TIDMREC
RNS Number : 5175P
Record PLC
18 November 2016
RECORD plc
PRESS RELEASE
18 November 2016
INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS TO 30 SEPTEMBER
2016
Record plc, the specialist currency manager, today announces its
unaudited results for the six months to 30 September 2016.
Financial headlines:
-- AUME(1) increased to $55.0bn(2) / GBP42.4bn ($52.9bn /
GBP36.8bn at 31 March 2016)
-- Client numbers increased to 61 (from 58) over the six month
period
-- Revenue increased by 7% to GBP11.1m compared to the six
months to 30 September 2015 (GBP10.4m)
-- Underlying(3) operating margin of 33% (six months to 30
September 2015: 33%)
-- Underlying profit before tax decreased by 2% to GBP3.6m (six
months to 30 September 2015: GBP3.7m)
-- Basic EPS of 1.33 pence (six months to 30 September 2015:
1.36 pence)
-- Strong financial position with shareholders' equity increased
to GBP35.0m (30 September 2015: GBP33.3m)
-- Interim dividend of 0.825p per share will be paid on 23
December 2016 (six months to 30 September 2015: 0.825p per share
)
Key developments:
-- Sterling weakened against most major currencies following the
UK's decision to leave the EU, including decreases of approximately
13% and 11% against the US dollar and the Swiss Franc respectively,
and has continued to do so since the period end.
-- The half year saw aggregate net inflows of $1.4 billion
across all products and positive performance from each component of
the Multi-Strategy product.
-- During the period, investor awareness of the risks and
opportunities afforded by currency fluctuations in volatile market
conditions has been heightened by the ongoing Brexit debate, and
further underlined after the period by the outcome of the US
presidential election.
(1) As a currency manager Record manages only the impact of
foreign exchange and not the underlying assets, therefore its
"assets under management" are notional rather than real. To
distinguish this from the AUM of conventional asset managers,
Record uses the concept of assets under management equivalents
"AUME" and by convention this is quoted in US dollars.
(2) The Group has revised its approach to reporting AUME and a
reconciliation of AUME under the original and revised approaches is
provided after the notes to the financial statements. There has
been no change to the revenue-generating ability of the business as
a result of this reporting change.
(3) The underlying results are those before consolidating the
non-controlling interests in the seed funds, and reflect internal
management reporting of the revenues and costs driving future cash
flows of the business.
Commenting on the results, James Wood-Collins, Chief Executive
Officer of Record plc, said:
"The stand out market event during the first half of the
financial year was the UK's decision to leave the European Union
and the consequent depreciation of sterling against most major
currencies following the referendum result on 24 June. We are
actively anticipating the impact of Brexit on our clients and all
aspects of our business, and regard the maintenance of our ability
to serve EU clients following departure as essential.
"The Group has seen net inflows during the period of $1.4
billion spread across all product lines, an increase in client
numbers and positive performance across each component of the
Multi-Strategy product during the period.
"Against this backdrop, it's pleasing to announce underlying
revenues 1% ahead of the second half of last year, despite that
period having had the benefit of performance fees. Furthermore,
close control of operating costs has resulted in the underlying
operating profit margin of 33%, and underlying profit before tax of
GBP3.6 million, both being broadly in line with the same period
last year, despite that period having benefited from a temporary
increase in a tactical bespoke mandate.
"Volatility in currency markets is seemingly set to continue,
supported not least by economic and political uncertainty across
Europe and the US. Such volatility in addition to attractive
investment performance and an ultra-low interest rate environment
can all present new business opportunities. Our focus is to ensure
the Group is well placed to take advantage of such opportunities
and I believe further progress will be made in the second half of
the financial year."
Analyst briefing
There will be a presentation for analysts at 9.30am on Friday 18
November 2016 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 +44 1753 852222
Neil Record - Chairman
James Wood-Collins - Chief Executive Officer
Steve Cullen - Chief Financial Officer
MHP Communications +44 20 3128 8100
Nick Denton, Ollie Hoare
Chief Executive Officer's statement
Management fees and underlying revenues for the first half of
the year were close to the levels achieved in the same period last
year, despite that period benefiting from a temporary increase in a
tactical bespoke mandate. Management fees were satisfactorily ahead
of the second half of last year. Client numbers and AUME in both US
dollar and pound sterling terms have grown in the period. Net
inflows across all products contributed to growth in US dollar
terms, and sterling's depreciation over the period, in particular
against the Swiss franc, added further to AUME measured in
sterling.
James Wood--Collins
Chief Executive Officer
Market and performance overview
The stand-out market event of the period was sterling's
depreciation following the UK's decision to leave the European
Union. This was evident both in the immediate aftermath of the
referendum, and towards the end of the period as the timing and
nature of Brexit started to become clearer.
Between 23 June and 30 September 2016, sterling weakened by
approximately 13% against the US dollar. Financial markets had
clearly failed to anticipate a Leave vote, leading to a marked
depreciation on 24 June. The possibility of a "hard Brexit"
contributed to further weakening towards and shortly after the
period end. Despite the drama of 24 June and some of the following
days, the foreign exchange markets continued to function with high
transaction volumes throughout, although at the cost of poorer
liquidity and wider bid-offer spreads on the most dramatic
days.
The plans we had put in place to manage clients' portfolios
around the referendum served their purpose well. Avoiding trading
where possible reduced our clients' exposure to higher transaction
costs, and reducing the level of activity on UK clients' Dynamic
Hedging programmes mitigated the risk of underperformance. As a
result, UK Dynamic Hedging programmes adjusted hedge ratios in line
with fluctuations in sterling ahead of the referendum, and managed
hedging losses as sterling subsequently weakened.
Beyond the UK, markets saw some restoration of the link between
interest rate expectations and currency movements. The US dollar
and Swedish krona generally weakened due to uncertain expectations
of rate increases for the former, and further quantitative easing
for the latter. By contrast, the Japanese yen appreciated in
response to safe haven inflows and effective tightening of monetary
policy. The Norwegian krone, Australian dollar and New Zealand
dollar all strengthened with commodity prices, and in the latter
two cases despite a cut in interest rates. The recovery in
commodity prices, delayed expectations for US interest rate
increases and improving sentiment contributed to general
strengthening in emerging market currencies.
In this environment, US Dynamic Hedging programmes allowed
clients to benefit from a weakening dollar by reducing hedge
ratios, although costs were incurred in adjusting the hedges.
Each component of the Multi-Strategy product, namely Forward
Rate Bias, Emerging Market, Momentum and Value generated positive
performance over the half year. In the case of Forward Rate Bias
this was attributable both to appreciation of higher rate
investment currencies and to depreciation of most lower rate
funding currencies, with the exception of the Japanese yen. In the
case of Emerging Market this was attributable to a broad-based
recovery in emerging market currencies over the summer. Momentum
contributed to Multi-Strategy's net short position in sterling
which benefited from the outcome of the EU referendum, and Value
benefited in particular from the appreciation of the Japanese yen
following the referendum.
