -------- --------
Net gain / (loss) on forward foreign
exchange contracts at fair value
through profit or loss 173 (82)
-------------------------------------- -------- --------
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 foreign exchange contracts in order to achieve a
return. The Record Currency Global Alpha Fund uses a variety of
instruments including forward foreign exchange contracts, options
and futures in order to achieve a return.
All derivative financial instruments held by the Record Currency
- Global Alpha Fund and the Record Currency - Emerging Market
Currency Fund were classified as held for trading throughout the
period. The derivative financial instruments held by the Record
Currency FTSE FRB10 Index Fund were classified as held for trading
until the fund was deconsolidated from the Group on 1 March
2014.
At 31 March 2014 there were outstanding contracts with a
principal value of GBP26,387,218 (31 March 2013:
GBP13,893,809).
The net gain or loss on derivative financial instruments held
for trading is as follows:
Derivative financial instruments 2014 2013
held for trading
GBP'000 GBP'000
------------------------------------------ -------- --------
Net (loss) / gain on forward foreign
exchange contracts and foreign exchange
options at fair value through profit
or loss (283) 454
------------------------------------------ -------- --------
16. Cash management
The Group's cash management strategy employs a variety of
treasury management instruments including cash, money market
deposits and treasury bills. 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 deposit 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.
Group Company
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- --------
Bank deposits with maturities 14,989 - - -
> 3 months
Treasury bills with maturity 499 - - -
> 3 months
Money market instruments 15,488 - - -
with maturities > 3 months
------------------------------- -------- -------- -------- --------
Cash 1,476 1,863 34 1
Bank deposits with maturities
<= 3 months 10,027 27,162 - 1,000
------------------------------- -------- -------- -------- --------
Cash and cash equivalents 11,503 29,025 34 1,001
------------------------------- -------- -------- -------- --------
Total assets managed as
cash 26,991 29,025 34 1,001
------------------------------- -------- -------- -------- --------
Group Company
--------------------------- ------------------ ------------------
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Cash and cash equivalents
- Sterling 10,827 28,529 34 1,001
Cash and cash equivalents
- other currencies 676 496 - -
11,503 29,025 34 1,001
--------------------------- -------- -------- -------- --------
Since 31 December 2011, the Group cash and cash equivalents
balance has incorporated the cash held by the Record Currency -
FTSE FRB10 Index Fund and the Record Currency - Emerging Market
Currency Fund (refer to note 12 for explanation of accounting
treatment). At 31 March 2014, the Group no longer had control over
the Record Currency - FTSE FRB10 Index Fund and therefore there has
been a decrease in cash arising from the deconsolidation of
GBP1,876,718. In May 2013 Record plc seeded the Record Currency -
Global Alpha Fund with an investment of GBP1,000,000 and at 31
March 2014 the Group had control over this fund. Therefore the cash
and cash equivalents held by the Record Currency - Global Alpha
Fund have been incorporated above. As at 31 March 2014, the cash
and cash equivalents held by the seed funds over which the Group
had control totalled GBP3,434,805 (31 March 2013: GBP5,863,175) and
the money market instruments with maturities > 3 months held by
these funds were GBP499,179 (31 March 2013: GBPnil).
17. Current liabilities
Trade and other payables are stated at their original invoice
value, as the interest that would be recognised from discounting
future cash payments over the short payment period is not
considered to be material.
Trade and other payables
Group Company
------------------------------- ------------------ ------------------
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- --------
Trade payables 304 277 - -
Amounts owed to Group
undertaking - - 447 1,717
Other payables 1 1 5 -
Other tax and social security 304 285 - -
Accruals 2,097 2,109 - -
2,706 2,672 452 1,717
------------------------------- -------- -------- -------- --------
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
Current tax liabilities
Group Company
----------------- ------------------ ------------------
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- -------- --------
Corporation tax 832 760 - 25
----------------- -------- -------- -------- --------
18. 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.
2014 2013
--------------------------- ---------------------- ----------------------
GBP'000 Number GBP'000 Number
--------------------------- -------- ------------ -------- ------------
Authorised
Ordinary shares of 0.025p
each 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
--------------------------- -------- ------------ -------- ------------
Movement in Record plc shares held by the Record plc Employee
Benefit Trust (EBT)
The EBT was formed to hold shares acquired under the Record plc
share-based compensation plans. Under IFRS the EBT is considered to
be under de facto control of the Group, and has therefore been
consolidated into the Group 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.
Number
---------------------------------------- ----------
Record plc shares held by EBT as at 31
March 2012 2,028,432
Adjustment for net purchases by EBT 1,777,376
Record plc shares held by EBT as at 31
March 2013 3,805,808
Adjustment for net purchases by EBT 68,175
Record plc shares held by EBT as at 31
March 2014 3,873,983
---------------------------------------- ----------
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.
Further information regarding the Record plc share-based
compensation plans and relevant transactions made during the year
is included in note 19.
19. Share-based payments
During the year ended 31 March 2014 the Group has managed the
following share-based compensation plans:
a) The Group Profit Share Scheme: share awards issued under the
Group Profit Share Scheme are classified as share-based payments
with cash alternatives under IFRS 2.
b) The Record plc Share Scheme: share options issued under the
Record plc Share Scheme are classified as equity-settled
share-based payments under IFRS 2.
