TIDMREC
RNS Number : 4813R
Record PLC
15 June 2018
PRESS RELEASE
Record plc
15 June 2018
FINAL RESULTS ANNOUNCEMENT FOR THE YEARED 31 MARCH 2018
Record plc, the specialist currency manager, today announces its
audited results for the year ended 31 March 2018.
Financial headlines:
-- AUME(1) $62.2bn at 31 March 2018 (up 7%)
-- AUME GBP44.3bn at 31 March 2018 (down 5%)
-- Revenue of GBP23.8m (2017: GBP23.0m (as restated(2) ))
-- Profit Before Tax (PBT) of GBP7.3m (2017: GBP7.9m (as
restated(2) ))
-- Operating profit margin(3) of 31% (2017: 34%)
-- Robust financial position with net assets of GBP26.6m at 31
March 2018 (2017: GBP36.8m)
-- Basic EPS of 3.03p per share (2017: 2.91p)
-- Proposed final ordinary dividend for the year is 1.15p per
share, giving a total ordinary dividend in respect of the year of
2.30p per share (2017: 2.00p)
-- Special dividend declared for the year of 0.50p per share
(2017: 0.91p)
-- Company purchased approximately 22.3m shares for cancellation
in the year via Tender Offer, returning GBP10m to shareholders
Key developments:
-- Economic, political and market environment continues to
provide opportunities to engage with current clients and potential
clients across a broad spectrum of products
-- Changes in mix of fees on enhanced Passive Hedging products
adds further diversification in income streams
-- Continued investment in resources to maintain innovation and
service enhancement has contributed to margin compression
-- Currency Multi-Strategy fund launched in final quarter of the
financial year, increasing accessibility to a wider range of
investors
-- Office opened in Zürich during the year to support further
growth in Switzerland
(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.
(2) Revenue, gross profit, operating profit and profit before
tax for the comparative periods have been restated to reflect a
re-presentation of items previously included under other income, as
first disclosed in the results for the six-months ended 30
September 2017. As a result, operating profit and profit before tax
are now the same as the operating profit and profit before tax
previously disclosed as "underlying". A reconciliation of all items
under the historical and revised presentation is included under
note 13 to the financial statements.
(3) Operating profit margin is defined as operating profit
divided by revenue.
Commenting on the results, Neil Record, Chairman of Record plc,
said:
"This year, Record celebrates thirty-five years in the currency
markets. One of the main contributors to such longevity has been
the flexibility to take advantage of new opportunities as they
arise, and to adapt to meet new challenges.
"Such flexibility can be seen in the innovative changes made to
certain Passive Hedging mandates, which give opportunities for us
to reduce costs and to add further value for clients.
"These opportunities are now being recognised in commercial
terms, changing the mix in fees on such mandates and adding further
diversification to Record's income streams in the form of
performance fees, which over time are expected to match or exceed
foregone management fees.
"Notwithstanding the increase in revenue over the prior year,
this continued focus on investing in the business has contributed
to a decrease in our operating margin from 34% to 31%.
"Continued investment in resources and systems supports our
model of providing innovative and tailored currency solutions
alongside premium levels of client service, and allows Record to
remain at the vanguard of product innovation and to maintain our
premium proposition. Over time we are confident that the continued
enhancement of all our products including Passive Hedging will lead
to further growth opportunities."
Analyst briefing
There will be a presentation for analysts at 9.30am on Friday 15
June 2018 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, Ollie Hoare +44 20 3128 8100
Consolidated statement of comprehensive income
Year ended 31 March
Restated
2018 2017
GBP'000 GBP'000
--------- ---------
Revenue 23,834 22,952
Cost of sales (311) (298)
--------- ---------
Gross profit 23,523 22,654
Administrative expenses (16,424) (15,067)
Other income or expense 173 157
--------- ---------
Operating profit 7,272 7,744
Finance income 66 112
Finance expense (10) -
--------- ---------
Profit before tax 7,328 7,856
Taxation (1,182) (1,540)
--------- ---------
Profit after tax and total comprehensive
income for the year 6,146 6,316
Earnings per share for profit attributable
to the equity holders of the Group
during the year
Basic earnings per share 3.03p 2.91p
Diluted earnings per share 2.98p 2.90p
--------- ---------
Consolidated statement of financial position
As at 31 March
Restated
2018 2017
GBP'000 GBP'000
-------- ---------
Non--current assets
Property, plant and equipment 910 881
Intangible assets 228 245
Investments 1,115 -
Deferred tax assets 86 102
-------- ---------
Total non--current assets 2,339 1,228
-------- ---------
Current assets
Trade and other receivables 6,775 6,972
Derivative financial assets 266 53
Money market instruments with maturities > 3 months 10,198 18,102
Cash and cash equivalents 12,498 19,120
-------- ---------
Total current assets 29,737 44,247
-------- ---------
Total assets 32,076 45,475
-------- ---------
Current liabilities
Trade and other payables (2,630) (3,013)
Corporation tax liabilities (399) (804)
Financial liabilities (2,467) (4,779)
Derivative financial liabilities (29) (48)
Total current liabilities (5,525) (8,644)
Total net assets 26,551 36,831
-------- ---------
Equity
Issued share capital 50 55
Share premium account 2,237 1,971
Capital redemption reserve 26 20
Retained earnings 24,238 34,785
-------- ---------
Total equity 26,551 36,831
-------- ---------
Chairman's statement
This year, Record celebrates thirty-five years in the currency
markets, underlining our strength and resilience in a continually
challenging and evolving environment.
