TIDMREC
RNS Number : 2338Q
Record PLC
16 June 2015
PRESS RELEASE
Record plc
16 June 2015
FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2015
Second successive year of growth
Record plc, the specialist currency manager, today announces its
audited results for the year ended 31 March 2015.
Financial headlines:
-- AUME(1) $55.4bn at 31 March 2015 (up 7%)
-- AUME GBP37.3bn at 31 March 2015 (up 20%)
-- Revenue of GBP21.1m (up 6%)
-- Pre-tax profit of GBP7.7m (up 18%)
-- Operating profit margin of 36% to 31 March 2015 (2014:
32%)
-- Financial position remains strong with net assets of GBP35.8m
at 31 March 2015 (2014: GBP32.9m).
-- Basic EPS of 2.66p per share (2014: 2.48p)
-- Proposed final dividend for the year to 31 March 2015 is
0.90p per share, giving a total dividend in respect of the year of
1.65p per share (2014: 1.50p)
Key developments:
-- Client numbers increased to 55 at 31 March 2015 (up 15%)
-- Total dividend for the year increased from 1.50p per share to
1.65p per share (up 10%)
-- Currency for Return - two new Multi-Strategy mandates added
in the year ended 31 March 2015. The Multi-Strategy product reaches
its third anniversary in July 2015
-- The continued expectation of monetary policy divergence and
the return of volatility has resulted in a high level of engagement
with potential clients and consultants on currency-related
issues
Commenting on the results, Neil Record, Chairman of Record plc,
said:
"The twelve months to 31 March 2015 have been characterised in
FX markets by the two central themes of continued expectation of
monetary policy divergence and the re-emergence of volatility. Such
market factors have served to increase the focus amongst the
institutional investment community on currency-related issues,
resulting in a more supportive environment for Record's products
and services.
"The Group's strategy remains focused on building long-term,
sustainable growth of the business through excellent client
relationships and offering a wide range of diversified solutions to
fit clients' objectives. This strategy has so far succeeded in
giving the Group a more diversified spread of clients and revenue
sources, less exposed to any one investment process or market
environment.
"Against this backdrop it is pleasing to announce a second
consecutive year of growth in AUME, client numbers, revenues and
earnings. In addition to growing Passive Hedging AUME during the
year, the Group's higher-margin Currency for Return products have
also seen net inflows. The Multi-Strategy product reaches its third
anniversary in July 2015 and we have added two new mandates during
the year. The Group also saw strong inflows into a bespoke mandate
of a more tactical nature.
"The Board is recommending a final dividend of 0.90 pence per
share, taking the total dividend for the year to 1.65 pence per
share, an increase of 10%, reflecting the improved financial
performance of the Group.
"With divergence in monetary policies and currency market
volatility seemingly set to continue, we would expect the increased
focus on currency-related issues to be maintained. This view is
reinforced by the current high level of engagement with potential
clients and investment consultants across a broad range of currency
issues. The pace and extent to which this engagement translates
into new business opportunities is necessarily uncertain, although
the Group is well placed to take advantage of such opportunities as
they arise."
(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.
Analyst briefing
There will be a presentation for analysts at 9.30am on Tuesday
16 June 2014 at Cenkos plc offices: 6-8 Tokenhouse Yard, London,
EC2R 7AS. 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
Neil Record - Chairman
James Wood-Collins -
Chief Executive Officer
Steve Cullen - Chief
Financial Officer +44 1753 852222
MHP Communications
Nick Denton, Jack Holden,
Jennifer Iveson +44 20 3128 8100
Consolidated statement of comprehensive income
Year ended 31 March
2015 2014
Note GBP'000 GBP'000
----------------------------------- ----- --------- ---------
Revenue 3 21,057 19,922
Cost of sales (148) (86)
----------------------------------- ----- --------- ---------
Gross profit 20,909 19,836
Administrative expenses (13,373) (13,412)
Operating profit 4 7,536 6,424
Finance income 146 113
Profit before tax 7,682 6,537
Taxation 6 (1,708) (1,494)
----------------------------------- ----- --------- ---------
Profit after tax and total
comprehensive income for
the year 5,974 5,043
Profit and total comprehensive
income for the year attributable
to:
Non-controlling interests 192 (364)
Owners of the parent 5,782 5,407
----------------------------------- ----- --------- ---------
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 2.66p 2.48p
Diluted earnings per share 7 2.65p 2.47p
----------------------------------- ----- --------- ---------
Consolidated statement of financial position
As at 31 March
Note 2015 2014
GBP'000 GBP'000
---------------------------------- ----- -------- --------
Non-current assets
Property, plant and equipment 10 129 86
Intangible assets 11 504 734
Investments 12 2,567 2,754
Deferred tax assets 13 73 158
---------------------------------- ----- -------- --------
3,273 3,732
Current assets
Trade and other receivables 14 6,324 5,646
Derivative financial assets 15 619 198
Money market instruments
with maturity > 3 months 16 18,100 15,488
Cash and cash equivalents 16 12,010 11,503
---------------------------------- ----- -------- --------
Total current assets 37,053 32,835
---------------------------------- ----- -------- --------
Total assets 40,326 36,567
---------------------------------- ----- -------- --------
Current liabilities
Trade and other payables 17 (2,949) (2,706)
Corporation tax liabilities 17 (893) (832)
Derivative financial liabilities 15 (680) (122)
---------------------------------- ----- -------- --------
Total current liabilities (4,522) (3,660)
---------------------------------- ----- -------- --------
Total net assets 35,804 32,907
---------------------------------- ----- -------- --------
Equity
Issued share capital 18 55 55
Share premium account 1,847 1,838
Capital redemption reserve 20 20
Retained earnings 30,006 27,327
---------------------------------- ----- -------- --------
Equity attributable to
owners of the parent 31,928 29,240
Non-controlling interest 20 3,876 3,667
---------------------------------- ----- -------- --------
Total equity 35,804 32,907
---------------------------------- ----- -------- --------
Chairman's statement
In line with the improved performance of the Group, the Board is
increasing the total dividend for the year by 10% to 1.65 pence per
share.
Overview
This year has been one of elevated currency volatility, both at
very short horizons, and in longer-term trends. This is in contrast
to the previous three or four years, where currency volatility had
been low by historical standards, and very low compared to the
years 2008 and 2009 when the Global Financial Crisis spilled over
to the currency markets.
Looking at shorter horizons, the abandonment on 15 January 2015
of the Swiss Central Bank policy of capping the Swiss Franc's value
against the Euro resulted in the largest recorded one-day movement
(18%) of a major currency pair since the advent of floating
currencies in 1972.
At longer horizons, the US Dollar's rise against the Euro was
also large by recent standards (at 28% between 31 March 2014 and 31
March 2015).
Such market factors have only served to increase the focus as we
engage with clients, potential clients and investment consultants
on currency-related issues which, as would be expected, has
resulted in a more supportive environment for Record's products and
services across a broad range of clients and currency issues.
Consequently, it is pleasing to note a second consecutive year of
growth in AUME, client numbers, revenue, profits and earnings.
Financial highlights
AUME increased to $55.4 billion (2014: $51.9 billion) including
net inflows of $2.9 billion over the year. The shift in product mix
from Dynamic Hedging to lower-margin Passive Hedging over the last
few years has slowed considerably, with outflows in Dynamic Hedging
of $2.3 billion over the year being matched by inflows to Currency
for Return of $2.3 billion and further inflows to Passive Hedging
of $2.9 billion. Client numbers increased during the year by 7,
ending the year at 55 clients (2014: 48 clients).
Total revenues grew 6% to GBP21.1 million (2014: GBP19.9
million) due to growth in both existing client mandates during the
year and, more latterly, by new client wins further bolstered by
Record's first performance fee for five years of GBP0.5 million. It
should be noted that the majority of the growth in AUME and client
numbers occurred in the latter part of the year, so the full year
benefit of these movements will only be seen in the current
financial year. The doubling in our Currency for Return AUME to
$4.8 billion (2014: $2.4 billion) includes our second segregated
Multi-Strategy mandate and the launch of a new pooled fund
implementing the Multi-Strategy programme. These flows, in
conjunction with the further inflows to Passive Hedging mentioned
above, underline the strength of our product suite and increased
diversity across Record's client base by objectives and
geography.
This growth in revenues and consistent cost control has resulted
in an increase in operating margin to 36% (2014: 32%), an increase
in profit before tax of 18% to GBP7.7 million (2014: GBP6.5
million), achieving an increase in basic earnings per share of 7%
to 2.66 pence (2014: 2.48 pence).
Dividend
Our dividend policy has been both consistent and transparent
with a view to achieving a level of dividend which is at least
covered by earnings and which allows for sustainable dividend
growth by the business in line with the trend in profitability. The
dividend has been maintained at 1.50 pence per share for the last
three years.
In line with the improved performance of the Group, the Board is
increasing the total dividend by 10%, recommending a final dividend
of 0.90 pence per share and taking the total dividend in respect of
the year ended 31 March 2015 to 1.65 pence per share. Subject to
shareholders' approval, the dividend will be payable on 29 July
2015 to shareholders on the register at 26 June 2015.
For the current financial year, the Board's expectation, subject
to business conditions, is to maintain the total dividend at 1.65
pence per share, which the Board would expect to be payable equally
in respect of an interim and a final dividend. However, in setting
the interim and final dividends the Board will be mindful of
setting a level of dividend payments which it expects to be at
least covered by earnings and which allows for future sustainable
dividend growth by the business in line with the trend in
profitability, such that the total dividend may be more or less
than 1.65 pence per share.
Group strategy
The Group's strategy remains focused on building long-term,
sustainable growth of the business through excellent client service
and relationships. With this in mind, over recent years the
business has focused on recruiting high-quality people, investing
in systems and infrastructure and producing a diversified product
suite.
The result is that the Group now has a more diversified spread
of clients and a product suite developed to offer opportunities for
assisting clients with currency issues irrespective of their
primary objective or where the market stands within the current
economic cycle. Over recent years, the focus on building a strong
base of Passive Hedging clients during a period of low volatility
and risk sentiment whilst developing a suite of Currency for Return
products has borne fruit - Passive Hedging now accounts for 74% of
AUME (2014: 73%) and, despite lower revenue margins, represents a
strong and stable revenue stream.
In addition, heightened currency volatility has resulted in
increased opportunities for our Currency for Return products at
higher revenue margins, culminating in two new mandates for our
Multi-Strategy product plus inflows from an existing client into a
bespoke mandate of a more tactical nature - all evidence of our
ability to offer flexibility of approach to meet changing client
demands during fluctuating market conditions.
The Board
There have been no changes to the Board composition during the
year. However, the Board is cognisant of the fact that two of the
current three independent directors, Cees Schrauwers and Andrew
Sykes, will no longer be deemed independent from November 2016,
having joined Record just prior to IPO in December 2007. With a
view to enabling a smooth transition and handover period, the
Nomination Committee is managing a process to identify and recruit
replacement independent directors. Further announcements will be
made in due course.
Outlook
With divergence in monetary policies and geopolitical and
economic uncertainty seemingly set to continue for the foreseeable
future, contributing to renewed and sometimes heightened volatility
in currency markets, we would expect the increased focus on
currency-related issues to be maintained. This view is reinforced
by the current high level of engagement with potential clients and
investment consultants across a broad range of currency issues. The
pace and extent to which this engagement translates into new
business opportunities is necessarily uncertain. However, the Group
is well placed to take advantage of such opportunities as they
arise by servicing clients' needs to the highest possible standards
and in doing so generating long-term sustainable growth for
shareholders.