Regulation
Regulatory change continues to be a major theme in the foreign
exchange markets. This half year saw the first implementation of
mandatory variation margin rules amongst bank counterparties, with
the effects on our clients expected to be felt from the first
calendar quarter in 2017.
As previously reported, we continue to be frustrated by
differences in rules across jurisdictions. We are nevertheless
committing significant resources to managing the impact of these
rules on our clients, and to seeking to mitigate any adverse
consequences for our business. In doing so we are also continuing
to explore ways we can generate new business opportunities from
these changes, by broadening our product offering in collateral
management and in cash management more widely.
We are also looking further ahead to the impact of the UK's
departure from the European Union. We are actively anticipating
Brexit's impact on our clients, colleagues and regulatory
permissions, amongst other topics. With respect to regulatory
permissions, we regard the maintenance of our ability to serve EU
clients after the UK's departure as essential. We are therefore
establishing contingency plans to allow this to continue even in
the absence of "passporting" or its equivalent on a system-wide
basis. In the meantime, we continue with our projects to plan for
impending regulation such as the Markets in Financial Instruments
Directive II.
Financial highlights
Management fees of GBP10.6 million represented a 3% reduction on
the first half of last year, which had benefited from a temporary
increase in a tactical bespoke mandate, and a 6% increase on the
second half of last year. Underlying revenues of GBP10.6 million
represented a 1% reduction on the first half of last year, and were
1% ahead of the second half, which had benefited from performance
fee revenues. The underlying operating profit margin was maintained
at 33%, leading to underlying profit before tax of GBP3.6 million,
as compared to GBP3.7 million for the first half of last year, and
GBP3.4 million for the second half.
Asset flows
AUME grew over the period by 4% in US dollar terms to $55.0
billion, and by 15% in sterling terms, to GBP42.4 billion. This
growth was due to net inflows of $1.4 billion across all product
lines, with Passive Hedging and Currency for Return the largest
contributors at $0.9 billion and $0.4 billion respectively. Market
and exchange rate movements also contributed positively over the
period in aggregate.
We are introducing a new product category, Multi-product
mandates, in this reporting period to recognise that some client
mandates have combined hedging and return-seeking objectives, and
may have a fee structure recognising this. The tactical bespoke
mandate referred to above is one such. These fee structures can no
longer readily be separated into their hedging and return-seeking
components, and so we are introducing this new category to maintain
the clear link between AUME, fee levels, and management fees. It
should be emphasised that this is purely a reporting change, with
no change to the business's revenue-generating ability.
Products and distribution
We have seen a growing level of new business discussions, in
particular towards the end of the period. This can be attributed to
marked currency volatility on the one hand, and positive
performance across all return-seeking strategies on the other.
There is a welcome degree of diversification in the objectives
clients are looking to meet. Client and consultant engagement
ranges across passive hedging, active hedging and return-seeking
objectives, and in some cases combinations of these. This is the
case across our core markets of the UK, continental Europe, and
North America, and in markets we are exploring such as
Australia.
We continue to be enthusiastic about our collaboration with
WisdomTree Investments, Inc., which was extended during the period
to include signals to hedge dynamically currency exposures within
their Canadian as well as US rules-based index families.
Board changes and dividend
We were delighted to welcome Rosemary Hilary to the Board as an
independent non-executive director in June 2016. Rosemary was
previously Chief Audit Officer at TSB and prior to that at the
FCA/FSA, and formerly held senior supervisory roles at the FSA and
the Bank of England.
With Jane Tufnell having joined in September 2015 and Rosemary
in June 2016, September 2016 saw Record announce the resignation of
non-executive directors Cees Schrauwers and Andrew Sykes. Cees and
Andrew had both joined the Board just prior to Record's
introduction to the Official List in December 2007, and
consequently would no longer be deemed independent. Cees and Andrew
both made enormous contributions to Record during their tenure on
the Board, and we are very appreciative for their commitment, and
their invaluable advice and guidance.
An interim dividend of 0.825p per share will be paid on 23
December 2016 to shareholders on the register at 2 December
2016.
The Board's intention for the financial year, subject to
business conditions, is to maintain the total ordinary dividend at
1.65p per share. However in setting the dividend, the Board will be
mindful of achieving a level which it expects to be at least
covered by earnings and which allows for future sustainable
dividend growth in line with the trend in profitability, such that
the total ordinary dividend may be more or less than 1.65p per
share. The Board will also give consideration to returning at least
part of any excess of the current year's earnings per share over
ordinary dividends to shareholders, potentially in the form of
special dividends.
Outlook
Currency market volatility, attractive investment performance
and even regulatory changes can all present new business
opportunities. The Group's management and staff are working hard to
convert these opportunities into new mandates. On behalf of the
Board, I would like to thank our clients for their continued
support, and our staff for their commitment and hard work.
James Wood--Collins
Chief Executive Officer
Interim management review
Business review
During a period of heightened volatility and market uncertainty
since the prior year end, AUME and client numbers have grown and
management fees have increased when compared to the final six
months of the prior financial year.
A new product category (Multi-product) has been introduced which
recognises those clients having mandates with combined hedging and
return-seeking objectives. The current climate of general economic
uncertainty and historically low interest rates has increased
interest from investors in such mandates, capable of harvesting
returns whilst also acting to reduce currency risk. Such mandates
are generally remunerated on a different basis (e.g. on a notional
mandate size) and hence are not readily attributable into their
component parts for AUME and fee rate purposes. The new product
category recognises such mandates separately and seeks to maintain
the link between average AUME and average fee rates for all product
categories going forward. Consequently comparative figures have
been restated to reflect this new category, and a full
reconciliation is provided following the notes to the financial
statements. It should be noted that this restatement in no way
affects the revenue-generation capability of the mandates or of the
business but instead reflects more accurately the underlying
objectives of each category of mandate. All figures given in this
commentary reflect the new category and the restatement of historic
numbers.
AUME increased by 4% to $55.0bn (31 March 2016: $52.9bn).
Dynamic Hedging AUME decreased to $5.7bn (31 March 2016: $6.1bn)
but was offset by growth in Passive Hedging AUME to $45.6bn (31
March 2016: $43.4bn), including net inflows of $0.9bn. Currency for
Return AUME grew by 50% to $0.9bn (31 March 2016: $0.6bn),
including net inflows of $0.4bn, and Multi-product AUME remained
constant at $2.6bn at period end. Client numbers continued to grow,
increasing by 5% to 61 at 30 September 2016 (31 March 2016: 58) and
by 13% compared to the same period last year (30 September 2015: 54
clients).
Management fees for the six month period decreased by 3% to
GBP10.6m from GBP11.0m in the equivalent period in the prior year,
which had benefited from a temporary increase in a tactical bespoke
mandate. Approximately 80% of Record's management fees are
denominated in currencies other than sterling. Due to sterling
weakness following the result of the EU referendum on 24 June,
management fees earned for the period have increased upon
translation into sterling.
Headline revenues for the six month period of GBP11.1m are 7%
higher than the comparable period last year (six months ended 30
September 2015: GBP10.4m) and 3% higher than the GBP10.7m reported
for the second half of the prior financial year, despite this
latter period including a performance fee of GBP0.3m.