The Group fulfils its obligations arising from both schemes
through purchasing shares in the market.
a) Group Profit Share Scheme
Share-based payments with cash alternatives
These transactions are compound financial instruments, which
include a debt element and a cash element. The fair value of the
debt component of the amounts payable to the employee is calculated
as the cash amount alternative offered to the employee at grant
date and the fair value of the equity component of the amounts
payable to the employee is calculated as the market value of the
share award at grant date less the cash forfeited in order to
receive the share award. The debt component is charged to profit or
loss over the period in which the award is earned and remeasured at
fair value at each reporting date. The equity component is charged
to profit or loss over the period in which the award is earned.
The Group Profit Share Scheme allocates a proportion of
operating profits to a profit share pool to be distributed between
all employees of the Group. The Remuneration Committee has the
discretion to vary the proportion awarded to the profit share pool
between 25% and 35% of operating profits, with the intention of
maintaining an average level of 30% of operating profits over the
medium term. 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.
If an individual elects to receive Additional Shares, the Group
simultaneously awards a Matching Share value amount using a
multiple decided by the Remuneration Committee. The multiple is
dependent on the level of seniority of the employee. The number of
shares is determined by the post-tax cash attributed to Earned
Shares plus Additional Shares plus Matching Shares divided by the
aggregate market value achieved on the purchase of all such shares
in the market. Shares awarded under the Profit Share Scheme do not
include any vesting restrictions but rather restrictions over
subsequent sale and transfer. All shares the subject of share
awards vest immediately and are transferred to a nominee allowing
the individual to retain full rights in respect of the shares
purchased. These shares cannot be sold, transferred or otherwise
disposed of without the consent of the Remuneration Committee
except as follows:
-- Earned shares - one third on each anniversary of the Profit
Share Payment date; and
-- Additional or Matching shares - the third anniversary of the
Profit Share Payment date for Directors and senior employees and
the second anniversary of the Profit Share Payment date for all
other employees.
The Group Profit Share Scheme rules contain claw back provisions
allowing for the repayment of profit share payments under certain
circumstances including a material breach of contract, an error in
performance of duties or a restatement of accounts which leads to a
change in any prior award under the scheme.
Shares awarded under this scheme are purchased in the
market.
b) The Record plc Share Scheme
Equity-settled share-based payments
The fair value of the amounts payable to employees under these
awards is recognised as an expense over the vesting period of the
award, with a corresponding increase in equity. All such awards
made by the Group involve the parent company granting rights to its
equity instruments to employees of its subsidiary. Consequently the
subsidiary measures the services received from its employees in
accordance with the above classification under IFRS 2 and
recognises a corresponding increase in equity as a contribution
from the parent. The parent has the obligation to settle the
transaction with the subsidiary's employees and therefore
recognises an increase in its investment in the subsidiary and a
corresponding increase in equity.
The fair value of options granted is measured at grant date
using an appropriate valuation model, taking into account the terms
and conditions upon which the instruments were granted. The fair
value amounts for the options issued since listing on the London
Stock Exchange were determined using quoted share prices.
The Record plc Share Scheme (the "Share Scheme") was adopted by
the Company on 1 August 2008 and was initially created to allow
deferred share awards to be granted to new senior employees.
During 2011, the Share Scheme was amended to include the ability
to grant HMRC approved options ("Approved Options") to employees of
Record plc or its subsidiaries whilst retaining the ability to
grant unapproved options ("Unapproved Options"). The exercise price
per share of Approved Options must be no lower than the market
value of a share on the dealing day immediately preceding the date
of grant. Each participant may be granted Approved Options over
shares with a total market value of up to GBP30,000 on the date of
grant. There is no such limit on the value of grant for Unapproved
Options, which may be granted with any exercise price (including
GBPnil), but have recently been granted with a market-value
exercise price in the same way as for the Approved Options.
Options over an aggregate of 3,560,000 shares were granted under
the Share Scheme during the year (2013: 2,220,000), of which
2,945,000 shares were made subject to Unapproved Options (2013:
410,000) and 615,000 to Approved Options (2013: 1,810,000). All
options were granted with an exercise price per share equal to the
share price prevailing at the time of grant. The Approved Options
become exercisable on the fourth anniversary of grant, subject to
the employee remaining in employment with the Group and to the
extent a performance condition based on the Company's total
shareholder return in comparison with a relevant peer group has
been met. The Unapproved Options issued on 27 September 2013 each
become exercisable in four equal tranches on the first, second,
third and fourth anniversary of the date of grant, subject to the
employee being in employment with the Group at the relevant vesting
date and to the extent personal performance conditions have been
satisfied. The Unapproved Options issued on 18 November 2013 to the
Chief Executive Officer, James Wood-Collins, each become
exercisable in three equal tranches on the third, fourth and fifth
anniversary of the date of grant, subject to the employee being in
employment with the Group at the relevant vesting date and to the
extent personal performance conditions have been satisfied.