On behalf of the Board, I would like to take this opportunity to
thank everyone at Record for their hard work during the year and
for helping to deliver the second consecutive year of growth for
the Group.
Neil Record
Chairman
Chief Executive Officer's Statement
A second successive year of growth in client numbers, AUME,
revenues and profits confirms the Group's strategy of offering a
wide range of diversified solutions to clients' objectives.
Record's second successive year of growth can be credited to
gains in both hedging and return-seeking strategies, the rate of
which has accelerated throughout the year to culminate in
substantial inflows in the final quarter.
The benefits of these inflows in the form of revenues and
profits are expected to be seen fully in the current financial
year. The increasingly divergent and volatile market environment
offers opportunities for our strategies to perform well, and
diversification of Record's clients as well as within strategies
should protect the Group from any one event or environment.
Market overview
The twelve months to 31 March 2015 have been characterised in FX
markets by two themes in particular: the continued expectation of
monetary policy divergence; and the re-emergence of volatility.
Amongst major developed market central banks, the US Federal
Reserve stopped its asset purchase programme in October 2014, and
is widely expected to increase interest rates in 2015. As a result
the US Dollar strengthened markedly over the year, particularly in
the last quarter against the Euro. Euro weakness in turn can be
attributed to the European Central Bank launching its own asset
purchase programme, confirming it at the opposite end of the
"loosening vs. tightening" spectrum to the Federal Reserve. The
Bank of England is perceived to be on the path towards rate
tightening, although declining UK inflation has caused the market's
expectation of the timing of rate rises to be extended. The Bank of
Japan has also maintained, and during the year sought to
accelerate, its loose monetary policy.
The most dramatic example of loosening came from the Swiss
National Bank, which announced a further reduction to negative
interest rates, in conjunction with dropping the cap on the value
of the Swiss Franc against the Euro. This unexpected event caused
the Swiss Franc to strengthen dramatically, in the largest one-day
movement ever seen in a major developed market currency pair.
Investment performance
In this environment Record's strategies performed as expected.
Passive Hedging should have no unpredictable investment outcomes,
and in particular the hedging programmes for our Swiss clients all
performed as expected in the aftermath of the Swiss National Bank's
announcement. All of our clients had chosen to retain their hedges
on Euro-denominated assets, precisely to protect against such an
announcement and its consequences.
Dynamic Hedging programmes also performed as expected. US-based
clients experienced modest underperformance in the first quarter as
the US Dollar broadly weakened, followed by three successive
quarters of increasing outperformance, offsetting a large part of
the clients' underlying losses on depreciating foreign currencies.
UK-based clients saw mixed performance over the year, with hedging
gains and losses broadly tracking the path of Sterling.
Currency for Return strategies largely performed positively over
the year, with each of the Emerging Market, Momentum, Value and
Multi-Strategy programmes generating positive returns. Forward Rate
Bias ("FRB") strategies, both the Active FRB and the index-tracking
FTSE Currency FRB10 strategy, generated negative returns, largely
attributable to the dramatic appreciation of the Swiss Franc in
January. The FRB10 strategy outperformed Active FRB over the year,
leading the standard Multi-Strategy product as implemented in two
mandates launched in the last quarter of the year to outperform
modestly that implemented in the first Multi-Strategy mandate, now
approaching its third anniversary.
Asset flows and financial performance
AUME grew by 7% over the financial year to $55.4 billion. This
was achieved through new clients and increases to existing
mandates, resulting in net inflows of $2.9 billion, notwithstanding
the termination of a Dynamic Hedging mandate at the start of the
year, and some reductions in other Dynamic Hedging mandates
attributable to clients taking profits. External factors (i.e.
equity and other market movements and the impact of exchange rates
over the period) also contributed $0.6 billion.
Modest shifts in product mix towards lower-margin Passive
Hedging, and the inflows into higher-margin Currency for Return
strategies taking place towards the end of the year, meant that
underlying(1) revenues increased more modestly, by 3% to GBP20.9
million. Continued discipline on costs allowed the Group to improve
its underlying operating margin to 35%, leading to growth in
underlying operating profit before tax of 7% to GBP7.3 million, and
in basic earnings per share of 7% to 2.66 pence.
The tactical bespoke mandate which recently received inflows of
$1.75 billion (as announced on 13 March 2015) remains substantially
unchanged as at the date of this report.
Strategic progress
Client relationships - we have grown client numbers, and of
equal importance, we have grown our mandates with existing clients.
This has been achieved through our long-standing approach of
building trusted relationships with clients and their advisors, in
particular investment consultants. Building these relationships,
and then robustly and reliably implementing clients' individual
mandates, requires highly-experienced, skilled and professional
teams in all areas of the firm, which in turn puts pressure on
remuneration and on scalability.
Innovation - enhancement of existing products is a constant
feature at Record, driven by clients' needs and market
opportunities. During the year the dramatic change in the Swiss
Franc interest rate environment has created such needs, to which
Record has responded through increased flexibility in our Passive
Hedging. No new strategies were launched during the year, as the
Group focused on monetising the research commitment made in
particular to the Multi-Strategy product, but research has
continued into further extending and enhancing this product.
People - we have continued to attract, retain and develop
high-quality people. This starts with intern programmes, which at
Record are remunerated on the same scale as graduate hires,
continues through graduate and early-stage career hires, and is
then focused on internal development and retention. Mid-career
lateral hires tend to be less frequent, given the
highly-specialised nature of the Group's work. We have largely
succeeded in retaining key staff in a highly competitive employment
market. The trend towards higher fixed remuneration in financial
services in general and banking in particular is something that the
Group has had to recognise. We have chosen to do so in a way that
reflects the contribution of every part of the firm to our clients'
outcomes, by a one-off firm-wide salary increase of 10%, with
effect from 1 May 2015, outside the normal salary review round.
Growth - we have achieved growth in client numbers and in AUME.
Growth in revenues and in underlying profit before tax also
reflects shifts in product mix and the timing of inflows into
higher-margin products. This growth has been accompanied by further
diversification, in both investment strategy with inflows into
Multi-Strategy and other Currency for Return products, and in
structure with the launch by a third party of a UCITS-compliant
fund implementing the Multi-Strategy programme, to which Record is
the investment advisor. We continue to focus on growth from our
core markets of North America, continental Europe and in particular
Switzerland, and the United Kingdom while exploring potential new
markets such as Australia.
Risk management - we have continued to develop and invest in
systems, people and processes to manage the operational risk that
we assume from clients. During the year we have pursued a project
to strengthen the systems through which we implement the wider
diversity and greater volume of Hedging mandates we now manage.
Profitability - the Group's profitability has strengthened with
an underlying operating margin of 35%. Whilst our Hedging mandates
are bespoke to each client and so offer fewer economies of scale
than pooled funds, the more supportive environment for Currency for
Return strategies may allow some shift of product mix back to those
offering higher fees.
Outlook
The market backdrop of increasingly divergent interest rates and
rising volatility provides a more supportive environment for our
strategies than has been the case for many years.
In longer-established markets such as the UK and Switzerland,
the Group will continue to pursue gaining market share in
established strategies such as Passive Hedging through a determined
focus on better implementation and cost management for clients. In
other areas, whether currency management in general in the United
States, or return-seeking strategies in much of the world, the
Group will seek both to stimulate and to respond to demand from
clients as it emerges.
In all cases Record's management is very aware of the benefits
of diversification within and across our strategies, and management
and staff remain wholly focused on managing programmes to meet our
clients' best interests, and growing the business to create value
for shareholders.
1The Group uses non-GAAP measures such as "underlying revenue"
and "underlying operating profit". These measures are calculated by
removing the impact of non-controlling interests from the normal
GAAP measures presented in the financial statements calculated in
accordance with IFRS. The Group believes that these non-GAAP
measures provide a useful indication of the performance of the
business
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 five year history of these KPIs is shown below.
KPIs 2015 2014 2013 2012 2011
---------------------- -------- -------- -------- -------- --------
AUME at 31 March $55.4bn $51.9bn $34.8bn $30.9bn $31.4bn
- US Dollars
Client numbers
at 31 March 55 48 44 41 46
Underlying operating
profit margin 35% 33% 31% 32% 44%
Basic earnings 2.66 2.48 1.98 2.23 4.03
per share ("EPS") pence pence pence pence pence
---------------------- -------- -------- -------- -------- --------
How we performed this year
-- The AUME reached $55.4 billion at the year end, the highest
closing level of AUME for seven years. Net AUME inflows for the
year were $2.9bn.
-- Client numbers at the end of the year reached a five year
high of 55.
-- Underlying operating profit margin increased from 33% to
35%.
-- EPS increased by 7% due to increased revenues and continued
cost control during the year.
Business review
Market review
The predominant factors driving FX markets have been monetary
policy divergence and volatility.
The twelve months to 31 March 2015 have been characterised in FX
markets by two themes in particular: firstly, the continued
expectation of divergence in monetary policy between major
developed market central banks; and secondly, the re-emergence of
volatility, both day-to-day exchange rate volatility, and
unanticipated market events.
This section comments on the impact of both of these factors on
exchange rates and also considers questions of market structure and
functioning, which may in turn be contributing to the increased
volatility observed. This section also addresses the effects of
these on Record's strategies.
Monetary policy divergence
Major developed market central banks, in particular those of the
United States, the Eurozone, the United Kingdom, Japan and
Switzerland (referred to as the "G5"), uniformly pursued unusually
loose monetary policy as a consistent response to the global
financial crisis of the last decade. This highly convergent
strategy became more divergent in the prior financial year, and
this divergence has become more pronounced in the year to 31 March
2015.
In the United States, the Federal Reserve had decided to reduce
asset purchases (one of the tools of loose monetary policy, and
known as "quantitative easing") from December 2013, and stopped
such purchases altogether from October 2014. Debate has continued
throughout the year over when the Federal Reserve will first
increase interest rates, broadly leading the US Dollar to weaken
against many developed market currencies in the first three months
of the period, then strengthen markedly in the remaining nine
months. The US Dollar's almost universal appreciation against
developed market currencies, and indeed many emerging market
currencies, has been highly notable over the year, with the Dollar
appreciating 28% against the Euro, 12% against the Pound, and by a
similar magnitude against many other developed market
currencies.
The US Dollar's outperformance against the Euro can be
attributed as much to Euro weakness as Dollar strength, and Euro
weakness in turn can be attributed to the announcement by the
European Central Bank on 22 January 2015 of a larger than expected
asset purchase programme of EUR60 billion a month, running at least
until September 2016. This announcement, and the programme's launch
in March 2015, has confirmed the ECB at the opposite end of the
"loosening vs. tightening" spectrum to the Federal Reserve.
Political uncertainty focused on Greece has also contributed to
pressures on the Euro, and in our view continues to hold the
potential for an adverse shock.
The Bank of England by contrast is perceived to be on the path
towards rate tightening, not least due to the relative strength of
the UK economy. However, declining UK inflation, as indicated by
the change in the Consumer Prices Index falling to 0.0% in the year
to February 2015, has caused the market's expectation of the timing
of rate rises to be extended. As a result, although Sterling
strengthened over the first three months of the financial year, it
broadly weakened over the following six months, before
strengthening again somewhat in the final quarter.
The Bank of Japan has also maintained, and during the year
sought to accelerate, its loose monetary policy. The most dramatic
example of loosening though has come from the Swiss National Bank,
which announced a further reduction in the interest rate on certain
deposit accounts by 0.5 percentage points, to -0.75%, on 15 January
2015, in conjunction with ending its prior policy of capping the
value of the Swiss Franc against the Euro. Despite the interest
rate cut, the Swiss Franc appreciated dramatically on the day, as
discussed further under "Volatility" below. Negative interest rates
have also been imposed in other countries adjacent to (but not part
of) the Eurozone such as Denmark.