Personnel costs of GBP3.4m are 3% lower than the same period
last year (30 September 2015: GBP3.5m) and are in line with the
annualised rate reported for last year of GBP6.8m. Similarly
non-personnel costs of GBP2.1m are equivalent to the same period
last year, and have decreased slightly on an annualised basis
versus last year (12 months to 31 March 2016: GBP4.3m).
Profit before tax on a fully consolidated basis of GBP4.0m (and
therefore including the full impact of non-controlling interests in
seed funds) has increased by 22% (six months ended 30 September
2015: GBP3.3m) and operating profit margin on the same basis has
increased from 31% to 36%, due predominantly to the effect of
consolidating the seed funds in full. On an underlying basis,
profit before tax of GBP3.6m shows a marginal fall versus the same
period last year (GBP3.7m) and a 6% increase when compared to the
final six months of last year (GBP3.4m), which included performance
fees of GBP0.3m.
The Group maintains a strong and liquid balance sheet.
Shareholders' funds stood at GBP35.0m at the balance sheet date,
compared to GBP33.7m at the last year end date of 31 March 2016 (30
September 2015: GBP33.3m).
Product investment performance
During the period, US-based Dynamic Hedging clients experienced
a general weakening of the US dollar against developed market
currencies, with the exception being sterling following the UK's
vote to leave the EU in June The Japanese yen appreciated the most
in response to safe haven inflows in June, and a shift to a tighter
monetary policy stance in September. The Dynamic Hedging programmes
responded as expected, with hedge ratios varying systematically in
response to currency movements.
UK-based Dynamic Hedging clients experienced an unequivocal
weakening of the pound against all currencies within the programmes
between the end of March and the end of September. The programmes
performed as expected, adjusting hedge ratios in line with
fluctuations coming up to and following the EU referendum vote and
as a result controlled hedging losses.
Our Currency for Return strategies, Momentum, Value, Forward
Rate Bias and Emerging Market, all performed positively over the
period.
The FTSE Currency FRB10 Index outperformed, as losses in April
were more than offset by positive returns in the subsequent five
months. This outperformance was largely attributable to long
positions in New Zealand dollar which appreciated over the last six
months and short positions in the Swedish krona, which depreciated.
During the period, all Record Active Forward Rate Bias portfolios
were transitioned to the FRB10 strategy as part of account
restructuring processes agreed with the respective clients.
The Emerging Market strategy outperformed as part of a broad
based rebound in emerging market asset prices over the summer,
driven by a recovery in global risk sentiment, commodity prices and
a repricing of investor expectations towards slower US interest
rate normalisation. As a result, Record's Emerging Market strategy
performed positively as negative returns in April and May were
outweighed by gains in the subsequent four months.
Investment performance in the Multi-Strategy product which uses
the FTSE Currency FRB10 index strategy produced positive returns
over the period as the Value, Momentum, Emerging Market and FRB10
strategies all outperformed.
Return Volatility
Half since since
year inception inception
Fund name Gearing return p.a. p.a.
-------------------------- -------- -------- ----------- -----------
FTSE FRB10 Index
Fund(4) 1.8 3.97% 1.60% 7.46%
Emerging Market Currency
Fund(5) 1 3.16% 0.54% 6.61%
-------------------------- -------- -------- ----------- -----------
Return Volatility
since since
Half year inception inception
Index/composite returns(6) return p.a. p.a.
---------------------------- ---------- ----------- -----------
FTSE Currency FRB10 GBP
excess return 2.16% 2.31% 4.64%
Currency Value 1.82% 3.39% 3.23%
Currency Momentum 4.76% 2.68% 3.74%
Record Multi--Strategy(7) 2.52% 1.56% 2.20%
Record Multi--Strategy
(with FRB10)(8) 3.16% 2.06% 2.42%
---------------------------- ---------- ----------- -----------
(4) FTSE FRB10 Index Fund return data is since inception in
December 2010.
(5) Emerging Market Currency Fund return data is since inception
in December 2010.
(6) The Currency Alpha composite closed on 28 July 2016.
(7) Multi--Strategy return data is since inception in August
2012.
(8) Multi--Strategy with FRB10 return data is since inception in
February 2015.
AUME development
AUME has risen to $55.0bn, an increase of $2.1bn (4%) in the
period, which can be attributed as follows:
AUME movement in the six months to 30 September 2016
$bn
-------------------------------- -----
AUME at 1 April 2016 52.9
Net client flows +1.4
Equity and other market impact +2.3
Foreign exchange impact -1.6
-------------------------------- -----
AUME at 30 September 2016 55.0
-------------------------------- -----
Net client flows and numbers
The net inflow of $1.4bn includes net inflows to Passive Hedging
of $0.9bn and net inflows from Currency for Return products of $0.4
bn.
The net inflows in Passive Hedging were principally from new
clients. Growth in Currency for Return related to the
Multi-Strategy product. Flows to and from Dynamic Hedging and Cash
during the period were negligible, and aggregated to $0.1bn.
Client numbers increased by 3 to 61 clients as at 30 September
2016 (31 March 2016: 58 clients; 30 September 2015: 54
clients).
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 Multi-product mandates, are linked to
equity and other market levels. Market performance added $2.3bn to
AUME in the six months to 30 September 2016.
Additional 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 hedging mandates by product as at 30
September 2016
Fixed
Equity income Other
% % %
----------------- ------- -------- ------
Dynamic Hedging 91 - 9
Passive Hedging 27 42 31
----------------- ------- -------- ------
Forex
As 91% of the Group's AUME is non--US Dollar denominated,
foreign exchange movements may have an impact on AUME when
expressing non--US Dollar AUME in US Dollars. In the six months to
30 September 2016, foreign exchange movements reduced AUME by
$1.6bn.
Product mix
There has been a small shift in product mix during the six month
period with growth in both Passive Hedging mandates and
Multi-Strategy Currency for Return mandates. Multi-product
offerings have remained broadly unchanged in the period. Hedging
represents 93% of total AUME (31 March 2016: 94%), of which Dynamic
Hedging represents $5.7bn and 10% of total AUME, falling from
$6.1bn (12%) at 31 March 2016.
AUME composition by product
30 Sep 30 Sep 31 Mar
16 15 16
----------- ----------- -----------
$bn % $bn % $bn %
--------------------- ----- ---- ----- ---- ----- ----
Dynamic Hedging 5.7 10 6.6 13 6.1 12
Passive Hedging 45.6 83 41.7 80 43.4 82
Currency for Return 0.9 2 0.6 1 0.6 1
Multi-product 2.6 5 3.3 6 2.6 5
Cash and other 0.2 - 0.2 - 0.2 -
--------------------- ----- ---- ----- ---- ----- ----
Total 55.0 100 52.4 100 52.9 100
--------------------- ----- ---- ----- ---- ----- ----
Revenue
Record's revenue is principally management fees earned from the
provision of currency management services.
Management fee income for the six months to 30 September 2016
was GBP10.6m, a fall of 3% on the six months ended 30 September
2015 (GBP11.0m), and an increase of 6% over the second half of last
year.