Overview
Such resilience is only possible through our commitment to our
clients, which in turn is due to the flexibility of the business
and its staff to take advantage of new opportunities as they arise,
and to adapt to meet new challenges.
With this in mind, Record has seen a year of investment in
resources and systems. These investments support our ability to
offer innovative and differentiated products to our clients and to
maintain our premium levels of service, as well as to address new
regulatory requirements, such as under MiFID II.
Regulation in the foreign exchange market continues to play a
pivotal role in the move towards cost transparency. In our role of
acting as agent for our clients, we put the utmost importance on
integrity and acting solely in our clients' best interests, and in
promoting the highest standards of transparency and market conduct.
In this respect, we fully support and endorse all efforts made to
increase transparency, to encourage best practice and to maintain
the highest levels of integrity by all foreign exchange market
participants. We were therefore delighted to sign up to both the FX
Global Code and the LGPS Investment Code of Transparency during the
year, and have become a signatory to the UN-supported Principles
for Responsible Investment since the end of the year.
Group strategy
Our core strategy remains to achieve and maintain trusted
adviser status so as to grow our relationships with current and
potential clients, and to provide market-leading products and
service levels. In order to achieve this, the Group continues to
invest in its talented people, in innovation and in systems.
In my statement last year, I highlighted the opportunities for
saving costs and adding value for clients on certain types of
Passive Hedging mandates using opportunities created by the
emergence of a gap between interest rates implied by forward FX
rates and actual market interest rates - this gap being known in
the FX markets as "basis". These opportunities are now being
recognised in commercial terms, through innovative changes made to
some enhanced Passive Hedging mandates. There has been a change in
mix of fees on these mandates from management fee only to reduced
management fee plus a performance fee element. The first
performance fees under these changes could be recognised in the
current year.
This innovative product development gives the business a level
of exposure to market performance even in passive mandates. This
adds further diversification to Record's income streams,
potentially leading to fees exceeding those earned on a management
fee only basis.
The Group also recognises the importance of progress in its
distribution strategy. During the year an office was opened in
Zürich to enhance our current relationships in Switzerland, and to
support further growth in that market. A Currency Multi-Strategy
fund was launched towards the end of the year, recognising the need
to offer an alternative vehicle to investors for whom a pooled fund
is more suitable than a segregated mandate. It was also pleasing to
note the start of a new segregated Multi-Strategy mandate in a
rekindled market (Australia) for Record, in the quarter following
the year end.
Capital and dividend
In the previous financial year, the Board confirmed a change in
capital policy which aims to ensure retained capital broadly
equivalent to one year's worth of future estimated overheads
(excluding variable remuneration), in addition to capital assessed
as required for regulatory purposes, for working capital purposes
and for investing in new opportunities for the business.
In my statement last year I confirmed that the Board was
considering a return of excess capital to shareholders. A Tender
Offer was subsequently approved at General Meeting on 14 July 2017,
and the Company purchased approximately 22.3 million ordinary
shares (approximately 10% of the then-outstanding share capital)
for cancellation, returning just over GBP10 million to
shareholders.
In line with the Group's dividend policy, the Board is
recommending a final ordinary dividend of 1.15 pence per share,
which would represent a 15% increase in the ordinary full year
dividend to 2.30 pence per share. This includes a specific increase
of 10% offsetting the decrease in issued shares cancelled following
the Tender Offer in July. The interim dividend of 1.15 pence per
share was paid on 22 December 2017, and the final ordinary dividend
of 1.15 pence per share, subject to shareholders' approval, will be
paid on 1 August 2018 to shareholders on the register at 29 June
2018.
The Board has maintained its policy of declaring a special
dividend equal to the excess of earnings per share over ordinary
dividends and any increase in the Group's capital requirements. A
marginal increase in the Group's assessment of its Pillar II
regulatory capital requirement in conjunction with the anticipated
increase in costs for the current financial year increases capital
required under the Group's policy. The net increase in capital
requirements is equal to approximately 0.23 pence per share, and as
a result the Board is announcing a special dividend of 0.50 pence
per share to be paid simultaneously with the final dividend,
thereby taking total dividends for the year to 2.80 pence per
share, compared to earnings per share of 3.03 pence.
In the future, it remains the Board's intention to pursue a
progressive ordinary dividend policy, with dividends expected to be
paid equally in respect of an interim and a final dividend. In
setting the interim and final dividends, the Board will be mindful
of setting a level of ordinary 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. The Board intends to continue its approach of
considering returning to shareholders any excess of earnings over
the sum of ordinary dividends for the financial year and increased
capital requirements, normally in the form of special
dividends.