Options without performance conditions are valued using the
Black-Scholes method, options with performance conditions are
valued using a risk-neutral Monte Carlo valuation. Expected
volatilities used are based on historic volatilities.
The Group share-based payment expense in respect of the Share
Scheme was GBP155,625 in the year ended 31 March 2014 (2013:
60,311).
Outstanding share options
At 31 March 2014, the total number of ordinary shares of 0.025p
outstanding under Record plc share compensation schemes was
6,955,000 (2013: 4,120,000). These deferred share awards and
options are over issued shares, a proportion of which are hedged by
shares held in an Employee Benefit Trust. Details of outstanding
share options and deferred shares awarded to employees are set out
below:
Date of At 1 Granted Exercised Lapsed At 31 Earliest Latest Exercise
grant April March vesting vesting price
2013 2014 date date*
------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
08/08/11 1,000,000 - (250,000) - 750,000 08/08/13 08/08/15 GBP0.3180
------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
08/08/11 300,000 - (75,000) - 225,000 08/08/13 08/08/15 GBP0.3225
------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
02/12/11 600,000 - - - 600,000 02/12/15 02/12/15 GBP0.1440
------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
18/12/12 1,810,000 - - (195,000) 1,615,000 18/12/16 18/12/16 GBP0.3098
------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
18/12/12 410,000 - - (205,000) 205,000 18/12/13 18/12/16 GBP0.3098
------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
27/09/13 - 615,000 - - 615,000 27/09/17 27/09/17 GBP0.3085
------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
27/09/13 - 1,545,000 - - 1,545,000 27/09/14 27/09/17 GBP0.3085
------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
18/11/13 - 1,400,000 - - 1,400,000 18/11/16 18/11/18 GBP0.3000
------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Total
options 4,120,000 3,560,000 (325,000) (400,000) 6,955,000
------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Weighted GBP0.29 GBP0.31 GBP0.32 GBP0.31 GBP0.29
average
exercise
price
of options
------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
*Note that under the terms of the deeds of grants, options are
exercisable for a specified period of time following the vesting
date.
During the year 325,000 options granted on 8 August 2011 were
exercised. The share price at date of exercise was GBP0.37. At 31
March 2014 a total of 376,250 options had vested and were
exercisable.
The Directors' interests in the combined share schemes are as
follows:
Ordinary shares held as at
31 March 2014 31 March 2013
----------------------------------- -------------- --------------
Record plc Group Profit Share
Scheme (interest in restricted
share awards)
James Wood-Collins 1,272,732 1,180,824
Leslie Hill 278,748 253,078
Bob Noyen 292,022 253,078
Steve Cullen 67,173 58,026
Record plc Share Scheme (interest
in unvested share options)
James Wood-Collins 1,400,000 -
Steve Cullen 75,000 75,000
----------------------------------- -------------- --------------
Performance measures
The Approved Option Scheme includes certain performance
criteria. At vesting date, a percentage of the total options
granted will vest according to the median total shareholder return
(TSR) as measured against the FTSE 350 General Financial - Price
Index. The performance target table is given below:
Percentage by which Record's TSR is Percentage of option
below the median TSR performance of which vests
the Index
---------------------------------------------- ---------------------
Equal to or above the median TSR performance 100%
---------------------------------------------- ---------------------
Equal to or above 75% of the median
TSR performance 75%
---------------------------------------------- ---------------------
Equal to or above 50% of the median
TSR performance 50%
---------------------------------------------- ---------------------
Below 50% of the median TSR performance 0%
---------------------------------------------- ---------------------
The Unapproved Option Scheme relating to grants of options to
board directors includes certain performance criteria and claw back
provisions. At vesting date, a percentage of the total options
granted will vest according to the average growth in Earnings Per
Share (EPS) over a three year period, as follows:
Record's 3 year average EPS growth Percentage of shares
subject to the Award
which vest
------------------------------------ ----------------------
>RPI Growth + 13% 100%
------------------------------------ ----------------------
>RPI Growth + 10%, = <RPI + 13% 75%
------------------------------------ ----------------------
>RPI Growth + 7%, = <RPI + 10% 50%
------------------------------------ ----------------------
>RPI Growth + 4%, = <RPI + 7% 25%
------------------------------------ ----------------------
=<RPI Growth + 4% 0%
------------------------------------ ----------------------
These Unapproved Options are subject to claw back provisions
allowing the Remuneration Committee to adjust the number of shares
that may be, or were, acquired to be decreased if the committee
considers that either a material breach of contract has arisen or
in respect of retrospective amendments required to calculations of
the Group's performance upon which vesting calculations were
originally based. The claw back provisions allow the Group to take
various steps until the claw back obligation is satisfied,
including reduction of future share option awards, transfer of
shares back to the Group for nil consideration, reduction of future
payments under the Group Profit Share Scheme or payment of sales
proceeds back to the Group.
The Record plc Share Incentive Plan
The Group operates the Record plc Share Incentive Plan (SIP), to
encourage more widespread ownership of Record plc shares by
employees. The SIP is a tax-approved scheme offering attractive tax
savings for employees retaining their shares in the scheme over the
medium to long term.