Management fees by product (GBPm)
Dynamic Hedging management fees decreased by 13% to GBP2.6m
compared to the equivalent period last year (GBP3.0m) due
predominantly to the outflow announced in early October 2015. In
the six months ended 30 September 2016, Dynamic Hedging generated
24% of management fee income (six months ended 30 September 2015:
27% and six months ended 31 March 2016: 25%).
Passive Hedging management fees continue to grow both in
absolute terms and as a proportion of overall management fees,
accounting for 53% of management fee income in the period (six
months ended 30 September 2015: 41%), increasing by GBP1.1m
compared to the six months ended 30 September 2015 and by GBP0.7m
versus the second half of last year. This increase in fees reflects
the steady growth in Passive Hedging AUME over the last three
years, both from inflows to existing mandates and from new client
wins.
Management fees from Currency for Return products in the period
increased by GBP0.1m when compared to the six months ended 30
September 2015, and represented 4% of management fees for the
period (six months ended 30 September 2015: 4%). The increase was
driven by inflows into the Multi-Strategy product following a
period of positive performance.
The Multi-product category, which includes those mandates with
both hedging and return-seeking objectives, generated management
fees of GBP1.9m. This represents a decrease of GBP1.2m (38%)
compared to the six months ended 30 September 2015 and was due to
an outflow announced from a bespoke tactical mandate in the
previous financial year.
Revenue analysis (GBPm)
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
----------------------- ----------- ----------- ----------
Management fees
Dynamic Hedging 2.6 3.0 5.5
Passive Hedging 5.6 4.5 9.4
Currency for Return 0.5 0.4 0.8
Multi-product 1.9 3.1 5.2
----------------------- ----------- ----------- ----------
Total management fees 10.6 11.0 20.9
Performance fees - - 0.3
Other income 0.5 (0.6) (0.1)
----------------------- ----------- ----------- ----------
Total revenue 11.1 10.4 21.1
----------------------- ----------- ----------- ----------
The average management fee rates for all product lines have
remained broadly constant over the six months ended 30 September
2016.
Average management fee rates (bps p.a.)
Six months Six months Year
ended ended ended
Product 30 Sep 16 30 Sep 15 31 Mar 16
----------------- ----------- ----------- ----------
Dynamic Hedging 13 13 13
Passive Hedging 4 3 3
Currency for
Return 17 19 20
Multi-product 20 18 19
----------------- ----------- ----------- ----------
Other income consists principally of gains or losses made on
derivative financial instruments employed by the funds seeded by
the Group, which are consolidated in full. It also includes gains
or losses on hedging revenues denominated in currencies other than
sterling, and other foreign exchange gains or losses.
The aggregate gain from investments in seed funds and derivative
financial instruments held by seed funds was GBP0.2m in the six
months ended 30 September 2016 (six months ended 30 September 2015:
loss of GBP0.6m; year ended 31 March 2016: loss of GBP0.2m).
Expenditure
Expenditure analysis (GBPm)
Six months Six months Year
ended ended ended
30 Sep 30 Sep 31 Mar
16 15 16
---------------------------------- ----------- ----------- -------
Personnel costs 3.4 3.5 6.8
Non-personnel costs 2.1 2.1 4.3
---------------------------------- ----------- ----------- -------
Administrative expenditure
excluding Group Profit
Share 5.5 5.6 11.1
Group Profit Share 1.5 1.5 3.0
---------------------------------- ----------- ----------- -------
Total administrative expenditure 7.0 7.1 14.1
---------------------------------- ----------- ----------- -------
The total expenditure in the six months to 30 September 2016 was
GBP7.0m, a decrease of GBP0.1m (1%) when compared to the six months
to 30 September 2015 (GBP7.1m). Personnel costs excluding Group
Profit Share (GPS) of GBP3.4m for the six months ended 30 September
2016 have fallen by GBP0.1m versus the six months ended 30
September 2015.
Non-personnel costs have been closely controlled and have
remained at historic levels. On 7 September 2016, a new lease was
signed allowing the business to remain in the same building until
September 2022. Once works are complete and the new offices are
fully occupied, the annual commitment will increase by
approximately GBP0.2m per annum.
Group Profit Share (GPS) Scheme
The cost of the GPS scheme for the six months to 30 September
2016 of GBP1.5m was unchanged compared to the six months to 30
September 2015 (GBP1.5m), and in line with underlying operating
profit. The GPS continues to be calculated at 30% of pre-GPS
underlying operating profit in the period.
Operating profit and margins
The operating profit for the six months ended 30 September 2016
of GBP4.0m was 23% higher than the six month period ended 30
September 2015 (GBP3.2m). Operating profit margin for the six
months ended 30 September 2016 was 36% on a fully consolidated
basis (six months ended 30 September 2015: 31%).
Management also considers profit before tax and operating profit
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 under IFRS. The underlying operating profit for
the six months ended 30 September 2016 was GBP3.5m (six months to
30 September 2015: GBP3.6m) and underlying operating profit margin
for the six month period ending 30 September 2016 was 33% (six
months to 30 September 2015: 33% and year to 31 March 2016:
33%).
Cash flow
The Group generated GBP3.4m of cash from operating activities
after tax during the six month period ended 30 September 2016 (six
months ended 30 September 2015: GBP2.4m). Taxation paid during the
period was GBP0.8m compared to GBP0.9m for the six months ended 30
September 2015. On 3 August 2016 the Group paid a final dividend of
0.825p per share in respect of the year ended 31 March 2016 which
equated to a distribution of GBP1.8m (during the six months ended
30 September 2015 the Group paid a final dividend of 0.90p per
share in respect of the year ended 31 March 2015, a distribution of
GBP2.0m).
Dividends
The Group will pay an interim dividend of 0.825p per share in
respect of the six months ended 30 September 2016. The dividend
will be paid on 23 December 2016 to shareholders on the register on
2 December 2016. Subject to business conditions in the second half
of the financial year and a satisfactory outlook, the Group
currently intends to pay a final ordinary dividend of 0.825p for
the financial year ending 31 March 2017.
As previously stated in the Annual Report for the year ended 31
March 2016, the Board will also give consideration to returning at
least part of any excess of current year earnings per share over
ordinary dividends to shareholders, potentially in the form of
special dividends.
Capital management
The Board's intention is to retain sufficient capital within the
business to meet continuing obligations, to sustain future growth
and to provide a buffer against adverse market conditions. The
Group has no debt and shareholders' funds were GBP35.0m at 30
September 2016 (30 September 2015: GBP33.3m).
The dividend payment on 23 December 2016 will equate to a
distribution of GBP1.8m, following which the business will retain
cash and money market instruments on the balance sheet which are
significantly in excess of financial resource requirements required
for regulatory purposes.
Principal risks and uncertainties
The principal risks and uncertainties documented in the Annual
Report for the year ended 31 March 2016 remain relevant to
Record.
Since publishing the Annual Report, the UK's decision to leave
the European Union has been confirmed. The outcome of future
negotiations regarding the UK's departure from the EU will impact
how Record can transact on behalf of its clients, how it can
distribute its products to EU-based clients and how it retains
employees from the EU.