The Board will continue to consider ordinary dividends and other
distributions to shareholders on a "total distribution" basis. The
total distribution for any year will be at least covered by
earnings, and will always be subject to the financial performance
of the business, the market conditions at the time and to any
further capital assessed as required under the policy described
above.
The Board
The Senior Independent Director, David Morrison, will no longer
be deemed independent from 1 October 2018. A formal search process
overseen by the Nomination Committee commenced early in 2017 with a
view to appointing a new independent director to the Board prior to
the end of David's tenure. In this respect we were pleased to
announce the appointment of Tim Edwards to the Board as
non-executive director, effective 21 March 2018.
Tim brings a wealth of experience to the Board from his
background in advising, leading and investing, in particular in
high-growth businesses in biotechnology and related fields. His
skills and expertise especially in the areas of corporate
development and people management will be highly relevant to
Record's continued development, and my Board colleagues and I are
delighted to welcome him to the Board.
Outlook
Although this financial year saw fewer political shocks than
that preceding it, the world still seems to be in a period of rapid
change - globalisation is being challenged and the threat of
protectionism and trade wars is growing. In such times, financial
markets, including foreign exchange markets, will continue to be
impacted by ongoing geopolitical developments and instability.
Such developments provide opportunities for the Group to engage
with both current and prospective clients, and to use our
innovative and flexible approach in tailoring our products to meet
specific client objectives. All of this is directed towards
delivering sustainable, long-term growth for the business and
sustainable long-term returns for our shareholders.
The continued success of the Group is due to the support of our
clients and to the talented people within, providing innovation and
thought-leadership as well as the highest levels of client service.
On behalf of the Board, I would like to take this opportunity to
thank everyone and to look forward to further opportunities and
growth in the year ahead.
Neil Record
Chairman
14 June 2018
Chief Executive Officer's statement
In a year when sterling's strength presented revenue headwinds,
in contrast to the previous financial year, Record achieved revenue
growth of 4%. Continued investments to enhance our products and
services, as well as increased occupancy costs, led to a reduction
in operating margin to 31%, and a 7% reduction in profit before
tax.
Record's management is confident that these investments will
create further opportunities to grow the business in the current
financial year, with a diverse portfolio of well-positioned
services in both currency risk management and return-seeking
strategies.
Market overview
The year to 31 March 2018 saw a period of relative calm in
financial markets, due to improvements in developed market growth
prospects and the apparent lack of inflationary pressures. In
contrast to the previous year, political outcomes were much as
anticipated and were not a major source of market uncertainty.
Historically low asset price volatility was therefore a major theme
for the year, though this ended somewhat abruptly early in 2018.
With a lack of political stimulus, trends in the FX market were
driven primarily by economic surprises, in particular Eurozone
growth.
Investment performance
Dynamic Hedging for US clients generated modestly negative
returns, although the low hedge ratios maintained by Record's
process meant that clients kept most of the gains from a broadly
weak US dollar. Performance for UK clients was mixed by
currency.
In return-seeking programmes, Multi-Strategy mandates generated
negative returns, although Record's track record since inception
continues to be supportive of further sales of this product.
Asset flows and financial performance
AUME increased by 7% in US dollar terms over the financial year
to $62.2 billion, and decreased by 5% in sterling terms to GBP44.3
billion. Net outflows of $1.2 billion in the year represented
aggregate net outflows from hedging of $2.2 billion (predominantly
represented by net outflows from Dynamic Hedging of $1.7 billion),
offset by net inflows to Currency for Return, Multi-product and
cash of $0.6 billion, $0.3 billion and $0.1 billion respectively.
The aggregate impact of external factors (i.e. equity and other
market movements and the impact of exchange rates over the period)
was to increase AUME by $5.1 billion and the effect of changes to
portfolio sizes for some Currency for Return mandates with defined
volatility targets increased AUME by $0.1 billion. Client numbers
increased to 60. The anticipated mandate changes set out in April's
Fourth Quarter Trading Update, resulting in net inflows of $0.5
billion to Passive Hedging and $0.3 billion to Multi-Strategy, and
one net additional client, have now all taken place.
Revenues increased by 4% to GBP23.8 million, notwithstanding the
impact of sterling strength on the conversion of the 87% of
management fees that are denominated in currencies other than
sterling. Record's costs before variable remuneration grew by 13%,
largely attributable to the 11% growth in personnel costs due to
continued investment in additional headcount in order to maintain
innovation and enhancement of our services. As a result the Group's
operating margin reduced from 34% to 31%, and profit before tax
fell by 7% to GBP7.3 million. Basic earnings per share of 3.03
pence represented a 4% increase on the prior financial year, taking
into account the Tender Offer undertaken in July 2017.
Strategic progress
Record's strategic progress over the year can be measured
against each of the strategic objectives set out in the Annual
Report 2017.