As an incentive to employees, the Group matches every two shares
bought by employees with a free matching share. During the year,
the Group awarded 31,143 free shares to employees. The expense
charged in respect of the SIP was GBP10,865 in the year ended 31
March 2014 (2013: GBP7,408).
20. Non-controlling interest
Record plc has made investments in a number of funds where it is
in a position to be able to control those funds by virtue of the
size of its holding. Non-controlling interests occur when Record
plc is not the only investor in the fund. The non-controlling
interest is measured at cost plus movement in value of the third
party investment in the fund.
Record has seeded three funds which have been active during the
year ended 31 March 2014.
The Record Currency - Emerging Market Currency Fund was
considered to be under control of the Group through holding a
majority interest throughout the period and the Record Currency
Global Alpha Fund was considered to be under control of the Group
through holding a majority interest from its inception (in May
2013) onwards.
The mark to market value of the units held by other investors in
these funds represents the only non-controlling interests in the
Group.
The Record Currency - FTSE FRB10 Index Fund was considered to be
under control of the Group from the beginning of the period until
28 February 2014, when new external investment meant that Record no
longer held a majority interest.
Mark to market value of external holding in seeded funds
consolidated into the accounts of the Record Group
2014 2013
GBP'000 GBP'000
------------------------------------- -------- --------
Record Currency - FTSE FRB10 Index
Fund - 871
Record Currency - Emerging Market
Currency Fund 2,488 2,775
Record Currency - Global Alpha Fund 1,179 -
3,667 3,646
------------------------------------- -------- --------
21. Financial risk management
The Group's current activities result in the following financial
risks and management responses to those risks in order to minimise
any resulting adverse effects on the Group's financial
performance.
Objectives, policies and processes for managing risk and the
methods used to measure the risk
Financial assets principally comprise trade receivables, other
receivables, money market instruments, cash and cash equivalents
and derivative financial assets. Financial liabilities comprise
trade and other payables and derivative financial liabilities. The
main risks arising from financial instruments are credit risk,
liquidity risk, foreign currency risk and interest rate risk each
of which is discussed in further detail below.
The Group monitors and mitigates financial risk on a
consolidated basis. The Group has implemented a framework to manage
the risks of its business and to ensure that the Directors have in
place risk management practices appropriate to a listed company.
The management of risk is directed by the Board and reviewed by the
Audit and Risk Committee.
The Company's material financial instruments are investments in
the seeded funds, and balances due to/from Group undertakings. The
Company's financial risk is managed as part of the Group financial
risk management process and therefore separate disclosures for the
Company have not been provided.
Credit risk
The Group has established a cash management team to manage Group
cash in accordance with an approved cash management policy. The
policy stipulates exposure limits by instruments, counterparty,
tenor and duration. Counterparty exposures are measured against
ratings published by credit-rating agencies and are monitored
daily. The maximum single exposure to any counterparty under the
policy is 20% of total cash.
The primary objective of the cash management team is to
diversify and manage counterparty risk within the risk appetite of
the Group and the limits set by the policy. The secondary objective
is to maintain yield given the constraints under the policy whilst
ensuring sufficient liquidity to meet future cash flow commitments
as instructed by the finance team.
The Chief Financial Officer is responsible for reviewing the
Group's credit exposure and ensuring that any credit concerns are
raised to the Risk Management Committee and that action is taken to
mitigate these risks.
The Group's maximum exposure to credit risk is as follows:
2014 2013
Financial assets at 31 March GBP'000 GBP'000
------------------------------------------ -------- --------
Investment in Record Currency - FTSE 1,120 -
FRB10 Index fund
Securities (TIPS) 1,634 -
Trade receivables 4,431 4,825
Accrued income 518 -
Other receivables 51 40
Other financial assets at fair value
through profit or loss 198 43
Money market instruments with maturities 15,488 -
> 3 months
Cash and cash equivalents 11,503 29,025
------------------------------------------ -------- --------
34,943 33,933
------------------------------------------ -------- --------
The debtors' age analysis is also evaluated on a regular basis
for potential doubtful debts. It is management's opinion that no
provision for doubtful debts is required. The table below is an
analysis of trade receivables and accrued income by due date:
Carrying Neither 0-3 months More than
amount impaired past due 3 months
nor past past due
due
At 31 March 2014 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- ---------- ----------- ----------
Trade receivables 4,431 4,226 205 -
Accrued income 518 518 - -
------------------- --------- ---------- ----------- ----------
4,949 4,744 205 -
------------------- --------- ---------- ----------- ----------
96% 4% 0%
------------------- --------- ---------- ----------- ----------
Carrying Neither 0-3 months More than
amount impaired past due 3 months
nor past past due
due
At 31 March 2013 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- ---------- ----------- ----------
Trade receivables 4,825 4,751 74 -
------------------- --------- ---------- ----------- ----------
98% 2% 0%
------------------- --------- ---------- ----------- ----------
The Group offers standard credit terms of 30 days from invoice
date. It is the Group's policy to assess debtors for recoverability
on an individual basis and to make a provision where it is
considered necessary. In assessing recoverability the Group takes
into account any indicators of impairment up until the reporting
date. The application of this policy generally results in debts
between 0-3 months overdue not being provided for unless individual
circumstances indicate that a debt is impaired.