Record has established a management team to monitor the progress
towards Brexit and to review and anticipate the ramifications to
our clients and our business on an ongoing basis.
Contingency plans are being established to allow the continued
maintenance of our ability to serve EU clients irrespective of the
final outcome of negotiations surrounding the retention of
"passporting" or its equivalent.
Account concentration risk has continued during the six months
to 30 September 2016. The proportion of management fee income
generated from the largest client was 14% for the six months ended
30 September 2016 (year ended 31 March 2016: 13%). The proportion
of income for the six months ended 30 September 2016 generated from
the largest five clients was 58% (year ended 31 March 2016:
60%).
Statement of Directors' responsibilities
The half-yearly financial report is the responsibility of the
Directors who confirm that to the best of their knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as endorsed
and adopted by the EU;
-- the interim management review includes a fair review of the information required by:
o DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
o DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the Annual Report 2016 that could do so.
The Directors of Record plc are listed on the Record plc website
at ir.recordcm.com/board-of-directors.
Neil Record Steve Cullen
Chairman Chief Financial Officer
Independent review report to the members of Record plc
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report of
Record Plc for the six months ended 30 September 2016 which
comprises the consolidated statement of comprehensive income, the
consolidated statement of financial position, the consolidated
statement of changes in equity, the consolidated statement of cash
flows and the related notes. We have read the other information
contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company, in accordance with
International Standard on Review Engagements (UK and Ireland) 2410,
'Review of Interim Financial Information performed by the
Independent Auditor of the Entity' issued by the Auditing Practices
Board. Our review work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's members as a
body, for our review work, for this report, or for the conclusion
we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1 the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union.
Our responsibility
Our responsibility is to express a conclusion on the condensed
set of financial statements in the half-yearly financial report
based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2016 is not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Grant Thornton UK LLP
Auditor
17 November 2016
Financial statements
Consolidated statement of comprehensive income
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
Note GBP'000 GBP'000 GBP'000
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Revenue 3 11,080 10,384 21,134
Cost of sales (138) (98) (221)
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Gross profit 10,942 10,286 20,913
Administrative expenses (6,977) (7,071) (14,123)
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Operating profit 3,965 3,215 6,790
Finance income 67 76 143
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Profit before tax 4,032 3,291 6,933
Taxation (722) (706) (1,523)
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Profit after tax and total comprehensive income for the period 3,310 2,585 5,410
Profit and total comprehensive income for the period attributable to:
Non-controlling interests 431 (381) (131)
Owners of the parent 2,879 2,966 5,541
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Earnings per share for profit attributable to the equity holders of the
parent during the
period (expressed in pence per share)
Basic earnings per share 4 1.33p 1.36p 2.55p
Diluted earnings per share 4 1.33p 1.35p 2.54p
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Consolidated statement of financial position
Unaudited Unaudited Audited
As at As at As at
30 Sep 16 30 Sep 15 31 Mar 16
Note GBP'000 GBP'000 GBP'000
--------------------------------------------------- ----- ---------- ---------- ----------
Non-current assets
Property, plant and equipment 161 116 81
Intangible assets 176 389 299
Deferred tax assets 43 103 43
--------------------------------------------------- ----- ---------- ---------- ----------
Total non-current assets 380 608 423
--------------------------------------------------- ----- ---------- ---------- ----------
Current assets
Trade and other receivables 5,966 5,913 5,695
Derivative financial assets 10 54 23 106
Money market instruments with maturity > 3 months 6 20,069 14,181 13,020
Cash and cash equivalents 6 16,114 19,241 21,720
--------------------------------------------------- ----- ---------- ---------- ----------
Total current assets 42,203 39,358 40,541
--------------------------------------------------- ----- ---------- ---------- ----------
Total assets 42,583 39,966 40,964
--------------------------------------------------- ----- ---------- ---------- ----------
Current liabilities
Trade and other payables (2,448) (2,460) (2,372)
Corporation tax liabilities (720) (729) (776)
Derivative financial liabilities 10 (135) (139) (108)
--------------------------------------------------- ----- ---------- ---------- ----------
Total current liabilities (3,303) (3,328) (3,256)
--------------------------------------------------- ----- ---------- ---------- ----------
Total net assets 39,280 36,638 37,708
--------------------------------------------------- ----- ---------- ---------- ----------
Equity
Issued share capital 8 55 55 55
Share premium account 1,899 1,899 1,899
Capital redemption reserve 20 20 20
Retained earnings 33,050 31,336 31,715
--------------------------------------------------- ----- ---------- ---------- ----------
Equity attributable to owners of the parent 35,024 33,310 33,689
Non-controlling interests 9 4,256 3,328 4,019
--------------------------------------------------- ----- ---------- ---------- ----------
Total equity 39,280 36,638 37,708
--------------------------------------------------- ----- ---------- ---------- ----------
Approved by the Board on 17 November 2016 and signed on its
behalf by:
Neil Record Steve Cullen
Chairman Chief Financial Officer
Consolidated statement of changes in equity
Total
attributable
to equity
Called Share Capital holders
up share premium redemption Retained of the Non-controlling Total
capital account reserve earnings parent interests equity
Unaudited Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ---- --------- -------- ----------- --------- ------------- --------------- -------
As at 1 April 2015 55 1,847 20 30,006 31,928 3,876 35,804
Profit and total
comprehensive
income for the period - - - 2,966 2,966 (381) 2,585
Dividends paid 5 - - - (1,962) (1,962) - (1,962)
Own shares acquired
by EBT - - - (337) (337) - (337)
Release of shares
held by EBT - 52 - 303 355 - 355
Change in non-controlling
interests on initial
consolidation of seed
fund - - - - - 417 417
Redemption of units
in funds - - - - - (584) (584)
Share-based payments - - - 360 360 - 360
-------------------------- ---- --------- -------- ----------- --------- ------------- --------------- -------
Transactions with
shareholders - 52 - (1,636) (1,584) (167) (1,751)
-------------------------- ---- --------- -------- ----------- --------- ------------- --------------- -------
As at 30 September
2015 55 1,899 20 31,336 33,310 3,328 36,638
-------------------------- ---- --------- -------- ----------- --------- ------------- --------------- -------
Profit and total
comprehensive
income for the period - - - 2,575 2,575 250 2,825
Dividends paid 5 - - - (1,788) (1,788) - (1,788)
Own shares acquired
by EBT - - - (669) (669) - (669)
Release of shares
held by EBT - - - 233 233 - 233
Issue of units in
funds - - - - - 441 441
Share-based payments - - - 28 28 - 28
-------------------------- ---- --------- -------- ----------- --------- ------------- --------------- -------
Transactions with
shareholders - - - (2,196) (2,196) 441 (1,755)
-------------------------- ---- --------- -------- ----------- --------- ------------- --------------- -------
As at 31 March 2016 55 1,899 20 31,715 33,689 4,019 37,708
-------------------------- ---- --------- -------- ----------- --------- ------------- --------------- -------
Profit and total
comprehensive