Although this trend towards more divergent monetary policy has
been widely reported, there are at least two aspects of it that are
worth emphasising. Firstly, a considerable deal of market focus and
attention is given to the specifics of, for example, at which
meeting one or other central bank is expected first to raise rates.
In our view, such focus risks "missing the wood for the trees", at
least as far as our strategies are concerned. We claim no advantage
in foreseeing the specific details of any one central bank's
decision-making, but instead focus on the bigger picture of
increasingly divergent action between central banks.
Secondly, it is easy to forget amidst the focus on central bank
divergence, that we have yet to see any policy rate amongst the G5
increase from their uniformly close-to-zero level (although some
divergence has emerged with Swiss Franc rates decreasing further
still). Whilst FX markets naturally seek to anticipate rate
increases, and are certainly pricing in wider rate divergence at
more distant time horizons, it is worth remembering that all of the
market movement so far attributed to monetary policy and interest
rate divergence reflects only its expectation, not yet its
delivery, and hence there is scope for the delivery to exceed
expectations (or, of course, to fall short).
Volatility
Volatility has also become more pronounced over the year,
measured both by the volatility of day-to-day exchange rate
movements, which had fallen to unusually low levels in the early
part of the year, and by unanticipated market events.
The most prominent of these over the financial year was the
surprise announcement by the Swiss National Bank of its removal of
the CHF1.20 ceiling on the value of the Swiss Franc against the
Euro, as referred to above. This was explicitly attributed to
divergent monetary policies, and was widely believed to be in
anticipation of the ECB announcing its asset purchase programme,
which followed the Swiss National Bank's announcement by one week.
The Swiss Franc immediately appreciated all the way to (and
through) parity against the Euro, in the largest one-day movement
ever seen in a major developed market currency pair. The Swiss
Franc market was effectively closed for up to an hour after the
announcement, and continued to be volatile and illiquid over
subsequent days.
A separate example of market volatility was provided by the
overnight (London time) reaction to remarks made by Federal Reserve
Chair Janet Yellen on 18 March 2015. These remarks, which were
taken to indicate that US interest rate rises were more distant
than the market had anticipated, caused the US Dollar to weaken
against the Euro by approximately 4% in overnight trading, before
recovering almost to its prior level.
FX markets
Throughout this financial year, FX markets have continued to
come under greater regulatory focus than has been the case
historically. This has taken many forms, including continued
investigation into FX benchmarks, the inclusion of FX markets in
broader reviews such as the Fair and Effective Markets Review
undertaken by the Bank of England, the Financial Conduct Authority,
and HM Treasury, and regulatory fines and penalties on banks
exceeding $10 billion.
As a specialist currency manager whose interests are completely
aligned with those of its clients, Record is wholly supportive of
appropriate and considered regulatory change to maintain the fair,
effective and open functioning of the FX markets. We do however
recommend that any change starts from a detailed understanding of
how the market functions today.
We continue to believe that the currency markets as they
function presently can serve their users extremely well. The FX
spot, forward and non-deliverable forward markets, constructed from
a series of bilateral relationships with market-making
counterparties competing on standard terms, and offering
round-the-clock pricing, continue to remain highly liquid, with
very competitive transaction costs. Attempts at reform must
therefore avoid any unintended consequences that may disrupt the
already efficient currency markets.
Indeed, it may be the case that the FX market has already begun
to see undesirable and unintended consequences of reforms attempted
so far. Whilst the immediate reaction to the Swiss National Bank's
surprise announcement was inevitably dramatic, the Swiss Franc
market continued to be surprisingly volatile and fragile for some
days. The causes of this prolonged market impact are unclear, but
it has been suggested that it may be attributable to less appetite
to hold risk within banks, to liquidity fragmentation amongst
trading venues, and even to less experienced bank FX traders.
Effects on Record's strategies
The effects of the various factors above on Record's strategies
and on demand for them are complex, but some conclusions can be
drawn.
Although the long-term strategic arguments in support of
currency hedging are focused around volatility reduction, there is
no doubt that the prospect of a strengthening base currency, and
hence the risk of losses caused by depreciating exposure
currencies, can encourage investors to consider hedging on a more
tactical basis.
The experience of US investors since the middle of the financial
year, with a strengthening US Dollar causing currency to detract
from the performance of international asset allocations, has
allowed Record's currency hedging strategies to generate attractive
off-setting performance for US clients. It has also contributed to
a marked increase in interest from investment consultants and
prospective clients. As ever, some investors will be encouraged to
consider hedging against the prospect of further appreciation,
while others may feel they have "missed the boat". In any event,
the US Dollar strength alone has given currency and currency
strategies greater prominence amongst US investors.
With respect to return-seeking currency strategies, the most
obvious beneficiary of monetary policy divergence, and hence
anticipated interest rate divergence, are forward rate bias or
"carry trade" strategies, which tend to perform well both in
anticipation of rate divergence, as well as in established
divergent environments with larger rate differentials to harvest.
Record has seen continued interest in forward rate bias strategies
throughout the financial year.
Momentum and value strategies are less evidently directly
affected by developed market interest rates. Although emerging
market currency strategies are widely perceived to underperform in
periods of US Dollar strength, this sensitivity can be offset to a
large degree by appropriate portfolio construction.
The differing reactions of currency strategies to market
conditions highlight the benefits of diversification. These are
evident both within Record's client base, as measured by clients'
objectives and by their geography and hence base currency, as well
as within strategies, in particular the Currency Multi-Strategy
product which will reach its third anniversary this year.
The impact on Record's clients of the unexpected Swiss decision
in January serves as a microcosm to illustrate these benefits. Our
Swiss hedging clients benefited significantly from the appreciation
of the Swiss Franc, although of course only to the extent that
these hedging gains offset currency losses in the underlying
assets. Correspondingly our non-Swiss hedging clients suffered
losses in their hedging portfolios, although again only offsetting
gains on their typically modest allocation to Swiss assets.
Performance across return-seeking strategies was diverse, with the
standard Multi-Strategy product overall recording a modest loss on
the day, all of which was recouped in the rest of the quarter.
Whilst market volatility can present challenges, the need to
access limited liquidity, and to ensure clients continue to receive
the best-available execution, provide an environment in which
Record's skill and experience can be demonstrated to good
effect.
Operating review
Growth in AUME and client numbers has been accompanied by
diversification in investment strategy, in structure and in
geography.
Product investment performance
Our hedging products are predominantly systematic in nature. The
effectiveness of each client mandate 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 generally saw underlying losses from currency over
the year as Sterling strengthened against most G10 currencies,
leading to lower Sterling valuations for foreign currency
investments. UK-based Dynamic Hedging programmes systematically
increased Euro hedge ratios over the year in response to Sterling
strength to protect against these losses. Conversely, in the case
of the strengthening US Dollar, hedge ratios declined during the
year, thus containing hedging losses and allowing UK investors to
capture the gains in the underlying US currency exposure. Overall,
the returns from hedging were positive and helped to offset the
effects of the underlying foreign currency exposure.
US investors also saw losses from currency on international
exposures when valuing positions in US Dollars, as the US Dollar
strengthened against every G10 currency. Record's Dynamic Hedging
product increased hedge ratios over the year in response to the US
Dollar's strength. As a result, returns from hedging were positive
and compensated losses from foreign currency exposure.
Record had a number of "live" Currency for Return products in
the year. The Active Forward Rate Bias ("FRB"), Record Currency -
FTSE FRB10 Index Fund, and Emerging Market products are founded on
market risk premia and as such perform more strongly in "risk on"
environments. By contrast, Momentum and Value strategies are more
behavioural in nature, and as a result are less risk-sensitive.
Active FRB or FRB10 Index, Emerging Market, Momentum and Value can
also be combined to create the Record 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 mainly due to the short position in the Swiss
Franc which appreciated sharply following the Swiss National Bank's
decision to abandon the cap on the value of the currency. 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 FRB
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 strategy, 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 positive
returns over the period as emerging market currencies appreciated
against a basket of developed market currencies, notwithstanding US
Dollar strength.
Record's first live Multi-Strategy mandate combining Active FRB,
Emerging Market, Momentum and Value strategies, delivered 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 Active FRB strand and, to a lesser
extent, the Emerging Market strand (the divergence in the
performance of the latter versus the Emerging Market Currency Fund
was due to differences in portfolio construction).
In the last quarter Record also established two new
Multi-Strategy accounts, one on a segregated basis and one within a
UCITS fund, with both including the FRB10 Index product in place of
the Active FRB strategy. At the end of the reporting period both
mandates had positive performance.
Returns data for Currency for Return strategies
Fund Name Gearing Return Return Volatility
for the since since
12 months inception inception
to 31 % p.a. % p.a.
March
2015 %
-------------------------- -------- ----------- ----------- -----------
FTSE FRB 10 Index
Fund1 1.8 -1.34% 2.24% 7.76%
Emerging Market Currency
Fund2 1 1.02% 0.64% 6.70%
Index /composite Return Return Volatility
returns for the since since
12 months inception inception
to 31 % p.a. % p.a.
March
2015 %
-------------------------- -------- ----------- ----------- -----------
Alpha composite3 -1.66% 0.03% 3.09%
FTSE Currency FRB10
GBP Excess return(4) -0.90% 2.45% 4.69%
Currency Value(5) 5.97% 3.46% 3.07%
Currency Momentum(6) 1.74% 2.63% 2.92%
Record Multi-Strategy
(ungeared)(7) 1.08% 1.83% 2.22%
-------------------------- -------- ----------- ----------- -----------
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 Record Currency - Emerging Market Currency Fund return data is
since inception in December 2010, GBP base.
(3) Alpha Composite data is since January 2003, USD base.
(4) FTSE Currency FRB10 GBP Excess return data is since December
1987, GBP base.
5 Currency Value return data is since inception in July 2012,
CAD base.
6 Currency Momentum return data is since inception in July 2012,
CAD base.
7 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 $3.5bn (+7%)
to finish the year at AUME of $55.4bn compared with $51.9bn at the
end of the previous year.
When expressed in Sterling, AUME increased by GBP6.2bn (+20%) to
finish the year at GBP37.3bn (2014: GBP31.1bn).
AUME development ($bn)
Opening Net client Markets FX effects Closing
AUME at inflows AUME at
1 April 31 March
2014 2015
--------- ----------- -------- ----------- ----------
51.9 +2.9 +5.6 -5.0 55.4
--------- ----------- -------- ----------- ----------
AUME movements
The Group has seen net inflows of $2.9bn from clients. Inflows
from both new and existing clients totalled $12.9bn, and were
offset by outflows of $10.0bn.
Dynamic Hedging AUME experienced net outflows of $2.3bn, ending
the year at $9.2bn (2014: $11.3bn). The loss of a Dynamic Hedging
programme was reported in early April representing an outflow of
$0.6bn, with the remaining net outflows attributable predominantly
to clients taking profits partially offset by inflows from a new
Dynamic Hedging client. The $0.8bn impact of growth in the value of
underlying assets was mostly offset by the impact of movements in
exchange rates of -$0.6bn.
Passive Hedging AUME continued to grow and reached $41.2bn
(2014: $37.9bn) by the end of the year, an increase of 9% (2014:
+71%). Net inflows of $2.9bn were from a combination of new and
existing clients with the net impact of external factors
contributing a further $0.4bn.
Currency for Return AUME has doubled to $4.8bn (2014: $2.4bn).
The increase is due principally to aggregate inflows of $2.3bn both
from an existing client into a bespoke programme during the year
and from the addition of two new clients with Multi-Strategy
mandates. The net impact of external factors increased AUME by
$0.1bn.