Trade receivables are made up of 42 debtors' balances (2013:
36). The largest individual debtor corresponds to 20% of the total
balance (2013: 31%). Debtor days, based on the generally accepted
calculation of debtor days, is 80 days (2013: 95). This reflects
the quarterly billing cycle used by the Group for the vast majority
of its fees. As at 31 March 2014 only 4% of debt was overdue (2013:
2%) and the Directors consider this to be fully recoverable. No
debtors' balances have been renegotiated during the year or in the
prior year.
Liquidity risk
The Group is exposed to liquidity risk, namely that it may be
unable to meet its payment obligations as they fall due. The Group
maintains sufficient cash and marketable securities to be able to
meet all such obligations. Management review cash flow forecasts on
a regular basis to determine whether the Group has sufficient cash
reserves to meet the future working capital requirements and to
take advantage of business opportunities. The average creditor
payment period is 24 days (2013: 21 days).
Contractual maturity analysis for financial liabilities:
Carrying Due or due Due between Due between
amount in less 1 and 3 3 months
than 1 month months and 1 year
At 31 March 2014 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- -------------- ------------ ------------
Trade and other payables 305 305 - -
-------------------------- --------- -------------- ------------ ------------
Accruals 2,097 146 1,080 871
-------------------------- --------- -------------- ------------ ------------
Derivative financial
liabilities 122 110 8 4
-------------------------- --------- -------------- ------------ ------------
Carrying Due or due Due between Due between
amount in less 1 and 3 3 months
than 1 month months and 1 year
At 31 March 2013 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- -------------- ------------ ------------
Trade and other payables 278 278 - -
-------------------------- --------- -------------- ------------ ------------
Accruals 2,109 449 810 850
-------------------------- --------- -------------- ------------ ------------
Derivative financial
liabilities 25 - 25 -
-------------------------- --------- -------------- ------------ ------------
Interest rate risk
Interest rate risk is the risk that the value of a financial
instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates. Interest rate
risk arises from interest bearing financial assets and liabilities
used by the Group. Interest bearing assets comprise money market
instruments and cash and cash equivalents which are considered to
be short-term liquid assets. It is the Group's policy to settle
trade payables within the credit terms allowed and the Group does
not therefore incur interest on overdue balances.
Interest rate profiles
Fixed rate Floating No interest Total
rate rate
At 31 March 2014 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ----------- --------- ------------ --------
Financial assets
Investment in Record
Currency - FTSE FRB10
Index fund - - 1,120 1,120
Securities (TIPS) - 1,634 - 1,634
Trade receivables - - 4,431 4,431
Accrued income - - 518 518
Other receivables - - 51 51
Derivative financial
assets at fair value
through profit or
loss - - 198 198
Money market instruments
with maturities >
3 months 15,488 - - 15,488
Cash and cash equivalents 10,027 1,476 - 11,503
----------------------------- ----------- --------- ------------ --------
Total financial assets 25,515 3,110 6,318 34,943
----------------------------- ----------- --------- ------------ --------
Financial liabilities
Trade and other payables - - (305) (305)
Accruals - - (2,097) (2,097)
Derivative financial
liabilities at fair
value through profit
or loss - - (122) (122)
Total financial liabilities - - (2,524) (2,524)
----------------------------- ----------- --------- ------------ --------
Fixed rate Floating No interest Total
rate rate
At 31 March 2013 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ----------- --------- ------------ --------
Financial assets
Trade receivables - - 4,825 4,825
Other receivables - - 40 40
Derivative financial
assets at fair value - - 43 43
Cash and cash equivalents 27,162 1,863 - 29,025
----------------------------- ----------- --------- ------------ --------
Total financial assets 27,162 1,863 4,908 33,933
----------------------------- ----------- --------- ------------ --------
Financial liabilities
Trade and other payables - - (278) (278)
Accruals - - (2,109) (2,109)
Derivative financial
liabilities at fair
value through profit
or loss - - (25) (25)
Total financial liabilities - - (2,412) (2,412)
----------------------------- ----------- --------- ------------ --------
Foreign currency risk
Foreign currency risk refers to the risk that the value of a
financial commitment or recognised asset or liability will
fluctuate due to changes in foreign currency rates. The Group makes
use of forward foreign exchange contracts to manage the risk
relating to future transactions in accordance with the Group's risk
management policy. The fair value of the forward foreign exchange
contracts held to hedge cash flow at 31 March 2014 was a net asset
of GBP3,317 (2013: liability of GBP24,610). Gains on the forward
foreign exchange contracts were GBP172,978 in the year (2013: loss
of GBP82,288). The future transactions relating to the forward
foreign exchange contracts are expected to occur within the next
three months. Changes in the fair values of forward foreign
exchange contracts are recognised directly in profit or loss.
The Group is exposed to foreign currency risk on sales and cash
holdings that are denominated in a currency other than Sterling.
The principal currencies giving rise to this risk are the US
Dollar, the Swiss Franc, the Euro and the Canadian Dollar.