income for the period - - - 2,879 2,879 431 3,310
Dividends paid 5 - - - (1,791) (1,791) - (1,791)
Release of shares
held by EBT 8 - - - 211 211 - 211
Redemption of units
in funds - - - - - (194) (194)
Share-based payments - - - 36 36 - 36
Transactions with
shareholders - - - (1,544) (1,544) (194) (1,738)
-------------------------- ---- --------- -------- ----------- --------- ------------- --------------- -------
As at 30 September
2016 55 1,899 20 33,050 35,024 4,256 39,280
-------------------------- ---- --------- -------- ----------- --------- ------------- --------------- -------
Consolidated statement of cash flows
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
Note GBP'000 GBP'000 GBP'000
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Net cash inflow from operating activities after tax 7 3,394 2,414 5,509
Cash flow from investing activities
Purchase of intangible software - (25) (39)
Purchase of property, plant and equipment (109) (13) (29)
Sale of securities - 1,564 1,462
(Purchase)/sale of money market instruments with maturity > 3 months (7,049) 3,919 5,079
Increase in cash due to accounting treatment of funds previously not
consolidated on line-by-line
basis - 1,968 1,968
Interest received 49 82 165
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Net cash (outflow)/inflow from investing activities (7,109) 7,495 8,606
Cash flow from financing activities
Cash outflow from redemption of units in funds (194) (584) (143)
Cash inflow from exercise of share options 28 - -
Purchase of own shares - (183) (794)
Dividends paid to equity shareholders 5 (1,791) (1,962) (3,750)
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Cash outflow from financing activities (1,957) (2,729) (4,687)
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Net (decrease)/increase in cash and cash equivalents in the period (5,672) 7,180 9,428
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Effect of exchange rate changes 66 51 282
Cash and cash equivalents at the beginning of the period 21,720 12,010 12,010
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Cash and cash equivalents at the end of the period 16,114 19,241 21,720
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Closing cash and cash equivalents consists of:
Cash 6 6,587 4,604 5,439
Cash equivalents 6 9,527 14,637 16,281
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Cash and cash equivalents 16,114 19,241 21,720
------------------------------------------------------------------------- ----- ----------- ----------- ----------
Notes to the financial statements
These financial statements exclude disclosures that are
immaterial and judged to be unnecessary to understand our results
and financial position.
1) Basis of preparation
The condensed set of financial statements included in this
interim financial report has been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union. The financial
information set out in this interim report does not constitute
statutory accounts as defined in Section 434 of the Companies Act
2006. The Group's statutory financial statements for the year ended
31 March 2016 (which were prepared in accordance with IFRSs as
adopted by the European Union) have been delivered to the Registrar
of Companies. The auditor's report on those financial statements
was unqualified and did not contain statements under Section 498(2)
or Section 498(3) of the Companies Act 2006.
Going concern
The Directors are satisfied that the Group has adequate
resources with which to continue to operate for the foreseeable
future, and therefore these financial statements have been prepared
on a going concern basis.
Consolidation
The accounting policies adopted in these interim financial
statements are identical to those adopted in the Group's most
recent annual financial statements for the year ended 31 March
2016.
The consolidated financial information contained within the
financial statements incorporates financial statements of the
Company and entities controlled by the Company (its subsidiaries)
drawn up to 30 September 2016. Control is achieved where the
Company has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities.
Where the Group controls an entity, but does not own all the share
capital of that entity, the interests of the other shareholders are
stated within equity as non-controlling interests, being the
proportionate share of the fair value of identifiable net assets on
date of acquisition plus the share of changes in equity since the
date of consolidation.
An Employee Benefit Trust ("EBT") has been established for the
purposes of satisfying certain share-based awards. The Group has
'de facto' control over this entity. This trust is fully
consolidated within the financial statements.
At the beginning of the period, the Group had investments in
three funds which it was in a position to control. These fund
investments are held by Record plc and represent seed capital
investments by the Group. The funds are consolidated on a
line-by-line basis from the time that the Group gains control over
the fund.
2) Critical accounting estimates and judgements
The accounting policies, presentation and methods of computation
applied in the interim financial statements are consistent with
those applied in the financial statements for the year ended 31
March 2016.
3) Revenue
Segmental analysis
The Executive Committee (comprising the Executive Directors
together with two senior managers) which is the entity's Chief
Operating Decision Maker, considers that its services comprise one
operating segment (being the provision of currency management
services) and that it operates in a market that is not bound by
geographical constraints. The Group provides management with
revenue information disaggregated by product, whilst operating
costs, assets and liabilities are presented on an aggregated basis.
This reflects the unified basis on which the products are marketed,
delivered and supported.
a) Product revenues
The Group has split its currency management revenues by product.
Revenue attributable to the non-controlling interests' holding in
seed funds and other income arises mainly from gains/losses on
derivative financial instruments.
Six months Six months Year
ended ended ended
30 Sep 30 Sep 31 Mar
16 15 16
Revenue by product
type GBP'000 GBP'000 GBP'000
------------------------ ----------- ----------- --------
Management fees
Dynamic Hedging 2,596 2,998 5,514
Passive Hedging 5,613 4,493 9,438
Currency for Return 469 397 790
Multi-product 1,907 3,068 5,199
------------------------ ----------- ----------- --------
Total management
fee income 10,585 10,956 20,941
Performance fee income - - 315
Other income 495 (572) (122)
------------------------ ----------- ----------- --------
Total revenue 11,080 10,384 21,134
------------------------ ----------- ----------- --------
Other income includes gains attributable to the non-controlling
interests' holding in the funds of GBP441,492 (six months ended 30
September 2015: losses of GBP372,721; year ended 31 March 2016:
losses of GBP112,274).
b) Geographical analysis
The geographical analysis of revenue is based on the location of
the client to whom the services are provided. All revenue
originated in the UK.
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
Revenue by geographical region GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- ----------
Currency management income
UK 2,019 2,343 4,501
US 2,256 1,758 3,746
Switzerland 5,606 6,329 11,939
Other 704 526 1,070
---------------------------------- ----------- ----------- ----------
Total currency management income 10,585 10,956 21,256
Other income 495 (572) (122)
---------------------------------- ----------- ----------- ----------
Total revenue 11,080 10,384 21,134
---------------------------------- ----------- ----------- ----------
Other income is not analysed by geographical region.
4) Earnings per share
Basic earnings per share are calculated by dividing the profit
for the financial period attributable to equity holders of the
parent by the weighted average number of ordinary shares in issue
during the period.
Diluted earnings per share are calculated as for the basic
earnings per share with a further adjustment to the weighted
average number of ordinary shares to reflect the effects of all
potential dilution.
There is no difference between the profit for the financial
period attributable to equity holders of the parent used in the
basic and diluted earnings per share calculations.