Equity and other market performance
Record's AUME is affected by movements in equity and other
market levels because substantially all the Passive and Dynamic
Hedging, and some of the Currency for Return mandates, are linked
to equity and other market levels. Market performance increased
AUME by $5.6bn in the year to 31 March 2015.
Further detail on the composition of assets underlying our
Hedging mandates is provided below to help illustrate more clearly
the impact of equity and fixed income market movements on these
mandate sizes.
Class of assets underlying mandates by product as at 31 March
2015
Equity Fixed income Other
------- ------------- ------
% % %
----------------- ------- ------------- ------
Dynamic Hedging 75% 0% 25%
Passive Hedging 33% 55% 12%
----------------- ------- ------------- ------
Forex
The percentage of the Group's AUME which is non-US Dollar
denominated is 87%. The foreign exchange impact of the conversion
of non-US Dollar mandate sizes into US Dollar AUME had the impact
of reducing AUME by $5.0bn over the year. This movement does not
have an equivalent impact on the Sterling value of fee income.
The split of AUME at the year end by base currency was 21% in
Sterling, 61% in Swiss Francs, 13% in US Dollars, 5% in Euros and
less than 1% in Canadian and Singapore Dollars.
Product mix
AUME composition 31 March 15 31 March 14
by product
-------------- --------------
US $bn % US $bn %
--------------------- ------- ----- ------- -----
Dynamic Hedging 9.2 17% 11.3 22%
Passive Hedging 41.2 74% 37.9 73%
Currency for Return 4.8 9% 2.4 5%
Cash 0.2 -% 0.3 -%
--------------------- ------- ----- ------- -----
Total 55.4 100% 51.9 100%
--------------------- ------- ----- ------- -----
The gradual shift in product mix over the last few years from
higher-margin to lower-margin products has slowed considerably. The
doubling of AUME in the Currency for Return product has more than
offset the reduction in Dynamic Hedging AUME over the year,
although the majority of inflows into Currency for Return were from
a bespoke mandate of a tactical nature, part of which may therefore
only be temporary. With respect to actual flows, aggregate net
flows amounted to zero between these two higher-margin products.
Currency for Return represented 9% (2014: 5%) of total AUME and
Dynamic Hedging 17% (2014: 22%). The proportion of total AUME
represented by Passive Hedging was broadly unchanged at 74% (2014:
73%).
Client numbers
At 31 March 2015 Record had 55 clients compared to 48 clients at
the end of the prior year, a net gain of seven clients over the
year.
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
15 14 15 14 15 14
-------------------- --------- --------- ---------- ---------- --------- ---------
Sterling GBP 2.7bn GBP 2.3bn GBP 4.7bn GBP 3.6bn GBP 0.1bn -
US Dollar USD 3.2bn USD 5.9bn USD 0.2bn USD 0.2bn USD 3.6bn USD 1.5bn
Swiss Franc CHF 1.9bn CHF 1.4bn CHF 30.3bn CHF 25.7bn CHF 0.7bn CHF 0.6bn
Euro - - EUR 2.4bn EUR 1.9bn - -
Canadian Dollar - - - - CAD 0.3bn CAD 0.3bn
Singapore Dollar - - - - SGD 0.1bn -
-------------------- --------- --------- ---------- ---------- --------- ---------
Financial review
For the second consecutive year, it is pleasing to report growth
in the main financial indicators of revenue, profits and
earnings.
Group revenue increased by 6% to GBP21.1m for the year and
includes the Group's first performance fees for five years, of
GBP0.5m.
The Group maintained aggregate management fees at GBP20.3m
(2014: GBP20.3m) despite the loss of a Dynamic Hedging client
announced at the start of the year and the full year financial
impact of reduced fee rates on Dynamic Hedging mandates announced
in November 2013.
Careful management of costs resulted in a 2% decrease in
personnel costs and a 5% decrease in non-personnel costs, which
were offset by an increase in the Group Profit Share cost of 10%.
Aggregate expenditure, including the Group Profit Share, was
maintained at 2014 levels of GBP13.4m.
Profit before tax increased by 18% to GBP7.7m.
Profit and loss (GBPm) 2015 2014
- Year ended 31 March
------------------------------ ------- -------
Revenue 21.1 19.9
------------------------------ ------- -------
Cost of sales (0.2) (0.1)
------------------------------ ------- -------
Gross profit 20.9 19.8
------------------------------ ------- -------
Personnel (excluding Group
Profit Share Scheme) (6.0) (6.1)
Non-personnel cost (4.2) (4.4)
Total expenditure (excluding
Group Profit Share Scheme) (10.2) (10.5)
------------------------------ ------- -------
Group Profit Share Scheme (3.2) (2.9)
------------------------------ ------- -------
Operating profit 7.5 6.4
Operating profit margin
% 36% 32%
------------------------------ ------- -------
Net interest received 0.2 0.1
------------------------------ ------- -------
Profit before tax 7.7 6.5
------------------------------ ------- -------
Tax (1.7) (1.5)
------------------------------ ------- -------
Profit after tax 6.0 5.0
------------------------------ ------- -------
Revenue
Record's revenue is principally management fees earned from the
provision of currency management services.
Revenue analysis (GBPm) 2015 2014
------------------------- ----- ------
Management fees 20.3 20.3
Performance fees 0.5 -
Other income 0.3 (0.4)
------------------------- ----- ------
Total 21.1 19.9
------------------------- ----- ------
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, in
line with the previous year (2014: GBP20.3m). The composition of
management fees has continued to reflect the shift from the
high-margin Dynamic Hedging product into the lower-margin Passive
Hedging product, lagging the corresponding shift in AUME reported
last year. Dynamic Hedging management fees decreased by GBP2.5m
with both the full year impact of the fee reductions given in the
prior year and the loss of a Dynamic Hedging client announced at
the start of the year being the main factors. This was mostly
offset by the growth in Passive Hedging management fees of GBP2.4m
due to the full year effect of prior year increases to Passive
Hedging AUME plus growth in existing clients mandates through the
year.
AUME growth reported in Currency for Return products occurred in
the latter part of the year, meaning that the effect on management
fees for the year ended 31 March 2015 was marginal, with related
revenues increasing to GBP2.8m (2014: GBP2.7m).
Dynamic Hedging represents 46% (2014: 59%) of total management
fees, and Passive Hedging increased to 40% (2014: 28%) and Currency
for Return 14% (2014: 13%) of total management fees.
Management fees by product 2015 2014
(GBPm)
---------------------------- ----- -----
Dynamic Hedging 9.4 11.9
Passive Hedging 8.1 5.7
Currency for Return 2.8 2.7
---------------------------- ----- -----
Total 20.3 20.3
---------------------------- ----- -----
As expected, the average fee rate achieved by the Dynamic
Hedging product fell slightly year on year as a result of a full
year's impact of the decrease in Dynamic Hedging fee rates
announced in November 2013.
Passive Hedging average fee rates have remained stable through
the period whilst Currency for Return rates have fallen slightly
due to inflows into mandates with tiered fee scales decreasing the
overall average fee rate.
Average management fee rates 2015 2014
by product - (bps)
------------------------------ ----- -----
Dynamic Hedging 15 16
Passive Hedging 3 3
Currency for Return 16 17
------------------------------ ----- -----
Performance fees
Performance fees of GBP0.5m were earned in the year, (2014:
GBPnil). Performance fees can be earned either from Currency for
Return or Dynamic Hedging mandates, dependent on the individual
client mandate. Record currently has two active mandates
incorporating a performance fee component, both of which are
Dynamic Hedging mandates.
Other income
Other income is principally from gains made on forward foreign
exchange contracts employed by the funds seeded by the Group and
consolidated under IFRS. It also includes hedging gains/losses on
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 during
the year ended 31 March 2015, in line with the prior year. Due to
careful cost control, expenditure reduced from the prior year by
GBP0.1m and GBP0.2m for non-personnel and personnel costs
respectively. The Group Profit Share cost increased by GBP0.3m over
the prior year in line with the increase in profitability.
As detailed more fully in the Chief Executive's statement, a
firm-wide salary increase of 10% has been granted in the current
year, effective 1 May 2015.
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 staff. The
Remuneration Committee has agreed that for the year ended 31 March
2015, the Group Profit Share Scheme is 30% of pre-GPS operating
profit. This represents GBP3.2m, an increase of GBP0.3m 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 shares in
the market following the announcement of interim and full year
financial results.
Operating profit and margins
On a fully consolidated basis, operating profit for the year
ended 31 March 2015 of GBP7.5m was 17% higher than the operating
profit for the previous financial year (2014: GBP6.4m) and
operating margin increased from 32% to 36%.
Management also considers operating profit and profit before tax
on an "underlying" basis, which excludes the impact of the income
and expenditure attributable to non-controlling interests (i.e.
gains and losses attributable to other investors in the seed funds
which are consolidated into the Group's financial statements on a
line-by-line basis, as required under IFRS). This reflects the
approach used for internal management reporting and is considered
to represent more accurately the core revenues and costs driving
current and future cash flows of the business. Underlying operating
profit for the year was GBP7.3m (2014: GBP6.8m) with underlying
profit before tax for the year of GBP7.5m (2014: GBP6.9m).
Cash flow
The Group's year end cash position was GBP12.0m (2014:
GBP11.5m). The cash generated from operating activities before tax
was GBP8.0m (2014: GBP6.7m), with GBP1.6m paid in taxation (2014:
GBP1.6m) and GBP3.3m paid in dividends (2014: GBP4.9m). At the year
end, the Group held money market instruments with maturities
between 3 and 12 months, worth GBP18.1m (2014: GBP15.5m). These
instruments are managed as cash by the Group but are not classified
as cash under IFRS rules (see note 16 in the financial statements
for more details).
Dividends
Shareholders received an interim dividend of 0.75p per share
paid on 19 December 2014. The Board recommends paying a final
dividend of 0.90p per share, equivalent to GBP1.9m, taking the
overall dividend to 1.65p per share, an increase of 10% over the
prior year (dividend paid in respect of year ended 31 March 2014:
1.50p per share).
Subject to shareholder approval, the dividend will be paid on 29
July 2015 to shareholders on the register on 26 June 2015, the
ex-dividend date being 25 June 2015. The dividend cover in the year
was 1.6 (2014: 1.7).
Financial stability and Capital management
The Group's financial position remains strong, with consolidated
net assets growing to GBP35.8m (2014: GBP32.9m) at the end of the
year represented predominantly by assets managed as cash totalling
GBP30.1m (2014: GBP27.0m).
The Board's policy is to retain capital (being equivalent to
shareholders' funds) within the business sufficient to meet
continuing obligations, to meet regulatory capital requirements, 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 three year cycle under various scenarios and monitors the capital
and liquidity positions of the Group on an ongoing and frequent
basis. The Group has no debt.
Record Currency Management Limited ("RCML") is a BIPRU limited
licence firm authorised and regulated in the UK by the Financial
Conduct Authority ("FCA"), and is a wholly owned subsidiary of
Record plc. RCML is required to submit semi-annual capital adequacy
returns, and it held significant surplus capital resources relative
to its regulatory financial resource requirement throughout the
year. Similarly the Group also submits semi-annual capital adequacy
returns but on a consolidated basis, taking account of the risks
across the business assessed by the Board as requiring further
capital. In assessing these risks, the Group uses an active
risk-based approach to monitoring and managing risks, which
includes its Internal Capital Adequacy Assessment Process
("ICAAP").
The Board is satisfied that the Group is adequately capitalised
both to continue its operations effectively and to meet regulatory
requirements, due to the size and liquidity of ongoing balance
sheet resources maintained by the Group.