Client relationships - our strategy of building trusted
individual relationships with clients and their advisers remains
unchanged. The Group benefits from the diversification amongst its
clients, by location, client type and objective, in that any given
period typically sees a variety of different themes predominate.
During the financial year, our business in Switzerland, long a core
market, continued to be focused largely on Passive Hedging. The
challenges in hedging to Swiss francs, particularly in a rising US
dollar interest rate environment, mean that Switzerland has led
much of our innovation in Passive Hedging. This innovation has
created opportunities to add value for clients, which in some cases
has led to those clients altering their fee structure to include a
performance-related element, as discussed in the Fourth Quarter
Trading Update.
In the US, the dollar has broadly been weak. As a result,
interest in currency hedging has diminished; we believe this to be
temporary and cyclical rather than structural. The UK market
continues to be more challenging, despite some recovery in
sterling, and we see Record's best prospects here in identifying
opportunities for specialist and differentiated hedging services.
Currency for Return in general, and Multi-Strategy in particular,
is much less dependent in perception on the client's base currency,
and we have continued to see growing interest. This has been
demonstrated by the new mandate that has started in this financial
year, and has encouraged us to launch the Record Currency
Multi-Strategy Fund.
Innovation - as outlined above, the enhancement of existing
products and development of new ones is a constant feature at
Record, driven by clients' needs and market opportunities. Much of
our focus in the financial year has been on developing Passive
Hedging to take advantage of market opportunities without changing
the client's hedge ratio, thereby reducing costs and adding value.
As well as identifying and monitoring market opportunities, we have
invested in the resources required to make investment decisions on
a dynamic basis.
Continued enhancement is also a feature of Dynamic Hedging and
Currency for Return strategies, with research in particular on
adding further strategies to Multi-Strategy. We equally invest in
operational and implementation capabilities. Although the reversal
of the introduction of mandatory variation margin on FX forwards
for many of our clients has meant that fewer clients than
anticipated have had to introduce this, we see growing
opportunities to use this capability for clients choosing to
exchange margin.
People - we continue to attract, retain and develop high-quality
staff, principally through intern programmes and graduate and
early-stage career hires. We then focus on internal development and
retention of these individuals. When recruiting staff early in
their careers some attrition is inevitable, but this also creates a
growing pool of alumni with whom we maintain strong
relationships.
We have largely succeeded in retaining key staff in a
highly-competitive employment market. During the year we have
brought much of our recruiting activity in-house, with the
intention of maintaining consistently high standards at lower cost
than using external recruitment agents. We participate in industry
remuneration benchmarking exercises, and regularly review
remuneration across the firm to ensure that we remain competitive,
whilst recognising increased individual contributions through
promotions. The increase in personnel costs (excluding variable
remuneration) of 11% has reflected the increase in staff numbers to
support product innovation and enhancement, and ultimately future
growth.
Risk management - the Group takes a proactive approach to
developing its systems, people and processes, in order to improve
management of operational risk and to meet the demands of emerging
regulatory requirements. Much of the systems development focus
during the financial year was on meeting the requirements of MiFID
II, which we were pleased to complete in time for the 3 January
2018 deadline. We have continued to extend the scope of enhanced
systems for exposure capture and rebalancing processes for Hedging
mandates, and to invest in our cyber-security defences. The Group
has developed a contingency plan should the UK's exit from the
European Union result in the loss of "passporting" permissions,
although implementation of this plan was paused given the
commitment by both UK and EU authorities to a transition period
extending to December 2020.
Growth - we have achieved growth in client numbers (59 to 60),
AUME ($58.2 billion to $62.2 billion), management fees (GBP22.7
million to GBP23.5 million) and revenues (GBP23.0 million to
GBP23.8 million) over the period. We have invested in people across
the business, with headcount growing from 75 at 31 March 2017 to 83
at 31 March 2018. We continue to focus on growth opportunities in
our core markets of the UK, continental Europe in particular
Switzerland, and North America, as well as selectively pursuing
opportunities in other markets.
Profitability - the Group's profitability has been restrained by
the decision to invest in additional headcount to maintain
innovation and service enhancement, as well as by increased office
occupancy costs. Record's management continues to be confident that
these investments will lead to further growth opportunities across
Record's product range. Record's profit before tax decreased from
GBP7.9 million to GBP7.3 million over the period, and the operating
margin has decreased from 34% to 31%.
Outlook
With respect to new business, we are seeing a gratifyingly
diverse range of opportunities across client locations, investor
types and objectives. The investments we are continuing to make in
service enhancement, in particular but not limited to Passive
Hedging, are expected to result in new opportunities with both
current and prospective clients, including in Europe and in
Switzerland in particular. In the US, recent US dollar weakness has
temporarily diminished interest in hedging, but Multi-Strategy
continues to be well-positioned, and the recently-launched fund is
expected to make it accessible to a wider range of investors than
previously. We continue to explore further opportunities in other
markets, such as Australia.