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
---------------------------------------------------------------------------- ------------ ------------ ------------
Weighted average number of shares used in calculation of basic earnings per
share 216,800,927 217,807,851 217,176,877
Effect of potential dilutive ordinary shares - share options 405,007 1,266,237 711,980
---------------------------------------------------------------------------- ------------ ------------ ------------
Weighted average number of shares used in calculation of diluted earnings
per share 217,205,934 219,074,088 217,888,857
---------------------------------------------------------------------------- ------------ ------------ ------------
Basic earnings per share 1.33p 1.36p 2.55p
Diluted earnings per share 1.33p 1.35p 2.54p
---------------------------------------------------------------------------- ------------ ------------ ------------
The potential dilutive shares relate to the share options
granted in respect of the Group's Share Scheme. At the beginning of
the period, there were share options in place over 13,369,249
shares. During the six months ended 30 September 2016, options over
200,000 shares were exercised, and options over 680,540 shares
either lapsed or were forfeited. As at 30 September 2016, there
were share options in place over 12,488,709 shares.
5) Dividends
The dividends paid during the six months ended 30 September 2016
totalled GBP1,790,888 (0.825p per share), which was the final
dividend in respect of the year ended 31 March 2016. An interim
dividend of GBP1,787,588 (0.825p per share) was paid in the six
months ended 31 March 2016, thus the full dividend in respect of
the year ended 31 March 2016 was 1.65p per share. The dividend paid
by the Group during the six months ended 30 September 2015 totalled
GBP1,962,261 (0.90p per share), which was the final dividend paid
in respect of the year ended 31 March 2015.
The interim dividend proposed in respect of the six months ended
30 September 2016 is 0.825p per share.
6) Cash management
The Group's cash management strategy employs a variety of
treasury management instruments including cash, money market
deposits and treasury bills with maturities of up to one year. We
note that not all of these instruments are classified as cash or
cash equivalents under IFRS.
IFRS defines cash and cash equivalents as cash in hand, on
demand and collateral deposits held with banks, and other
short-term highly liquid investments that are readily convertible
to a known amount of cash and are subject to an insignificant risk
of changes in value. Moreover, instruments can only generally be
classified as cash and cash equivalents where they are held for the
purpose of meeting short-term cash commitments rather than for
investment or other purposes.
In the Group's judgement, bank deposits and treasury bills with
maturities in excess of three 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 greater than
three months.
The table below summarises the instruments managed by the Group
as cash, and their IFRS classification:
As at As at As at
30 Sep 16 30 Sep 15 31 Mar 16
GBP'000 GBP'000 GBP'000
----------------------------------------------------- ---------- ---------- ----------
Bank deposits with maturities > 3 months 20,069 14,181 11,518
Treasury bills with maturities > 3 months - - 1,502
----------------------------------------------------- ---------- ---------- ----------
Money market instruments with maturities > 3 months 20,069 14,181 13,020
----------------------------------------------------- ---------- ---------- ----------
Cash 6,587 4,604 5,439
Bank deposits with maturities <= 3 months 9,527 14,637 16,281
----------------------------------------------------- ---------- ---------- ----------
Cash and cash equivalents 16,114 19,241 21,720
----------------------------------------------------- ---------- ---------- ----------
Total assets managed as cash by the Group 36,183 33,422 34,740
----------------------------------------------------- ---------- ---------- ----------
7) Cash flow from operating activities
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
GBP'000 GBP'000 GBP'000
---------------------------------------------------- ----------- ----------- ----------
Operating profit 3,965 3,215 6,790
Adjustments for non-cash movements:
Depreciation of property, plant and equipment 29 51 77
Amortisation of intangible assets 123 115 244
Share-based payments 8 360 388
Release of shares held by EBT 211 200 374
Other non-cash movements (66) (51) (282)
---------------------------------------------------- ----------- ----------- ----------
4,270 3,890 7,591
Changes in working capital
(Increase)/decrease in receivables (254) 405 610
Increase/(decrease) in payables 76 (513) (600)
Decrease in other financial assets 52 1,164 1,182
Increase/(decrease) in other financial liabilities 27 (1,633) (1,664)
Cash inflow from operating activities 4,171 3,313 7,119
Corporation taxes paid (777) (899) (1,610)
---------------------------------------------------- ----------- ----------- ----------
Net cash inflow from operating activities 3,394 2,414 5,509
---------------------------------------------------- ----------- ----------- ----------
8) Called up share capital
The share capital of Record plc consists only of fully paid
ordinary shares with a par value of 0.025p. All shares are equally
eligible to receive dividends and the repayment of capital and
represent one vote at the shareholders' meeting.
Unaudited Unaudited Audited as
as at as at at
30 Sep 16 30 Sep 15 31 Mar 16
---------------------- ---------------------- ----------------------
GBP'000 Number GBP'000 Number GBP'000 Number
--------------------- -------- ------------ -------- ------------ -------- ------------
Authorised
Ordinary shares
of 0.025p each 100 400,000,000 100 400,000,000 100 400,000,000
Called up, allotted
and fully paid
Ordinary shares
of 0.025p each 55 221,380,800 55 221,380,800 55 221,380,800
--------------------- -------- ------------ -------- ------------ -------- ------------
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. Any such gains or losses are recognised directly in
equity.
Number
------------------------------------- -----------
Record plc shares held by EBT as at
31 March 2015 3,848,062
Net change in holding of own shares
by EBT in period (59,257)
------------------------------------- -----------
Record plc shares held by EBT as at
30 September 2015 3,788,805
Net change in holding of own shares
by EBT in period 1,153,443
------------------------------------- -----------
Record plc shares held by EBT as at
31 March 2016 4,942,248
Net change in holding of own shares
by EBT in period (838,748)
------------------------------------- -----------
Record plc shares held by EBT as at
30 September 2016 4,103,500
------------------------------------- -----------
The EBT holds shares in Record plc which are used to meet the
Group's obligations to employees under the Group Profit Share
Scheme and the Record plc Share Scheme. Own shares are recorded at
cost and are deducted from retained earnings.
On 20 June 2016, the EBT released 638,748 shares with a market
value of GBP157,288 to settle obligations under the Group Profit
Share Scheme, and 200,000 shares with a market value of GBP54,125
were released on exercise of options on 26 September 2016.
9) Non--controlling interests
Record plc has made investments in a number of funds where it is
in a position to be able to control those funds by virtue of the
size of its holding. Non-controlling interests occur when Record
plc is not the only investor in such funds. The non-controlling
interests are 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
period ended 30 September 2016.
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 - Strategy
Development 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 been under the
control of the Group since 1 September 2015, when the redemption of
units by two external investors meant that Record could control the
fund as the combined holding of Record plc and its Directors
constituted a majority interest from that point onwards. This fund
has therefore been consolidated into the Group's accounts from 1
September 2015 onwards.
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.