The Group held regulatory capital resources based on the audited
financial statements as at 31 March, as follows:
Regulatory capital 2015 2014
resources (GBPm)
------------------------ ------ ------
Core Tier 1 capital 31.9 29.2
------------------------ ------ ------
Deductions: Intangible
assets (0.5) (0.7)
------------------------ ------ ------
Regulatory capital
resources 31.4 28.5
------------------------ ------ ------
Further information regarding the Group's capital adequacy
information can be found in the Group's Pillar 3 disclosure, which
is available on the Group's website at www.recordcm.com.
Consolidated statement of comprehensive income
Year ended 31 March
2015 2014
Note GBP'000 GBP'000
----------------------------------- ----- --------- ---------
Revenue 3 21,057 19,922
Cost of sales (148) (86)
----------------------------------- ----- --------- ---------
Gross profit 20,909 19,836
Administrative expenses (13,373) (13,412)
Operating profit 4 7,536 6,424
Finance income 146 113
Profit before tax 7,682 6,537
Taxation 6 (1,708) (1,494)
----------------------------------- ----- --------- ---------
Profit after tax and total
comprehensive income for
the year 5,974 5,043
Profit and total comprehensive
income for the year attributable
to:
Non-controlling interests 192 (364)
Owners of the parent 5,782 5,407
----------------------------------- ----- --------- ---------
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 2.66p 2.48p
Diluted earnings per share 7 2.65p 2.47p
----------------------------------- ----- --------- ---------
Consolidated statement of financial position
As at 31 March
Note 2015 2014
GBP'000 GBP'000
---------------------------------- ----- -------- --------
Non-current assets
Property, plant and equipment 10 129 86
Intangible assets 11 504 734
Investments 12 2,567 2,754
Deferred tax assets 13 73 158
---------------------------------- ----- -------- --------
3,273 3,732
Current assets
Trade and other receivables 14 6,324 5,646
Derivative financial assets 15 619 198
Money market instruments
with maturity > 3 months 16 18,100 15,488
Cash and cash equivalents 16 12,010 11,503
---------------------------------- ----- -------- --------
Total current assets 37,053 32,835
---------------------------------- ----- -------- --------
Total assets 40,326 36,567
---------------------------------- ----- -------- --------
Current liabilities
Trade and other payables 17 (2,949) (2,706)
Corporation tax liabilities 17 (893) (832)
Derivative financial liabilities 15 (680) (122)
---------------------------------- ----- -------- --------
Total current liabilities (4,522) (3,660)
---------------------------------- ----- -------- --------
Total net assets 35,804 32,907
---------------------------------- ----- -------- --------
Equity
Issued share capital 18 55 55
Share premium account 1,847 1,838
Capital redemption reserve 20 20
Retained earnings 30,006 27,327
---------------------------------- ----- -------- --------
Equity attributable to
owners of the parent 31,928 29,240
Non-controlling interest 20 3,876 3,667
---------------------------------- ----- -------- --------
Total equity 35,804 32,907
---------------------------------- ----- -------- --------
Consolidated statement of changes in equity
Year ended 31 March 2015
Called Share Capital Retained Total Non-controlling Total
up share premium redemption earnings attributable interest equity
capital account reserve to equity
holders
of the
parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- --------- ------------ ---------- -------------- ---------------- --------
As at 1 April
2014 55 1,838 20 27,327 29,240 3,667 32,907
Profit and
total comprehensive
income for
the year - - - 5,782 5,782 192 5,974
Dividends paid - - - (3,266) (3,266) - (3,266)
Own shares
purchased by
EBT - - - (318) (318) - (318)
Release of
shares held
by EBT - 9 - 314 323 - 323
---------------------- ---------- --------- ------------ ---------- -------------- ---------------- --------
Transactions
with shareholders - 9 - (3,270) (3,261) - (3,261)
Issue of units
in funds to
non-controlling
interests - - - - - 17 17
Share option
reserve movement - - - 167 167 - 167
As at 31 March
2015 55 1,847 20 30,006 31,928 3,876 35,804
---------------------- ---------- --------- ------------ ---------- -------------- ---------------- --------
Year ended 31 March 2014
Called Share Capital Retained Total Non-controlling Total
up share premium redemption earnings attributable interest equity
capital account reserve to equity
holders
of the
parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- --------- ------------ ---------- -------------- ---------------- --------
As at 1 April
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
---------------------- ---------- --------- ------------ ---------- -------------- ---------------- --------
Transactions
with shareholders - - - (4,965) (4,965) - (4,965)
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
---------------------- ---------- --------- ------------ ---------- -------------- ---------------- --------
Consolidated statement of cash flows
Year ended 31 March
Note 2015 2014
GBP'000 GBP'000
--------------------------------- ----- -------- ---------
Operating profit 7,536 6,424
Adjustments for:
Profit on disposal of property,
plant and equipment - (1)
Depreciation of property,
plant and equipment 10 85 79
Amortisation of intangible
assets 11 230 229
Release of shares previously 308 -
held by EBT
Share option expense 167 156
--------------------------------- ----- -------- ---------
8,326 6,887
Changes in working capital
Increase in receivables (672) (68)
Increase in payables 243 29
Increase in other financial
assets (421) (231)
Increase in other financial
liabilities 558 121
--------------------------------- ----- -------- ---------
CASH INFLOW FROM OPERATING
ACTIVITIES 8,034 6,738
Corporation taxes paid (1,562) (1,571)
--------------------------------- ----- -------- ---------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 6,472 5,167
CASH FLOW FROM INVESTING
ACTIVITIES
Proceeds on disposal of
property, plant and equipment - 1
Purchase of property, plant
and equipment (128) (25)
Sale / (purchase) of securities 186 (1,114)
Purchase of money market
instruments with maturity
> 3 months 16 (2,612) (15,488)
Decrease in cash due to
accounting treatment of
funds previously consolidated
on line by line basis - (1,877)
Interest received 141 102
--------------------------------- ----- -------- ---------
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES (2,413) (18,401)
CASH FLOW FROM FINANCING
ACTIVITIES
Cash inflow from issue of
units in funds 17 677
Exercise of share options 15 104
Purchase of own shares (318) (171)
Dividends paid to equity
shareholders (3,266) (4,898)
--------------------------------- ----- -------- ---------
CASH OUTFLOW FROM FINANCING
ACTIVITIES (3,552) (4,288)
--------------------------------- ----- -------- ---------
NET INCREASE / (DECREASE)
IN CASH AND CASH EQUIVALENTS
IN THE YEAR 507 (17,522)
--------------------------------- ----- -------- ---------
Cash and cash equivalents
at the beginning of the
year 11,503 29,025
CASH AND CASH EQUIVALENTS
AT THE END OF THE YEAR 12,010 11,503
--------------------------------- ----- -------- ---------
Closing cash and cash equivalents
consists of:
Cash 2,730 1,476
Cash equivalents 9,280 10,027
----------------------------------- --- ------- -------
Cash and cash equivalents 16 12,010 11,503
----------------------------------- --- ------- -------
Company statement of financial position
As at 31 March
Note 2015 2014
GBP'000 GBP'000
----------------------------- ----- -------- --------
Non-current assets
Investments 12 3,539 3,378
----------------------------- ----- -------- --------
3,539 3,378
Current assets
Trade and other receivables 14 - 146
Cash and cash equivalents 16 17 34
----------------------------- ----- -------- --------
Total current assets 17 180
----------------------------- ----- -------- --------
Total assets 3,556 3,558
----------------------------- ----- -------- --------
Current liabilities
Trade and other payables 17 (481) (452)
Total current liabilities (481) (452)
----------------------------- ----- -------- --------
Total net assets 3,075 3,106
----------------------------- ----- -------- --------
Equity
Issued share capital 18 55 55
Share premium account 1,809 1,809
Capital redemption reserve 20 20
Retained earnings 1,191 1,222
----------------------------- ----- -------- --------
Total equity 3,075 3,106
----------------------------- ----- -------- --------
Company statement of changes in equity
Year ended 31 March 2015
Called Share Capital Retained Total shareholders'
up share premium redemption earnings equity
capital account reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- --------- ------------ ---------- --------------------
As at 1 April
2014 55 1,809 20 1,222 3,106
Profit and
total comprehensive
income for
the year - - - 3,068 3,068
Dividends paid - - - (3,266) (3,266)
---------------------- ---------- --------- ------------ ---------- --------------------
Transactions
with shareholders - - - (3,266) (3,266)
Share option
reserve movement - - - 167 167
---------------------- ---------- --------- ------------ ---------- --------------------
As at 31 March
2015 55 1,809 20 1,191 3,075
---------------------- ---------- --------- ------------ ---------- --------------------
Year ended 31 March 2014
Called Share Capital Retained Total shareholders'
up share premium redemption earnings equity
capital account 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)
---------------------- ---------- --------- ------------ ---------- --------------------
Transactions
with shareholders - - - (4,898) (4,898)
Share option
reserve movement - - - 156 156
---------------------- ---------- --------- ------------ ---------- --------------------
As at 31 March
2014 55 1,809 20 1,222 3,106
---------------------- ---------- --------- ------------ ---------- --------------------
Company statement of cash flows
Year ended 31 March
2015 2014
GBP'000 GBP'000
--------------------------------------- -------- --------
Operating loss (3) (345)
Adjustment for:
Loss on investments 5 142
Changes in working capital
Decrease in receivables 146 1,515
Increase / (decrease) in payables 29 (1,265)
CASH INFLOW FROM OPERATING ACTIVITIES 177 47
Corporation taxes paid - (24)
--------------------------------------- -------- --------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 177 23
CASH FLOW FROM INVESTING ACTIVITIES
Investment in seed funds - (1,000)
Dividends received 3,070 4,900
Interest received 2 8
--------------------------------------- -------- --------
NET CASH INFLOW FROM INVESTING
ACTIVITIES 3,072 3,908
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid to equity shareholders (3,266) (4,898)
--------------------------------------- -------- --------
CASH OUTFLOW FROM FINANCING
ACTIVITIES (3,266) (4,898)
--------------------------------------- -------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS IN THE YEAR (17) (967)
Cash and cash equivalents at
the beginning of the year 34 1,001
--------------------------------------- -------- --------
CASH AND CASH EQUIVALENTS AT
THE END OF THE YEAR 17 34
--------------------------------------- -------- --------
Closing cash and cash equivalents
consists of:
Cash 17 34
Cash equivalents - -
----------------------------------- --- ---
Cash and cash equivalents 17 34
----------------------------------- --- ---
Notes to the financial statements for the year ended 31 March
2015
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, and are shown in italics.
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 2015. 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 have
adequate resources with which to continue to operate for the
foreseeable future. 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 2014, with the remaining becoming effective in
future periods. The new standards and amendments to existing
standards effective for the year to 31 March 2015 have not had a
material impact on the financial statements of Record plc, but the
application of IFRS 12 has resulted in additional disclosures for
financial instruments (refer to note 20).
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 2015. Control is achieved where the Company is
exposed to or has rights over variable returns from its involvement
with the entity and it has the power to affect returns. 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. We consider that the Group
exerts such control in cases where it (either in isolation or
together with its related parties) holds a majority of units in the
fund. 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 2015 and the financial position of the
seeded funds as at 31 March 2015.
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 GBP3,069,187 attributable to the Company
(2014: GBP4,561,908).
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.
(g) Equity
Share capital represents the nominal value (par) of shares that
have been issued. Share premium includes any premium received on
issue of share capital. Retained earnings includes all current and
prior period retained profits and share based employee
remuneration. All transactions with owners of the parent are
recorded separately within equity.