From a financial perspective, the move, in the case of some
enhanced Passive Hedging mandates, to performance fee structures
means that management fee revenues will be reduced, although we
continue to expect performance fees to match or exceed the foregone
management fees over time. All of Record's management and staff
remain focused on maintaining and enhancing our relationships with
existing clients, as well as developing new client relationships,
so as to continue to grow the business.
James Wood-Collins
Chief Executive Officer
14 June 2018
Key Performance Indicators
Measuring our performance against our strategy
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 FY-18 FY-17 FY-16 FY-15 FY-14
AUME at 31 March $62.2bn $58.2bn $52.9bn $54.7bn $51.3bn
- US dollars(4)
Client numbers at
31 March 60 59 58 55 48
Operating profit
margin(5) 31% 34% 33% 35% 33%
Basic earnings per
share ("EPS") 3.03 p 2.91 p 2.55 p 2.66 p 2.48 p
-------- -------- -------- -------- --------
(4) As a currency manager Record manages only the impact of
foreign exchange and not the underlying assets of its clients,
therefore its AUM (Assets Under Management) are notional. 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.
5Revenue, gross profit, operating profit and profit before tax
for the comparative periods have been restated to reflect a
re-presentation of items previously included under other income, as
first disclosed in the results for the six months ended 30
September 2017. As a result, operating profit and profit before tax
are now the same as the operating profit and profit before tax
previously disclosed as "underlying". A reconciliation of all items
under the historical and revised presentation is included under
note 13 to the financial statements.
How we performed this year
-- AUME increased by +7% in US dollar terms but decreased by -5%
in sterling terms;
-- Client numbers remained at similar levels to last year,
growing by +1 and reached 60 at the end of the year;
-- Operating profit margin decreased to 31% for the year as a
result of the continued investment in resources to enhance products
and client service; and
-- Basic EPS increased by 4% for the year, as the result of two
factors - profit after tax fell by 3% whilst the GBP10 million
share buy back in July 2017 reduced the number of issued shares by
approximately 10%.
Business review
Market review
For the most part, the year to 31 March 2018 saw a period of
relative calm in financial markets, as improvements in developed
market growth prospects and the apparent lack of inflationary
pressures created a supportive environment for risk assets. In
addition, and in contrast to the previous year, outcomes on the
political front were much as anticipated and were not a major
source of market uncertainty. Historically low asset price
volatility was therefore a major theme for the year, though this
ended somewhat abruptly early in 2018. With a lack of political
stimulus, trends in the FX market were driven primarily by
fundamental economic surprises, with euro strength standing out in
particular. A lack of substantial changes to banking regulation
over the past year led to a continuation of the dislocations
between FX forwards and the money markets (FX basis).
Monetary policy and interest rates
Interest rates in developed markets remained low in relation to
the historic norms, although central banks began to show signs of
differentiation in their respective policy cycles. Those that
raised interest rates faced a combination of reduced slack in the
economy (in the US), wage and inflation pressures from stabilising
commodity prices (in Canada), and an inflation target overshoot (in
the UK). On the other end of the spectrum the Bank of Japan ("BoJ")
and Swiss National Bank ("SNB") both committed to continued low
interest rates. In between was the European Central Bank ("ECB"),
which maintained expansionary policy but continued to guide market
expectations around its normalisation strategy.
The Federal Reserve followed through on its promise of further
policy normalisation, contrary to market expectations at the start
of the year. An initial rate hike in June was followed by two more;
one in December and one at newly appointed Federal Reserve Chairman
Jerome Powell's first meeting in March. Underlying measures of US
inflation were broadly unchanged and remained below the Federal
Reserve's target. Despite a seemingly supportive economic backdrop,
the US dollar fell on a trade-weighted basis, continuing a trend
that first emerged in late 2016.
The ECB maintained its ultra-accommodative policy stance, though
altered the implementation of policy by lowering the size of
monthly bond purchases and extending the expected end date of its
QE programme. Easy policy in the Eurozone was overshadowed by an
economic revival which saw Eurozone growth outstrip that of other
G4 economies. Markets, and by extension the euro, responded
accordingly with the single currency appreciating notably. Europe's
busy political calendar did little to upset the upward trend as the
election of Emmanuel Macron in France and the formation of a
coalition government in Germany contrasted with the success of more
Eurosceptic parties in Italy's general election.
The Bank of England went some way towards reversing emergency
stimulus deployed following the Brexit referendum, and, having
turned cautiously optimistic on growth, hiked rates by 0.25% in
November. In addition to a less severe than projected slowdown
following the vote, the decision was simplified by inflation which,
as a result of sterling's decline in 2016, peaked above 3%. Though
there has been a general perception of sterling strength, this was
as much a story of US dollar weakness, as the pound appreciated
only modestly on a trade-weighted basis.
The Swiss National Bank continued to pursue exceptionally low
interest rates as inflationary pressures failed to materialise. The
Swiss franc showed mixed performance and depreciated notably versus
the euro yet strengthened against the US dollar. Overall, the franc
fell on a trade-weighted basis, and this was broadly reflective of
diverging monetary policy prospects vis-à-vis the rest of the
world, and the absence of severe political upset in Europe.