Mark to market value of external holding in seeded funds
consolidated into the accounts of the Record Group
As at As at As at
30 Sep 30 Sep 31 Mar
16 15 16
---------------------------- -------- -------- --------
GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- --------
Record Currency - Emerging
Market Currency Fund 3,802 2,434 3,583
Record Currency - Strategy - 481 -
Development Fund
Record Currency - FTSE
FRB10 Index Fund 454 413 436
---------------------------- -------- -------- --------
4,256 3,328 4,019
---------------------------- -------- -------- --------
10) 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 based on the
significance of inputs used in measuring their fair value. The
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:
Total Level 1 Level 2 Level 3
As at 30 September 2016 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------ -------- -------- -------- --------
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for seed funds 54 - 54 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for seed funds (17) - (17) -
Forward foreign exchange contracts used for hedging (118) - (118) -
------------------------------------------------------------ -------- -------- -------- --------
(81) - (81) -
------------------------------------------------------------ -------- -------- -------- --------
Total Level 1 Level 2 Level 3
As at 31 March 2016 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------ -------- -------- -------- --------
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for seed funds 106 - 106 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging (108) - (108) -
------------------------------------------------------------ -------- -------- -------- --------
(2) - (2) -
------------------------------------------------------------ -------- -------- -------- --------
Total Level 1 Level 2 Level 3
As at 30 September 2015 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------ -------- -------- -------- --------
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for seed funds 23 - 23 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for seed funds (53) - (53) -
Forward foreign exchange contracts used for hedging (86) - (86) -
------------------------------------------------------------ -------- -------- -------- --------
(116) - (116) -
------------------------------------------------------------ -------- -------- -------- --------
There have been no transfers between levels in any of the
reported periods.
Basis for classification of financial instruments classified as
Level 2 within the fair value hierarchy
Both forward foreign exchange contracts are classified as Level
2. These instruments are traded on an active market. The fair value
of forward foreign exchange contracts may be established using
interpolation of observable market data rather than a quoted
price.
11) Related parties
Related parties of the Group include key management personnel,
close family members of key management personnel, subsidiaries, the
EBT and the seed funds.
Key management personnel
The compensation given to key management personnel is as
follows:
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
GBP'000 GBP'000 GBP'000
------------------------------ ----------- ----------- ----------
Short-term employee benefits 2,243 1,938 3,894
Post-employment benefits 83 139 280
Share-based payments 600 555 989
2,926 2,632 5,163
------------------------------ ----------- ----------- ----------
The dividends paid to key management personnel in the six months
ended 30 September 2016 totalled GBP954,074 (year ended 31 March
2016: GBP1,963,285; six months ended 30 September 2015:
GBP1,019,193).
12) Post reporting date events
No adjusting or significant non-adjusting events have occurred
between the reporting date and the date of approval.
Product classification
Record has historically reported AUME and management fees
between four core products, being Dynamic Hedging, Passive Hedging,
Currency for Return and Cash & other.
However, clients may also elect for mandates with combined
hedging and return-seeking objectives, which cannot readily be
separated into hedging and return-seeking components. Therefore, to
reflect such mandates held not only with current clients but also
with potential future clients, a new product category has been
introduced: multi-product mandates. This new classification does
not represent a new service line, rather seeks to redefine the
boundaries between existing products, and combinations of
products.
To assist in understanding the changes, AUME, management fees
and management fee rates by product under both historic and revised
conventions have been presented.
AUME for the Multi-product classification will be based on the
chargeable size of those mandates, in order to maintain the clear
link between AUME, fee levels and management fees. This change in
definition gives rise to an AUME adjustment in the reconciliation
below of -$0.8bn as at 30 September 2016 (31 March 2016: -$0.8bn;
30 September 2015: -$0.9bn). These adjustments do not represent a
genuine AUME flow.
AUME ($ billion) Management Management
fees fee rates
(GBP million) (bps p.a.)
---------------------------------- ---------------------------------- ----------------------------------
Historic presentation
30-Sep-16 30-Sep-15 31-Mar-16 30-Sep-16 30-Sep-15 31-Mar-16 30-Sep-16 30-Sep-15 31-Mar-16
--------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Dynamic
Hedging 7.5 8.7 7.9 4.0 4.4 8.3 14 15 15
Passive
Hedging 46.0 42.1 43.8 5.6 4.5 9.4 4 3 3
Currency
for Return 2.1 2.3 1.8 1.0 2.1 3.2 14 15 15
Cash &
other 0.2 0.2 0.2
--------------- ---------- ---------- ---------- ---------- ---------- ----------
Total 55.8 53.3 53.7 10.6 11.0 20.9
--------------- ---------- ---------- ---------- ---------- ---------- ----------
Mandate re-classification
30-Sep-16 30-Sep-15 31-Mar-16 30-Sep-16 30-Sep-15 31-Mar-16
--------------- ---------- ---------- ---------- ---------- ---------- ----------
Dynamic
Hedging -1.8 -2.1 -1.8 -1.4 -1.4 -2.8
Passive
Hedging -0.4 -0.4 -0.4 0.0 0.0 0.0
Currency
for Return -1.2 -1.7 -1.2 -0.5 -1.7 -2.4
Multi-product +3.4 +4.2 +3.4 +1.9 +3.1 +5.2
Cash &
other 0.0 0.0 0.0
--------------- ---------- ---------- ---------- ---------- ---------- ----------
Total 0.0 0.0 0.0 0.0 0.0 0.0
--------------- ---------- ---------- ---------- ---------- ---------- ----------
AUME redefinition
30-Sep-16 30-Sep-15 31-Mar-16
--------------- ---------- ---------- ----------
Dynamic
Hedging 0.0 0.0 0.0
Passive
Hedging 0.0 0.0 0.0
Currency
for Return 0.0 0.0 0.0
Multi-product -0.8 -0.9 -0.8
Cash &
other 0.0 0.0 0.0
--------------- ---------- ---------- ----------
Total -0.8 -0.9 -0.8
--------------- ---------- ---------- ----------
Revised presentation
30-Sep-16 30-Sep-15 31-Mar-16 30-Sep-16 30-Sep-15 31-Mar-16 30-Sep-16 30-Sep-15 31-Mar-16
--------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Dynamic
Hedging 5.7 6.6 6.1 2.6 3.0 5.5 13 13 13
Passive
Hedging 45.6 41.7 43.4 5.6 4.5 9.4 4 3 3
Currency
for Return 0.9 0.6 0.6 0.5 0.4 0.8 17 19 20
Multi-product 2.6 3.3 2.6 1.9 3.1 5.2 20 18 19
Cash &
other 0.2 0.2 0.2
--------------- ---------- ---------- ---------- ---------- ---------- ----------
Total 55.0 52.4 52.9 10.6 11.0 20.9
--------------- ---------- ---------- ---------- ---------- ---------- ----------
Notes to Editors
This announcement includes information with respect to Record's
financial condition, its results of operations and business,
strategy, plans and objectives. All statements in this document,
other than statements of historical fact, including words such as
"anticipates", "expects", "intends", "plans", "believes", "seeks",
"estimates", "may", "will", "continue", "project" and similar
expressions, are forward-looking statements.
These forward-looking statements are not guarantees of the
Company's future performance and are subject to risks,
uncertainties and assumptions that could cause the actual future
results, performance or achievements of the Company to differ
materially from those expressed in or implied by such
forward-looking statements.
The forward-looking statements contained in this document are
based on numerous assumptions regarding Record's present and future
business and strategy and speak only as at the date of this
announcement.
The Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statements contained in this announcement whether as a result of
new information, future events or otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BIBDBLXBBGLR
(END) Dow Jones Newswires
November 18, 2016 02:00 ET (07:00 GMT)
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