In the year ended 31 March 2014, the Group invoiced the
following amounts in currencies other than Sterling:
Local currency Value in
value reporting
currency
'000 GBP'000
----------------------- --------------- -----------
US Dollar (USD) 12,783 7,954
Swiss Franc (CHF) 8,342 5,712
Canadian Dollar (CAD) 660 386
Euro (EUR) 736 620
14,672
----------------------- --------------- -----------
The value of revenues for the year ended 31 March 2014 that were
denominated in currencies other than Sterling was GBP14.7 million
(74% of total revenues). For the year ended 31 March 2013: GBP13.5
million (73% of total revenues).
Record plc's policy is to reduce the risk associated with the
Company's sales denominated in foreign currencies by using forward
fixed rate currency sales contracts, taking into account any
forecast foreign currency cash flows.
Foreign currency risk - sensitivity analysis
The Group has considered the sensitivity to exchange rate
movements by considering the impact on those revenues and costs
denominated in foreign currencies as experienced in the given
period. The sensitivity analyses below do not consider the impact
of exchange rate movements on the underlying portfolios of our
clients which would affect the quantum of fees earned.
Impact on Profit Impact on Total
After Tax for the Equity as at
year ended 31 March 31 March
-------------------------- ----------------------- ------------------
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----------- ---------- -------- --------
10% weakening in the
GBP/$ exchange rate 520 618 520 618
10% strengthening in
the GBP/$ exchange rate (520) (618) (520) (618)
-------------------------- ----------- ---------- -------- --------
10% weakening in the
GBP/CHF exchange rate 295 355 295 355
10% strengthening in
the GBP/CHF exchange
rate (295) (355) (295) (355)
-------------------------- ----------- ---------- -------- --------
Sterling/US Dollar exchange rate
The impact of a change of 10% has been selected as this is
considered reasonable given the current level of exchange rates and
the volatility observed both on a historical basis and market
expectations for future movement. When applied to the average
Sterling/USD exchange rate of $1.56/GBP this would result in a
weakened exchange rate of $1.42/GBP and a strengthened exchange
rate of $1.74/GBP.
Sterling/Swiss Franc exchange rate
The impact of a change of 10% has been selected as this is
considered reasonable given the current level of exchange rates and
the volatility observed both on a historical basis and market
expectations for future movement. When applied to the average
Sterling/CHF exchange rate of CHF1.46/GBP this would result in a
weakened exchange rate of CHF1.33/GBP and a strengthened exchange
rate of CHF1.62/GBP.
Sensitivity analyses have not been disclosed for other
currencies as any reasonable range of change in exchange rate would
not have a material impact on profit or equity.
FTSE FRB10 Index Fund
The Group seeded a product in December 2010, which is a fund
that tracks the FTSE Currency FRB10 Index by holding a portfolio of
developed market currency deliverable forward exchange contracts.
As Record plc exerted control over the fund from inception until 28
February 2014, it was consolidated into the Group's primary
statements until 28 February 2014. The net assets of the fund at 31
March 2013 were GBP2,037,488. Since 1 March 2014 the Group has not
exerted control over the fund, and has therefore recognised its
holding in the fund as an investment. The fair value of the Group's
investment at 31 March 2014 was GBP1,120,400. The Group has
provided the following data in respect of sensitivity to this
product:
Impact on Profit After Impact on Total Equity
Tax as at
for the year ended
----------------------- ---------------------------- -----------------------------
31 March 2014 31 March 2013 31 March 2014 31 March 2013
----------------------- ------------- ------------- ------------- --------------
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------------- ------------- ------------- --------------
10% depreciation
in the FTSE Currency
FRB10 Index (60) (124) (60) (124)
----------------------- ------------- ------------- ------------- --------------
10% appreciation
in the FTSE Currency
FRB10 Index 60 124 60 124
----------------------- ------------- ------------- ------------- --------------
The impact of a change to the index of 10% has been selected as
this is considered reasonable given the current level of the index
and the volatility observed on a historical basis and expectations
for future movement.
Emerging Market Currency Fund
The Group seeded a product in December 2010 called the Record
Currency - Emerging Market Currency Fund, which manages a portfolio
of emerging market currency deliverable forward exchange contracts
and emerging market currency non-deliverable forward exchange
contracts in order to achieve a return. As Record plc exerts
control over the fund, it has been consolidated into the Group's
primary statements. The net assets of the fund at 31 March 2014
were GBP3,505,641 (2013: GBP3,823,603). The Group has provided the
following data in respect of sensitivity to this product:
Impact on Profit After Impact on Total Equity
Tax as at
for the year ended
------------------------- ---------------------------- ------------------------
31 March 2014 31 March 2013 31 March 2014 31 March
2013
------------------------- ------------- ------------- ------------- ---------
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ------------- ------------- ------------- ---------
10% depreciation
in the Emerging Market
portfolio (418) (468) (418) (468)
------------------------- ------------- ------------- ------------- ---------
10% appreciation
in the Emerging Market
portfolio 418 468 418 468
------------------------- ------------- ------------- ------------- ---------
The impact of a change to the portfolio value of 10% has been
selected as this is considered reasonable given the current level
of exchange rates and the volatility observed both on a historical
basis and expectations for future movement in emerging markets.