The Japanese yen traded in a range versus the US dollar for most
of the financial year before strengthening in the first quarter of
2018. The BoJ continued to target a 10-year yield of 0%, though
markets began to price the possibility of an increase in the target
yield. This came despite only a modest improvement in core
inflation - which remains well below the BoJ target - and was in
reaction to hawkish verbal communications from BoJ Governor
Haruhiko Kuroda. The Bank officially maintained that inflation
would be allowed to overshoot the 2% target before monetary
tightening occurs.
FX basis developments
Over the past few years, the historical relationship between the
interest rates observed in the money markets and those implied by
the FX forward market has weakened. This dislocation is known as
the FX basis.
Over the year, there has been no major change in the overall
basis trends, although the magnitude of dislocations has varied
across the developed markets due to currency specific factors.
Brexit
This financial year covered the first half of the two-year
Article 50 notice period. The ebb and flow of expectations as to
the consequences of the UK's exit from the EU was felt both in
currency markets and in Record's contingency planning.
As noted above, it became evident throughout the year that the
immediate economic consequences of the Brexit referendum vote in
June 2016 had been less severe than expected in some quarters at
least. Despite the EU negotiating principle that "nothing is agreed
until everything is agreed", the year saw a gradual diminishing of
concerns over a "hard" Brexit, as some consensus began to emerge
between the UK and the EU. This was first evident in agreement in
principle on the financial terms of separation, citizens' right and
the Irish border in December 2017. Similar agreement on an
implementation or transition period was reached in March 2018. This
consensus as well as the improved economic backdrop contributed to
sterling's appreciation over the year, particularly against the US
dollar.
The caveat that "nothing is agreed until everything is agreed"
continues to hold however, and significant risks to the negotiation
process remain. In particular, major issues such as customs
arrangements have yet to be agreed, and the positions reached in
principle on the items set out above may fail to be translated into
detailed agreements. Furthermore any withdrawal agreement is
subject to political risk in the form of ratification by UK and EU
parliaments.
The emergent consensus on a transition period has affected
Record's implementation of its Brexit contingency plan. Since the
referendum, we have developed a plan focused on continuing to serve
existing clients, and market to new clients, across the remaining
EU27 countries. If this plan had to be implemented for March 2019,
Record would anticipate relocating a modest number of existing
staff to Dublin by the fourth quarter of 2018. Since the
anticipated transition period would preserve the legal and
regulatory status quo until December 2020, we have paused the
implementation of some aspects of this plan. We are aware though of
the remaining risks, and are further preparing for the risk that
the transition period falls through.
Regulation
Record's main regulatory focus during the financial year, in
addition to ensuring compliance with established regulatory regimes
to which Record adheres around the world, was on implementing the
requirements of new regulation. Foremost among these were the
revised EU Markets in Financial Instruments Directive, known as
MiFID II. This wide-ranging regulation had consequences across the
business, of which the most impactful were in post-trade
transparency and transaction reporting. We were pleased to achieve
full compliance by the deadline of 3 January 2018, and have now
embedded all the relevant requirements in our business-as-usual
processes.
The European Market Infrastructure Regulation, or EMIR, had also
been expected to impose widespread changes, in particular by
imposing mandatory variation margin on foreign exchange forward
contracts for a wide range of EU market participants, including
many of Record's clients. We had long advocated against this
approach, since the regulation was first proposed in 2014, and so
we were ultimately satisfied to see the range of market
participants affected by this reduced in scope in late 2017.
Record reviewed and modified its processes to meet its
obligations to safeguard personal data in order to meet the
requirements of the General Data Protection Regulation ("GDPR")
when it came into force on 25 May 2018.
Operating review
This section discusses Record's enhanced Passive Hedging
service, including its performance track record, before reviewing
investment performance of Record's other products.
Enhanced Passive Hedging
Over the past four years, Record has developed an enhanced
Passive Hedging service. This aims to reduce the cost of hedging by
introducing new flexibility into the implementation of currency
hedges, without changing the hedge ratio. Typically this involves
varying the hedge implementation to reduce costs in two key areas,
being the direct costs of maintaining the hedge (e.g. trading
spreads), and the interest rate differential embedded in the
forward contracts. While the strategy is partly systematic, the
episodic nature of many opportunities exploited by the strategy
means it requires a higher level of discretionary oversight than
has historically been associated with Passive Hedging.
The table below shows the total value added relative to a
fixed-tenor benchmark for an enhanced Passive Hedging programme for
a representative account.
Return for year Return since
to 31 March 2018 inception(6)
--------------------------------
Value added by enhanced Passive 0.12% 0.11% p.a.
Hedging programme relative
to a fixed-tenor benchmark
------------------ --------------
6Since inception in October 2014
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 year, US investors saw gains from
currency on international assets when valuing positions in US
dollars, as the US dollar depreciated against all G10 currencies.
Record's Dynamic Hedging product decreased hedge ratios in line
with US dollar weakness, and allowed clients to keep the majority
of these gains.