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, typically based
upon an agreed percentage of the assets under management
equivalents ("AUME") denominated in the client's chosen base
currency. 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.
Revenue by product type 2015 2014
GBP'000 GBP'000
---------------------------------- -------- --------
Management fees
Dynamic Hedging 9,376 11,872
Passive Hedging 8,105 5,728
Currency for Return 2,774 2,671
Total management fee income 20,255 20,271
---------------------------------- -------- --------
Performance fee income - Dynamic 480 -
Hedging
Revenue attributable to NCI
holding in seed funds 192 (344)
Other income 130 (5)
---------------------------------- -------- --------
Total revenue 21,057 19,922
---------------------------------- -------- --------
(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 2015 2014
GBP'000 GBP'000
---------------------------------- -------- --------
Management and performance
fee income
UK 5,501 5,141
US 3,660 5,769
Switzerland 10,352 6,893
Other 862 2,468
---------------------------------- -------- --------
Total management and performance
fee income 20,735 20,271
---------------------------------- -------- --------
Revenue attributable to NCI
holding in seed funds 192 (344)
Other income 130 (5)
---------------------------------- -------- --------
Total revenue 21,057 19,922
---------------------------------- -------- --------
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 2015, five clients individually
accounted for more than 10% of the Group's revenue during the year.
The five largest clients generated revenues of GBP3.2m, GBP2.4m,
GBP2.3m, GBP2.2m and GBP2.1m in the year (2014: two largest clients
generated revenues of GBP4.9m and GBP2.4m).
4. Operating profit
Operating profit for the year is stated after charging /
(crediting):
2015 2014
GBP'000 GBP'000
------------------------------------------------ -------- --------
Staff costs 8,919 8,911
Depreciation of property, plant
and equipment 85 79
Amortisation of intangibles 230 229
Auditor fees
Fees payable to the Group's
auditor for the audit of the
Company's annual accounts 44 36
The audit of the Group's subsidiaries,
pursuant to legislation 42 39
Other services pursuant to
legislation 65 62
Other services relating to
taxation 10 12
Operating lease rentals: Land
and buildings 224 231
Losses / (gains) on forward
FX contracts held to hedge
cash flow 92 (173)
Other exchange (gains) / losses (701) 326
------------------------------------------------ -------- --------
5. Staff costs
The average number of employees, including Directors, employed
by the Group during the year was:
2015 2014
------------------------------ ----- -----
Client Team 9 10
Research 11 10
Portfolio Management 9 9
Trading 6 5
Operations 4 4
Reporting Services 7 6
Systems 4 4
Finance, Human Resources and
Legal 6 6
Administration 1 1
Compliance 2 2
Corporate 9 9
------------------------------ ----- -----
Annual average 68 66
------------------------------ ----- -----
The aggregate costs of the above employees, including Directors,
were as follows:
2015 2014
GBP'000 GBP'000
-------------------------------- -------- --------
Wages and salaries 6,489 6,273
Social security costs 871 905
Pension costs 416 412
Other employment benefit costs 1,143 1,321
-------------------------------- -------- --------
Aggregate staff costs 8,919 8,911
-------------------------------- -------- --------
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:
2015 2014
GBP'000 GBP'000
----------------------------------- -------- --------
Profit before taxation 7,682 6,537
----------------------------------- -------- --------
Taxation at the standard rate
of tax in the UK of 21% (2014:
23%) 1,613 1,504
Tax effects of:
Other disallowable expenses
and non-taxable income 32 68
Capital allowances for the
period lower than depreciation 8 24
Lower tax rates on subsidiary
undertakings - (42)
Adjustments recognised in current
year in relation to the current
tax of prior years 5 (18)
Other temporary differences 50 (42)
----------------------------------- -------- --------
Total tax expense 1,708 1,494
----------------------------------- -------- --------
The tax expense comprises:
----------------------------------- -------- --------
2015 2014
GBP'000 GBP'000
----------------------------------- -------- --------
Current tax expense 1,623 1,647
Deferred tax expense 85 (153)
----------------------------------- -------- --------
Total tax expense 1,708 1,494
----------------------------------- -------- --------
The standard rate of UK corporation tax for the year is 21%
(2014: 23%). 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 2015 was GBP1,707,824
(2014: GBP1,493,615) which was 22.2% of profit before tax (2014:
22.9%).
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.
2015 2014
---------------------------------- ------------ ------------
Weighted average number of
shares used in calculation
of basic earnings per share 217,501,040 217,778,666
Effect of dilutive potential
ordinary shares - share options 892,093 893,900
---------------------------------- ------------ ------------
Weighted average number of
shares used in calculation
of diluted earnings per share 218,393,133 218,672,566
---------------------------------- ------------ ------------
pence pence
---------------------------------- ------------ ------------
Basic earnings per share 2.66 2.48
Diluted earnings per share 2.65 2.47
---------------------------------- ------------ ------------
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 6,955,000 shares. During the year
51,250 options were exercised, and a further 1,320,000 share
options lapsed or were forfeited. The Group granted 4,327,000 share
options with a potentially dilutive effect during the year, but
these 4,327,000 share options did not have a dilutive impact at the
year end.
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
2015 totalled GBP3,266,329 (1.50p per share) which comprised a
final dividend in respect of the year ended 31 March 2014 of
GBP1,634,833 (0.75p per share) and an interim dividend for the year
ended 31 March 2015 of GBP1,631,496 (0.75p per share).
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 (1.50p per share) and an interim dividend for the year
ended 31 March 2014 of GBP1,634,250 (0.75p per share).
The final dividend proposed in respect of the year ended 31
March 2015 is 0.90p 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 GBP416,276 (2014:
GBP412,357).
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 lease commencement 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
2015 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------------- ----------- -------------- --------
Cost
At 1 April
2014 534 721 272 1,527
Additions - 96 32 128
Disposals - (193) - (193)
At 31 March
2015 534 624 304 1,462
------------------ -------------- ----------- -------------- --------
Depreciation
At 1 April
2014 534 637 270 1,441
Charge for
the year - 78 7 85
Disposals - (193) - (193)
------------------ -------------- ----------- -------------- --------
At 31 March
2015 534 522 277 1,333
------------------ -------------- ----------- -------------- --------
Net book amounts
At 31 March
2015 - 102 27 129
------------------ -------------- ----------- -------------- --------
At 1 April
2014 - 84 2 86
------------------ -------------- ----------- -------------- --------
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
------------------ -------------- ----------- -------------- --------
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
2015 GBP'000 GBP'000
--------------------- --------- --------
Cost
At 1 April 2014 1,150 1,150
Additions - -
Disposals - -
At 31 March 2015 1,150 1,150
--------------------- --------- --------
Amortisation
At 1 April 2014 416 416
Charge for the year 230 230
Disposals - -
--------------------- --------- --------
At 31 March 2015 646 646
--------------------- --------- --------
Net book amounts
At 31 March 2015 504 504
--------------------- --------- --------
At 1 April 2014 734 734
--------------------- --------- --------
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
--------------------- --------- --------
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 GBP138,112 (2014: GBP136,071). All
amortisation charges are included within administrative
expenses.
12. Investments
Group
The Group holds certain securities through its seed funds. 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 2015 2014
GBP'000 GBP'000
---------------------------------- -------- --------
Record Currency - FTSE FRB10
Index Fund 1,105 1,120
US government treasury inflation
protected securities ("TIPS") 1,462 1,634
2,567 2,754
---------------------------------- -------- --------
The Record Currency - FTSE FRB10 Index Fund was consolidated
into the Group financial statements on a line by line basis until
28 February 2014. After this date the Group ceased to control the
fund as a result of investment into 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.
2015 2014
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 Fund Management Limited - -
N P Record Trustees Limited - -
--------------------------------------- -------- --------
Total investment in subsidiaries
(at cost) 30 30
--------------------------------------- -------- --------
Capitalised investment in respect
of share-based payments
Record Currency Management (US)
Inc. 76 66
Record Group Services Limited 341 184
--------------------------------------- -------- --------
Total capitalised investment in
respect of share-based payments 417 250
--------------------------------------- -------- --------
Total investment in subsidiaries 447 280
--------------------------------------- -------- --------
Particulars of subsidiary undertakings
Name Nature of Business
---------------------------- -----------------------------------
Record Currency Management Currency management services
Limited (FCA registered)
---------------------------- -----------------------------------
Record Group Services Management services to
Limited other Group undertakings
---------------------------- -----------------------------------
Record Portfolio Management Dormant
Limited
---------------------------- -----------------------------------
Record Currency Management US advisory and service
(US) Inc. company (SEC and CFTC registered)
---------------------------- -----------------------------------
Record Fund Management Dormant
Limited
---------------------------- -----------------------------------
N P Record Trustees Dormant trust company
Limited
---------------------------- -----------------------------------
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,
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
financial statements. 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 2015 2014
GBP'000 GBP'000
------------------------------ -------- --------
Record Currency - FTSE FRB10
Index Fund 1,105 1,120
Record Currency - Emerging
Market Currency Fund 1,028 1,017
Record Currency - Global
Alpha Fund 959 961
------------------------------ -------- --------
3,092 3,098
------------------------------ -------- --------
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.
2015 2014
GBP'000 GBP'000
---------------------------------- -------- --------
Profit and loss account movement
arising during the year (85) 153
---------------------------------- -------- --------
Asset brought forward 158 5
---------------------------------- -------- --------
Asset carried forward 73 158
---------------------------------- -------- --------
The provision for deferred taxation consists of the tax effect
of temporary differences in respect of:
2015 2014
GBP'000 GBP'000
---------------------------------- -------- --------
Deferred tax allowance on
unvested share options 66 159
Shortfall / (excess) of taxation
allowances over depreciation
on fixed assets 7 (1)
---------------------------------- -------- --------
73 158
---------------------------------- -------- --------
At the year end the Group had deferred tax assets of GBP72,518
(2014: GBP157,908). At the year end there were share options not
exercised with an intrinsic value for tax purposes of GBP327,987
(2014: GBP755,687). 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 administrative
expenses.
Group Company
------------------------------------ ------------------ ------------------
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------- -------- -------- --------
Trade receivables 4,648 4,431 - -
Amounts due from Group undertaking - - - 146
Accrued income 1,078 518 - -
Other receivables 74 51 - -
Prepayments 524 646 - -
------------------------------------ -------- -------- -------- --------
6,324 5,646 - 146
------------------------------------ -------- -------- -------- --------
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
receivables in the year ended 31 March 2015. The carrying amount of
receivables whose terms have been renegotiated, that would
otherwise be past due or impaired is GBPnil (2014: GBPnil).
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 the seed 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 2015 2014
GBP'000 GBP'000
------------------------------- -------- --------
Forward foreign exchange
contracts held to hedge cash
flow 8 7
Forward foreign exchange
contracts held for trading 35 153
Foreign exchange options
held for trading 576 38
------------------------------- -------- --------
Total derivative financial
assets 619 198
------------------------------- -------- --------
Derivative financial liabilities 2015 2014
GBP'000 GBP'000
---------------------------------- -------- --------
Forward foreign exchange
contracts held to hedge cash
flow - (3)
Forward foreign exchange
contracts held for trading - (33)
Short foreign exchange option
positions held for trading (680) (86)
---------------------------------- -------- --------
Total derivative financial
liabilities (680) (122)
---------------------------------- -------- --------
Derivative financial instruments held to hedge cash flow
At 31 March 2015 there were outstanding contracts with a
principal value of GBP4,260,992 (31 March 2014: GBP3,198,193) 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 2015. 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 2015 2014
held to hedge cash flow
GBP'000 GBP'000
---------------------------------- -------- --------
Net (loss) / gain on forward
foreign exchange contracts
at fair value through profit
or loss (92) 173
---------------------------------- -------- --------
Derivative financial instruments held for trading
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 2015 there were outstanding contracts with a
principal value of GBP36,120,350 (31 March 2014:
GBP26,387,218).