Global Alpha Fund
The Group seeded a product in May 2013 called the Record
Currency - Global Alpha Fund, which manages a portfolio of
derivative financial instruments including forward exchange
contracts, options and futures in order to achieve a return. As
Record plc exerts control over the fund, it has been consolidated
into the Group's primary statements. The net assets of the fund at
31 March 2014 were GBP2,138,582 (2013: GBPnil). The Group has
provided the following data in respect of sensitivity to this
product:
Impact on Profit After Impact on Total Equity
Tax as at
for the year ended
---------------------- ---------------------------- ------------------------
31 March 2014 31 March 2013 31 March 2013 31 March
2013
---------------------- ------------- ------------- ------------- ---------
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------- ------------- ------------- ---------
18% depreciation
in the Global Alpha
portfolio (184) N/a (184) N/a
---------------------- ------------- ------------- ------------- ---------
18% appreciation
in the Global Alpha
portfolio 184 N/a 184 N/a
---------------------- ------------- ------------- ------------- ---------
The impact of a change to the portfolio value of 18% has been
selected as this is considered reasonable given the current level
of exchange rates and the volatility observed both on a historical
basis and expectations for future movement (the target maximum
annual drawdown rate is 18%).
22. Fair value measurement
The following table presents financial assets and liabilities
measured at fair value in the consolidated statement of financial
position in accordance with the fair value hierarchy. This
hierarchy groups financial assets and liabilities into three levels
based on the significance of inputs used in measuring the fair
value of the financial assets and liabilities. The fair value
hierarchy has the following levels:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-- Level 2: inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level within which the financial asset or liability is
classified is determined based on the lowest level of input to the
fair value measurement. The financial assets and liabilities
measured at fair value in the statement of financial position are
grouped into the fair value hierarchy as follows:
2014 Level Level Level
1 2 3
-------------------------- -------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- --------
Financial assets at
fair value through
profit or loss
TIPS 1,634 1,634 - -
Investment in seed
fund 1,120 1,120 - -
Forward foreign exchange
contracts used for
seed funds 153 - 153 -
Options used for seed
funds 38 - 38 -
Forward foreign exchange
contracts used for
hedging 7 - 7 -
Financial liabilities
at fair value through
profit or loss
Forward foreign exchange
contracts used for
seed funds (33) - (33) -
Options used for seed
funds (86) - (86) -
Forward foreign exchange
contracts used for
hedging (3) - (3) -
-------------------------- -------- -------- -------- --------
2,830 2,754 76 -
-------------------------- -------- -------- -------- --------
2013 Level Level 2 Level
1 3
-------------------------- -------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- --------
Financial assets at
fair value through
profit or loss
Forward foreign exchange
contracts used for
seed funds 43 - 43 -
Financial liabilities
at fair value through
profit or loss
Forward foreign exchange
contracts used for
hedging (25) - (25) -
18 - 18 -
-------------------------- -------- -------- -------- --------
There have been no transfers between levels in the reporting
period (2013: none).
Basis for classification of financial instruments classified as
level 2 within the fair value hierarchy
Both forward foreign exchange contracts and options are
classified as level 2. Both of these instruments are traded on an
active market. Options are valued using an industry standard model
with inputs based on observable market data whilst the fair value
of forward foreign exchange contracts may be established using
interpolation of observable market data rather than from a quoted
price.
Classes and fair value of financial instruments
It is the Directors' opinion that the carrying value of all
financial instruments approximates to their fair value.
Categories of financial instrument
Note Loans and Financial Assets Liabilities
receivables liabilities at fair at fair
measured value value through
at amortised through profit
cost profit or loss
or loss
-------------------------- ----- ------------- -------------- --------- ---------------
At 31 March 2014 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----- ------------- -------------- --------- ---------------
Securities (TIPS) 12 - - 1,634 -
Investment in
Record Currency
- FTSE FRB10 Index
Fund 12 - - 1,120 -
Trade and other
receivables (excludes
prepayments) 14 5,000 - - -
Money market instruments
with maturities
> 3 months 16 15,488 - - -
Cash and cash
equivalents 16 11,503 - - -
Derivative financial
assets at fair
value through
profit or loss 15 - - 198 -
Current trade
and other payables 17 - (305) - -
Accruals 17 - (2,097) - -
Derivative financial
liabilities at
fair value through
profit or loss 15 - - - (122)
-------------------------- ----- ------------- -------------- --------- ---------------
31,991 (2,402) 2,952 (122)
-------------------------- ----- ------------- -------------- --------- ---------------
Note Loans and Financial Assets Liabilities
receivables liabilities at fair at fair
measured value value through
at amortised through profit
cost profit or loss
or loss
------------------------ ----- ------------- -------------- --------- ---------------
At 31 March 2013 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----- ------------- -------------- --------- ---------------
Trade and other
receivables (excludes
prepayments) 14 4,865 - - -
Cash and cash
equivalents 16 29,025 - - -
Other financial
instruments at
fair value through
profit or loss 15 - - 43 (25)
Current trade
and other payables 17 - (278) - -
Accruals 17 - (2,109) - -
------------------------ ----- ------------- -------------- --------- ---------------
33,890 (2,387) 43 (25)
------------------------ ----- ------------- -------------- --------- ---------------
23. Operating lease commitments
Leases in which substantially all the risks and rewards are
retained by the lessor are classified as operating leases. Payments
made under these operating leases are recognised in profit or loss
on a straight line basis over the term of the lease. Benefits
received as an incentive to sign a lease, whatever form they may
take, are credited to profit or loss on a straight line basis over
the lease term.