Mandates for our UK-based Dynamic Hedging clients performed as
expected in terms of allowing clients to benefit from periods of
strengthening foreign currencies, whilst being generally protected
against periods of weakening foreign currencies. The programmes
generated mixed results in line with differences in hedgeable
weights and active programme periods. Hedging gains came primarily
from hedging the US dollar, while euro losses were contained as
hedge ratios were reduced over the quarter in response to sterling
movements.
Record's principal Currency for Return product during the year
was Currency Multi-Strategy. This combines a number of diversified
return streams. Record's Multi--Strategy mandates combining Carry,
Emerging Market, Momentum and Value strategies delivered negative
performance over the period.
Return for 12 months to Volatility since
31 March 2018 Return since inception inception
Fund name Gearing % % p.a. % p.a.
--------------------------- -------- -------------------------- ----------------------- --------------------------
FTSE FRB10 Index Fund(7) 1.8 (2.61%) 1.44% 7.04%
Emerging Market Currency
Fund(8) 1 1.01% 1.51% 6.17%
--------------------------- -------- -------------------------- ----------------------- --------------------------
7 FTSE FRB10 Index Fund return data is since inception in
December 2010, GBP base.
8 Record Currency - Emerging Market Currency Fund return data is
since inception in December 2010, GBP base.
Return for 12 months to 31
March 2018 Return since inception Volatility since inception
Index/composite returns % % p.a. % p.a.
------------------------------ ----------------------------- ----------------------- ---------------------------
FTSE Currency FRB10 GBP Excess
return(9) (1.47%) 2.22% 4.57%
Record Multi--Strategy
composite(10) (1.74%) 1.73% 2.41%
9 FTSE Currency FRB10 GBP Excess return data is since December
1987, GBP base.
10 Record Multi--Strategy composite is since inception in July
2012, showing excess returns data gross of fees in USD base, and
has been scaled to a 4% target volatility
Gearing
The Currency for Return product group allows clients to select
the level of exposure they desire in their currency programmes. The
segregated mandates allow clients to individually pick the level of
gearing and/or volatility target. The pooled funds have
historically offered clients a range of gearing and target
volatility levels.
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 segregated mandate size or the
pooled fund's net assets. This is limited by the willingness of
counterparty banks to take exposure to the segregated client or
pooled fund. Gearing in this context does not involve
borrowing.
AUME development
AUME expressed in US dollar terms increased by 7% during the
year ended 31 March 2018, finishing at $62.2 billion (2017: $58.2
billion).
AUME expressed in sterling decreased to GBP44.3 billion (2017:
GBP46.6 billion), broadly reflecting sterling strength versus the
US dollar (+12%) and the Swiss franc (+7%) over the twelve
months.
AUME development ($bn)
Opening AUME Net client Portfolio Markets FX effects Closing AUME
at 1 April inflows scaling at 31 March
2017 adjustment 2018
58.2 -1.2 +0.1 +1.3 +3.8 62.2
----------- ------------ -------- ----------- -------------
AUME movements
The Group has seen net outflows of $1.2 billion during the year
arising from inflows from both new and existing clients of $9.9
billion offset by outflows of $11.1 billion.
Passive Hedging AUME grew by 10% to $53.0 billion at the end of
the year (2017: $48.2 billion). Marginal net outflows of -$0.5
billion were more than offset by the net impact of market factors
(+$1.7 billion). Movements in exchange rates contributed a further
+$3.6 billion.
Dynamic Hedging AUME decreased by -$2.0 billion ending the year
at $4.3 billion, the majority of the decrease being represented by
net outflows of -$1.7 billion. As reported during the year,
Record's remaining UK-based Dynamic Hedging clients either
converted their mandates to Passive Hedging or terminated in the
first half of the year as a result of the negative returns and cash
flows experienced linked to persistent weakness in sterling
following the EU referendum. External factors had an impact of
--$0.3 billion.
The Currency for Return product reached the fifth anniversary of
its live track record in July 2017 and saw AUME inflows of +$0.6
billion in the first quarter, ending the year at $1.6 billion
(2017: $1.0 billion).
Multi-product AUME increased from $2.5 billion to $3.0 billion
at year end, with inflows of +$0.3 billion from existing clients
and the net impact of external factors of +$0.2 billion.
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 increased AUME
by $1.3 billion in the year to 31 March 2018.
Further detail on the composition of assets underlying our
Hedging and Multi-product mandates is provided below to help
illustrate more clearly the impact of equity and fixed income
market movements on these mandate sizes.
AUME composition by underlying asset class as at 31 March
2018
Equity % Fixed income % Other %
Dynamic Hedging 96% -% 4%
Passive Hedging 29% 42% 29%
Multi-product -% -% 100%
--------- --------------- --------
Forex
As 89% of the Group's AUME is non--US dollar denominated,
foreign exchange movements may have an impact on AUME when
expressing non-US dollar denominated AUME in US dollars. Foreign
exchange movements increased AUME by $3.8 billion over the year.
This movement does not have an equivalent impact on the sterling
value of fee income.