The net gain or loss on derivative financial instruments held
for trading for the year was as follows:
Derivative financial instruments 2015 2014
held for trading
GBP'000 GBP'000
---------------------------------- -------- --------
Net loss on forward foreign
exchange contracts and foreign
exchange options at fair
value through profit or loss (232) (283)
---------------------------------- -------- --------
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
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Bank deposits with
maturities > 3 months 17,500 14,989 - -
Treasury bills with
maturity > 3 months 600 499 - -
Money market instruments
with maturities
> 3 months 18,100 15,488 - -
--------------------------- -------- -------- -------- --------
Cash 2,730 1,476 17 34
Bank deposits with
maturities <= 3
months 9,280 10,027 - -
--------------------------- -------- -------- -------- --------
Cash and cash equivalents 12,010 11,503 17 34
--------------------------- -------- -------- -------- --------
Total assets managed
as cash 30,110 26,991 17 34
--------------------------- -------- -------- -------- --------
Group Company
--------------------------- ------------------ ------------------
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Cash and cash equivalents
- Sterling 10,525 10,827 17 34
Cash and cash equivalents
- USD 818 613 - -
Cash and cash equivalents
- CHF 637 32 - -
Cash and cash equivalents
- other currencies 30 31 - -
12,010 11,503 17 34
--------------------------- -------- -------- -------- --------
Since 31 December 2011, the Group cash and cash equivalents
balance has incorporated the cash held by the Record Currency -
Emerging Market Currency Fund (refer to note 12 for explanation of
accounting treatment). In May 2013 Record plc seeded the Record
Currency -- Global Alpha Fund with an investment of GBP1,000,000
and since this time the Group has had control over this fund.
Therefore the cash and cash equivalents held by the Record Currency
- Global Alpha Fund have also been incorporated above. As at 31
March 2015, the cash and cash equivalents held by the seed funds
over which the Group had control totalled GBP3,920,614 (31 March
2014: GBP3,434,805) and the money market instruments with
maturities > 3 months held by these funds were GBP599,758 (31
March 2014: GBP499,179).
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
---------------------- ------------------ ------------------
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------- --------
Trade payables 181 304 - -
Amounts owed to
Group undertaking - - 480 447
Other payables 1 1 1 5
Other tax and social
security 312 304 - -
Accruals 2,455 2,097 - -
2,949 2,706 481 452
---------------------- -------- -------- -------- --------
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
Current tax liabilities
Group Company
----------------- ------------------ ------------------
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- -------- --------
Corporation tax 893 832 - -
----------------- -------- -------- -------- --------
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 each. All shares are
equally eligible to receive dividends and the repayment of capital
and represent one vote at the shareholders' meeting.
2015 2014
--------------------- ---------------------- ----------------------
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 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
Adjustment for net sales by EBT (25,921)
Record plc shares held by EBT
as at 31 March 2015 3,848,062
--------------------------------- ----------
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 2015 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.
c) 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.
All obligations arising from the three schemes are fulfilled
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. The charge to profit or loss in respect of Earned Shares in
the period was GBP683,978 (2014: GBP660,043). 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. The charge to profit or loss in respect of Matching
Shares in the period was GBP273,155 (2014: GBP260,541). 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 4,327,000 shares were granted under
the Share Scheme during the year (2014: 3,560,000), of which
4,007,000 were made subject to Unapproved Options and 320,000 to
Approved Options (2014: 2,945,000 made subject to Unapproved
Options and 615,000 to Approved Options). All options were granted
with an exercise price per share equal to the share price
prevailing at the time of grant.
The 2,160,000 Unapproved Options issued on 26 November 2014 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.
The 1,847,000 Unapproved Options issued on 24 March 2015 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 performance conditions have been
satisfied.
The 320,000 Approved Options issued on 24 March 2015 each become
exercisable on the 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 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 GBP166,587 in the year ended 31 March 2015 (2014:
GBP155,625).
Outstanding share options
At 31 March 2015, the total number of ordinary shares of 0.025p
outstanding under Record plc share compensation schemes was
9,910,750 (2014: 6,955,000). 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 At 1 Granted Exercised Lapsed At 31 Earliest Latest Exercise
of grant April / forfeited March vesting vesting price
2014 2015 date date*
------------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
08/08/11 750,000 - - (750,000) - 08/08/13 08/08/15 GBP0.3180
------------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
08/08/11 225,000 - - (75,000) 150,000 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 1,615,000 - - (125,000) 1,490,000 18/12/16 18/12/16 GBP0.3098
------------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
18/12/12 205,000 - (51,250) - 153,750 18/12/13 18/12/16 GBP0.3098
------------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
27/09/13 615,000 - - (135,000) 480,000 27/09/17 27/09/17 GBP0.3085
------------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
27/09/13 1,545,000 - - (235,000) 1,310,000 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
------------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
26/11/14 - 2,160,000 - - 2,160,000 26/11/17 26/11/19 GBP0.3586
------------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
24/03/15 - 320,000 - - 320,000 24/03/19 24/03/19 GBP0.3450
------------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
24/03/15 - 1,847,000 - - 1,847,000 24/03/16 24/03/19 GBP0.3450
------------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
Total
options 6,955,000 4,327,000 (51,250) (1,320,000) 9,910,750
------------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
Weighted GBP0.29 GBP0.35 GBP0.31 GBP0.31 GBP0.32
average
exercise
price
of options
------------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
*Note that under the terms of the deeds of grants, Unapproved
Options are exercisable for a year following the vesting date and
Approved Options are exercisable for up to six years after
vesting.
During the year 51,250 options granted on 18 December 2012 were
exercised. The share price at date of exercise was GBP0.34. At 31
March 2015 a total of 453,750 options had vested and were
exercisable.
The Directors' interests in the combined share schemes are as
follows:
Ordinary shares held
as at
31 March 31 March
2015 2014
------------------------- ----------- ----------
Record plc Group Profit
Share Scheme (interest
in restricted share
awards)
James Wood-Collins 753,377 1,272,732
Leslie Hill 294,528 278,748
Bob Noyen 303,378 292,022
Steve Cullen 146,220 67,173
Record plc Share Scheme
(interest in unvested
share options)
James Wood-Collins 2,030,000 1,400,000
Leslie Hill 630,000 -
Bob Noyen 630,000 -
Steve Cullen 345,000 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 Percentage of
TSR is below the median TSR shares subject
performance of the Index to the award
which vest
------------------------------ ----------------
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%
------------------------------ ----------------
Grants of options made to Board Directors under the Unapproved
Option Scheme include 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 Percentage of
growth 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.
c) 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 40,192 free shares (2014: 31,143 free shares) to
employees. The expense charged in respect of the SIP was GBP12,579
in the year ended 31 March 2015 (2014: GBP10,865).
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 plus those of any related parties.
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 2015.
The Record Currency - Emerging Market Currency Fund was
considered to be under control of the Group as the combined holding
of Record plc and its Directors constituted a majority interest
throughout the period. Similarly, the Record Currency - Global
Alpha Fund is considered to be under control of the Group as the
combined holding of Record plc and its Directors has constituted a
majority interest since inception.
The Record Currency - FTSE FRB10 Index Fund has not been under
the control of the Group since 28 February 2014, when new external
investment meant that Record no longer held a majority
interest.
The mark to market value of units held by investors in these
funds other than Record plc are shown as non-controlling interests
in the Group financial statements, in accordance with IFRS. There
were no other non-controlling interests in the Group financial
statements.
Relative holding of investors other than Record plc in seeded
funds consolidated into the accounts of the Record Group
2015 2014
Record Currency - Emerging
Market Currency Fund
Board Directors 42% 43%
Other investors 30% 28%
-------------------------------- ----- -----
Total non-controlling interest 72% 71%
-------------------------------- ----- -----
Record Currency - Global
Alpha Fund
Board Directors 54% 54%
Other investors 1% 1%
-------------------------------- ----- -----
Total non-controlling interest 55% 55%
-------------------------------- ----- -----
Summarised financial information for Record Currency - Emerging
Market Currency Fund, before intra-group eliminations, is set out
below
2015 2014
GBP'000 GBP'000
----------------------------------- -------- --------
Total assets 3,861 3,521
Total liabilities (147) (15)
Equity attributable to owners
of the parent 1,027 1,018
Non-controlling interests 2,687 2,488
----------------------------------- -------- --------
Profit and total comprehensive
income for the year attributable
to owners of the parent 10 (31)
Profit and total comprehensive
income for the year attributable
to NCI 194 (257)
----------------------------------- -------- --------
Profit and total comprehensive
income for the year 204 (288)
----------------------------------- -------- --------
Cash inflow/(outflow) 313 (433)
----------------------------------- -------- --------
Summarised financial information for Record Currency - Global
Alpha Fund, before intra--group eliminations, is set out below:
2015 2014
GBP'000 GBP'000
----------------------------------- -------- --------
Total assets 2,958 2,258
Total liabilities (809) (119)
Equity attributable to owners
of the parent 960 960
Non-controlling interests 1,189 1,179
----------------------------------- -------- --------
Profit and total comprehensive
income for the year attributable
to owners of the parent - (40)
Profit and total comprehensive
income for the year attributable
to NCI (2) (49)
----------------------------------- -------- --------
Profit and total comprehensive
income for the year (2) (89)
----------------------------------- -------- --------
Cash inflow 273 535
----------------------------------- -------- --------
Mark to market value of external holding in seed funds
consolidated into the accounts of the Record Group
2015 2014
GBP'000 GBP'000
---------------------------- -------- --------
Record Currency - Emerging
Market Currency Fund 2,687 2,488
Record Currency - Global
Alpha Fund 1,189 1,179
---------------------------- -------- --------
3,876 3,667
---------------------------- -------- --------
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 seed 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:
2015 2014
Financial assets at 31 March GBP'000 GBP'000
------------------------------- -------- --------
Investment in Record Currency
- FTSE FRB10 Index fund 1,105 1,120
Securities (TIPS) 1,462 1,634
Trade receivables 4,648 4,431
Accrued income 1,078 518
Other receivables 74 51
Other financial assets at
fair value through profit
or loss 619 198
Money market instruments
with maturities > 3 months 18,100 15,488
Cash and cash equivalents 12,010 11,503
------------------------------- -------- --------
39,096 34,943
------------------------------- -------- --------
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
amount impaired past due than
nor past 3 months
due past
due
At 31 March GBP'000 GBP'000 GBP'000 GBP'000
2015
------------------- --------- ---------- ----------- ----------
Trade receivables 4,648 4,648 - -
Accrued income 1,078 1,078 - -
------------------- --------- ---------- ----------- ----------
5,726 5,726 - -
------------------- --------- ---------- ----------- ----------
100% 0% 0%
------------------- --------- ---------- ----------- ----------
Carrying Neither 0-3 months More
amount impaired past due than
nor past 3 months
due past
due
At 31 March GBP'000 GBP'000 GBP'000 GBP'000
2014
------------------- --------- ---------- ----------- ----------
Trade receivables 4,431 4,226 205 -
Accrued income 518 518 - -
------------------- --------- ---------- ----------- ----------
4,949 4,744 205 -
------------------- --------- ---------- ----------- ----------
96% 4% 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 44 debtors' balances (2014:
42). The largest individual debtor corresponds to 17% of the total
balance (2014: 20%). Debtor days, based on the generally accepted
calculation of debtor days, is 82 days (2014: 80 days). This
reflects the quarterly billing cycle used by the Group for the vast
majority of its fees. As at 31 March 2015 no debt was overdue
(2014: 4%). 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 15 days (2014: 24 days).