On 25 January 2006, the Group signed a lease on new premises at
Morgan House, Madeira Walk, Windsor, Berkshire. This lease expires
on 19 June 2016. The annual commitment under this lease is
GBP229,710 (2013: GBP229,710).
The Group has considered the risks and rewards of ownership of
the leased property, and considers that they remain with the
lessor; consequently, this lease is recognised as an operating
lease.
At 31 March 2014 the Group had commitments under non-cancellable
operating leases relating to land and buildings as set out
below:
2014 2013
GBP'000 GBP'000
----------------------------------- -------- --------
Not later than one year 230 230
Later than one year and not later
than five years 287 517
517 747
----------------------------------- -------- --------
24. Related parties transactions
Company
Details of transactions between the Company and other Group
undertakings, which are related parties of the Company, are shown
below:
Transactions with subsidiaries
The Company's subsidiary undertakings are listed in note 12,
which includes a description of the nature of their business.
2014 2013
GBP'000 GBP'000
------------------------------------------ -------- --------
Amounts due from subsidiaries 146 1,661
Amounts due to subsidiaries (447) (1,717)
Interest received from subsidiaries
on intercompany loan balances 5 9
Net dividends received from subsidiaries 4,900 1,465
------------------------------------------ -------- --------
Amounts owed to and by related parties will be settled in cash.
No guarantees have been given or received. No provisions for
doubtful debts have been raised against amounts outstanding (2013:
GBPnil). During the year, as a result of the dissolution of Record
Currency Management (Jersey) Limited, Record plc wrote off an
intercompany loan balance due from Record Currency Management
(Jersey) Limited with a total of GBP228,530. No other expense has
been recognised during the period in respect of bad or doubtful
debts due from related parties (2013: GBPnil).
Transactions with seeded funds
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 the fund is considered to be a related party.
Record Currency - Global Alpha Fund and Record Currency -
Emerging Market Currency Fund are both related parties on this
basis. The only transaction between the Company and these two funds
during the year was the initial seed investment of GBP1 million
into the Record Currency - Global Alpha Fund. Similarly, the Record
Currency - FTSE FRB10 Index Fund was a related party until Record
plc ceased to have the majority interest as a result of a
significant external investment into the fund which diluted Record
plc's holding; there was no transaction between the Company and
this fund during the year.
Group
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:
2014 2013
GBP'000 GBP'000
------------------------------ -------- --------
Short-term employee benefits 3,651 3,435
Post-employment benefits 263 289
Share-based payments 1,052 901
Dividends 2,504 873
------------------------------ -------- --------
7,470 5,498
------------------------------ -------- --------
Directors' remuneration
2014 2013
GBP'000 GBP'000
--------------------------------------- -------- --------
Emoluments(11) (excluding pension
contribution) 2,136 2,159
Gains made on exercise of share
options - 9
Pension contribution(12) 140 186
--------------------------------------- -------- --------
Aggregate emoluments of the Directors 2,276 2,354
--------------------------------------- -------- --------
During the year, four Directors of the Company (2013: five)
participated in the Group Personal Pension Plan, a defined
contribution scheme.
(11) Excludes termination payment made to Paul Sheriff.
(12) Includes payments made in lieu of pension
contributions.
25. Capital management
The Group's objectives when managing capital are (i) to
safeguard the Group's ability to continue as a going concern, (ii)
to provide an adequate return to its shareholders, and (iii) to
meet regulatory capital requirements set by the UK Financial
Conduct Authority.
The Group sets the amount of capital in proportion to risk. The
Group manages the capital structure and makes adjustments to it in
light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders, or
issue new shares. The Group had no debt in the current or prior
financial year and consequently does not calculate a
debt-to-adjusted capital ratio.
For regulatory capital purposes Record plc is subject to
consolidated financial supervision by the Financial Conduct
Authority (FCA). Our regulatory capital requirements are in
accordance with FCA rules consistent with the Capital Requirements
Directive. Our financial resources have exceeded our financial
resource requirements (regulatory capital requirements) at all
times during the year. Further information is provided in the
Business Review.
26. Ultimate controlling party
As at 31 March 2014 the Company had no ultimate controlling
party, nor at 31 March 2013.
27. Post reporting date events
No adjusting or significant non-adjusting events have occurred
between the reporting date and the date of authorisation.
28. Statutory Accounts
This statement was approved by the Board on 16 June 2014. The
financial information set out above does not constitute the
Company's statutory accounts.
The statutory accounts for the financial year ended 31 March
2013 have been delivered to the Registrar of Companies, and those
for the year ended in 31 March 2014 will be delivered in due
course. The auditor has reported on those accounts; the reports
were unqualified, did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying the report, and did not contain statements under section
498(2) or 498(3) of the Companies Act 2006 in respect of either set
of accounts.
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
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