Contractual maturity analysis for financial liabilities:
Carrying Due or Due between Due between
amount due in 1 and 3 months
less than 3 months and 1
1 month year
At 31 March GBP'000 GBP'000 GBP'000 GBP'000
2015
---------------------- --------- ----------- ------------ ------------
Trade and other
payables 181 117 14 50
---------------------- --------- ----------- ------------ ------------
Accruals 2,455 129 1,254 1,072
---------------------- --------- ----------- ------------ ------------
Derivative financial
liabilities 680 70 344 266
---------------------- --------- ----------- ------------ ------------
Carrying Due or Due between Due between
amount due in 1 and 3 months
less than 3 months and 1
1 month year
At 31 March GBP'000 GBP'000 GBP'000 GBP'000
2014
---------------------- --------- ----------- ------------ ------------
Trade and other
payables 305 305 - -
---------------------- --------- ----------- ------------ ------------
Accruals 2,097 146 1,080 871
---------------------- --------- ----------- ------------ ------------
Derivative financial
liabilities 122 110 8 4
---------------------- --------- ----------- ------------ ------------
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.
A sensitivity analysis has not been disclosed for the impact of
interest rate changes as any reasonable range of change in interest
rate would not directly have a material impact on profit or
equity.
Interest rate profiles
Fixed Floating No interest Total
rate rate rate
At 31 March 2015 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- --------- ------------ --------
Financial assets
Investment in
Record Currency
- FTSE FRB10
Index fund - - 1,105 1,105
Securities (TIPS) - 1,462 - 1,462
Trade receivables - - 4,648 4,648
Accrued income - - 1,078 1,078
Other receivables - - 74 74
Derivative financial
assets at fair
value through
profit or loss - - 619 619
Money market
instruments with
maturities >
3 months 18,100 - - 18,100
Cash and cash
equivalents 9,280 2,730 - 12,010
----------------------- -------- --------- ------------ --------
Total financial
assets 27,380 4,192 7,524 39,096
----------------------- -------- --------- ------------ --------
Financial liabilities
Trade and other
payables - - (181) (181)
Accruals - - (2,455) (2,455)
Derivative financial
liabilities at
fair value through
profit or loss - - (680) (680)
Total financial
liabilities - - (3,316) (3,316)
----------------------- -------- --------- ------------ --------
Fixed Floating No interest Total
rate 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)
----------------------- -------- --------- ------------ --------
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 Group is exposed to foreign currency risk on sales and cash
holdings that are denominated in a currency other than Sterling,
and also on assets and liabilities on assets and liabilities held
by the Record Currency - Global Alpha Fund. 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 2015, the Group invoiced the
following amounts in currencies other than Sterling:
Local Value in
currency reporting
value currency
'000 GBP'000
------------------------ ---------- -----------
Swiss Franc (CHF) 11,858 7,852
US Dollar (USD) 9,654 6,072
Euro (EUR) 1,105 852
Canadian Dollar (CAD) 660 361
Singapore Dollar (SGD) 35 17
15,154
------------------------ ---------- -----------
The value of revenues for the year ended 31 March 2015 that were
denominated in currencies other than Sterling was GBP15.2 million
(72% of total revenues). For the year ended 31 March 2014: GBP14.7
million (74% of total revenues).
Record's policy is to reduce the risk associated with the
Group's sales denominated in foreign currencies by using forward
fixed rate currency sales contracts, taking into account any
forecast foreign currency cash flows.
The spot transactions relating to the maturity of these 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.
Of the cash denominated in currencies other than Sterling (refer
to note 16), only the cash holdings of the Record Currency - Global
Alpha Fund (totalling GBP807,607) are not covered by the Group's
hedging process, therefore the Directors consider that the foreign
currency risk on cash balances is not material.
The Group is exposed to foreign currency risk on all the assets
and liabilities held by the Record Currency - Global Alpha Fund,
which are consolidated into the Group Accounts. A sensitivity
analysis of the impact of the valuation of the net assets of this
seed fund are provided below.
Foreign currency risk - sensitivity analysis
The Group has considered the sensitivity to exchange rate
movements by considering the impact on those revenues, costs and
assets 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
after tax for total equity
the year ended as at 31 March
31 March
-------------------------- ------------------- ------------------
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- -------- -------- --------
10% weakening in
the GBP/$ exchange
rate 588 520 588 520
10% strengthening
in the GBP/$ exchange
rate (588) (520) (588) (520)
-------------------------- --------- -------- -------- --------
10% weakening in
the GBP/CHF exchange
rate 505 295 505 295
10% strengthening
in the GBP/CHF exchange
rate (505) (295) (505) (295)
-------------------------- --------- -------- -------- --------
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 $1.61/GBP this would result in a
weakened exchange rate of $1.47/GBP and a strengthened exchange
rate of $1.79/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 CHF1.50/GBP this would result in a
weakened exchange rate of CHF1.36/GBP and a strengthened exchange
rate of CHF1.67/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.
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 2015
were GBP3,714,107 (2014: GBP3,505,641). The Group has provided the
following data in respect of sensitivity to this product:
Impact on profit Impact on total
after tax for equity as at 31
the year ended March
31 March
------------------- ------------------- ------------------
2015 2014 2015 2014
------------------- --------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- -------- -------- --------
10% depreciation
in the Emerging
Market portfolio (324) (304) (324) (304)
------------------- --------- -------- -------- --------
10% appreciation
in the Emerging
Market portfolio 324 304 324 304
------------------- --------- -------- -------- --------
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 2015 were GBP2,148,875 (2014: GBP2,138,582). The Group has
provided the following data in respect of sensitivity to this
product:
Impact on profit Impact on total
after tax for equity as at 31
the year ended March
31 March
------------------ ------------------- ------------------
2015 2014 2015 2014
------------------ --------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------- -------- -------- --------
18% depreciation
in the Global
Alpha portfolio (307) (305) (307) (305)
------------------ --------- -------- -------- --------
18% appreciation
in the Global
Alpha portfolio 307 305 307 305
------------------ --------- -------- -------- --------
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:
2015 Level Level Level
1 2 3
----------------------- -------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------- --------
Financial assets
at fair value
through profit
or loss
Investment in
Record Currency
- FTSE FRB10 Index
Fund 1,105 1,105 - -
TIPS 1,462 1,462 - -
Forward foreign
exchange contracts
used for seed
funds 35 - 35 -
Options used for
seed funds 576 - 576 -
Forward foreign
exchange contracts
used for hedging 8 - 8 -
Financial liabilities
at fair value
through profit
or loss
Options used for
seed funds (680) - (680) -
2,506 2,567 (61) -
----------------------- -------- -------- -------- --------
2014 Level Level Level
1 2 3
----------------------- -------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------- --------
Financial assets
at fair value
through profit
or loss
Investment in
Record Currency
- FTSE FRB10 Index
Fund 1,120 1,120 - -
TIPS 1,634 1,634 - -
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 -
----------------------- -------- -------- -------- --------
There have been no transfers between levels in the reporting
period (2014: 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 Financial Assets Liabilities
and receivables liabilities at fair at fair
measured value value
at amortised through through
cost profit profit
or loss or loss
------------------------- ----- ----------------- -------------- --------- ------------
At 31 March GBP'000 GBP'000 GBP'000 GBP'000
2015
------------------------- ----- ----------------- -------------- --------- ------------
Investment
in Record Currency
- FTSE FRB10
Index Fund 12 - - 1,105 -
TIPS 12 - - 1,462 -
Trade and other
receivables
(excludes prepayments) 14 5,800 - - -
Money market
instruments
with maturities
> 3 months 16 18,100 - - -
Cash and cash
equivalents 16 12,010 - - -
Derivative
financial assets
at fair value
through profit
or loss 15 - - 619 -
Current trade
and other payables 17 - (182) - -
Accruals 17 - (2,455) - -
Derivative
financial liabilities
at fair value
through profit
or loss 15 - - - (680)
------------------------- ----- ----------------- -------------- --------- ------------
35,910 (2,637) 3,186 (680)
------------------------- ----- ----------------- -------------- --------- ------------
Note Loans Financial Assets Liabilities
and receivables liabilities at fair at fair
measured value value
at amortised through through
cost profit profit
or loss or loss
------------------------- ----- ----------------- -------------- --------- ------------
At 31 March GBP'000 GBP'000 GBP'000 GBP'000
2014
------------------------- ----- ----------------- -------------- --------- ------------
Investment
in Record Currency
- FTSE FRB10
Index Fund 12 - - 1,120 -
TIPS 12 - - 1,634 -
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)
------------------------- ----- ----------------- -------------- --------- ------------
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 (2014: 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 2015 the Group had commitments under non-cancellable
operating leases relating to land and buildings as set out
below:
2015 2014
GBP'000 GBP'000
---------------------------- -------- --------
Not later than one year 230 230
Later than one year and
not later than five years 57 287
287 517
---------------------------- -------- --------
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.
2015 2014
GBP'000 GBP'000
------------------------------- -------- --------
Amounts due from subsidiaries - 146
Amounts due to subsidiaries (480) (447)
Interest received from
subsidiaries on intercompany
loan balances 1 5
Net dividends received
from subsidiaries 3,070 4,900
------------------------------- -------- --------
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 (2014:
GBPnil). No expense has been recognised during the period in
respect of bad or doubtful debts due from related parties. During
the year ended 31 March 2014, 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.
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. 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 external investment into the fund sufficient to
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.
Key management personnel compensation
2015 2014
GBP'000 GBP'000
------------------------------ -------- --------
Short-term employee benefits 3,568 3,651
Post-employment benefits 229 263
Share-based payments 940 1,052
4,737 4,966
------------------------------ -------- --------
The dividends paid to key management personnel in the year ended
31 March 2015 totalled GBP1,677,173 (2014: GBP2,503,685)
Directors' remuneration
2015 2014
GBP'000 GBP'000
-------------------------- -------- --------
Emoluments(1) (excluding
pension contribution) 2,254 2,136
Gains made on exercise - -
of share options
Pension contribution(2) 137 140
-------------------------- -------- --------
Aggregate emoluments of
the Directors 2,391 2,276
-------------------------- -------- --------
During the year, three Directors of the Company (2014: four)
participated in the Group Personal Pension Plan, a defined
contribution scheme.
(1) Excludes termination payments made to Paul Sheriff.
(2) 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 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.
The Group's capital is managed within the categories set out
below:
2015 2014
GBPm GBPm
-------------------- ----- -----
Regulatory capital 8.8 8.7
Other operating
capital 20.5 17.7
-------------------- ----- -----
Operating capital 29.3 26.4
Seed capital 3.1 3.1
-------------------- ----- -----
Total capital 32.4 29.5
-------------------- ----- -----
Operating capital is equivalent to the aggregate net current
assets of the Company and the main trading subsidiaries of the
Group. Operating capital is intended to cover the regulatory
capital requirement plus capital required for day to day
operational purposes. The Directors consider that the other
operating capital significantly exceeds the actual day to day
operational requirements.
Seed capital is the capital deployed to support the growth of
new funds. Seed capital is limited to 15% of the Group's total
capital.
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 2015 the Company had no ultimate controlling
party, nor at 31 March 2014.
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 15 June 2015. The
financial information set out above does not constitute the
Company's statutory accounts.
The statutory accounts for the financial year ended 31 March
2014 have been delivered to the Registrar of Companies, and those
for the year ended in 31 March 2015 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
END
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