At 31 March 2018, the split of AUME by base currency was 15% in
sterling, 58% in Swiss francs, 11% in US dollars, 14% in euros and
2% in other currencies.
Product mix
AUME composition by product
31 March 18 31 March 17
US $bn % US $bn %
------- ------- -----
Dynamic Hedging 4.3 7% 6.3 11%
Passive Hedging 53.0 85% 48.2 83%
Currency for
Return 1.6 3% 1.0 2%
Multi-product 3.0 5% 2.5 4%
Cash 0.3 --% 0.2 --%
------- ----- ------- -----
Total 62.2 100% 58.2 100%
------- ----- ------- -----
Aggregate Hedging AUME represented 92% of the total AUME,
remaining broadly consistent with the prior year (2017: 94%).
However, the mix within Hedging products has changed with UK-based
Dynamic Hedging clients choosing to either transfer to lower-margin
Passive Hedging or to terminate during the first half of the year
as a result of negative returns and cash flows following a period
of sterling weakness after the EU referendum. Currency for Return
and Multi-product strategies increased during the year
predominantly as a result of aggregate net inflows of +$0.9
billion, and together now account for 8% of total AUME (2017:
6%).
Client numbers
Client numbers reached 60 at 31 March 2018 (2017: 59). The net
increase of one client over the year was comprised of seven new
clients and six clients whose mandates were terminated.
AUME composition by product and base currency
Dynamic Hedging Passive Hedging Currency for Return Multi-product
Base 31 March 31 March 31 March 31 March 31 March 31 March 17 31 March 18 31 March 17
currency 18 17 18 17 18
----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------
Sterling - GBP 1.7bn GBP 6.6bn GBP 7.8bn - - - -
US dollar USD 4.3bn USD 4.3bn USD 1.0bn USD 0.7bn USD 0.4bn USD 0.7bn USD 1.2bn USD 0.2bn
Swiss - - CHF 32.2bn CHF 31.6bn - - CHF 2.6bn CHF 2.3bn
franc
Euro - - EUR 7.1bn EUR 5.4bn - - - -
Canadian - - - - CAD 0.5bn CAD 0.4bn - -
dollar
Singapore - - SGD 0.1bn SGD 0.1bn - - - -
dollar
Swedish - - SEK 2.6bn SEK 2.4bn - - - -
krona
----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------
Financial review
The Group saw increased revenues in the year and continues to
invest in resources to further enhance its differentiated products
and services.
Overview
The Group's AUME grew to $62.2 billion (+7%) representing the
highest ever year end AUME reported for the Group, when expressed
in US dollars.
Asset net outflows were -$1.2 billion (2017 net inflows: +$3.2
billion), and increases in underlying equity and other market
movements totalled +$5.1 billion (2017: +$5.4 billion). Client
numbers remained broadly consistent with last year, reaching 60 at
the year-end (2017: 59).
The Group's total revenue increased by 4% over last year,
notwithstanding the reversal in part of last year's tailwind due to
sterling's depreciation following the UK referendum vote and its
effect on those Group revenues denominated in the base currencies
of our clients, when retranslated into sterling.
The Group continued to invest in resources to maintain the level
of innovation and product enhancement necessary to maintain
Record's differentiated and premium product and service offering
over the long term. Total operating expenditure (excluding variable
remuneration costs) increased by 13% over the prior year, including
increases in both personnel costs (+11%) and non-personnel costs
(+15%). Variable remuneration costs relating to the Group Profit
Share ("GPS") scheme decreased by 6% in line with the decrease in
operating profit (calculated before GPS).
The Group's operating profit margin decreased to 31% (2017: 34%)
for the year, and profit before tax decreased by 7% versus the
prior year.
Profit and loss (GBPm) 2018 2017
(restated)
Revenue 23.8 23.0
Cost of sales (0.3) (0.3)
------- ------------
Gross profit 23.5 22.7
Personnel (excluding GPS) (7.9) (7.1)
Non--personnel cost (5.4) (4.7)
Other income or expense 0.2 0.2
------- ------------
Total expenditure (excluding GPS) (13.1) (11.6)
GPS (3.1) (3.3)
------- ------------
Operating profit 7.3 7.8
------- ------------
Operating profit margin 31% 34%
Net interest received - 0.1
------- ------------
Profit before tax 7.3 7.9
Tax (1.2) (1.6)
------- ------------
Profit after tax 6.1 6.3
------- ------------
Revenue
Record's principal revenue is from management fees earned from
the provision of currency management services.
Revenue analysis (GBPm) 2018 2017
(restated)
Management fees 23.5 22.7
Performance fees - -
Other currency services income 0.3 0.3
----- ------------
Total 23.8 23.0
----- ------------
Record charges management fees to its clients based upon the
AUME of the product provided. Both Passive and Dynamic Hedging
typically have management fee only arrangements although Dynamic
and, more recently, enhanced Passive Hedging programmes can be
offered with 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 are normally invoiced on a quarterly basis,
although Record may invoice management fees for some of its larger
clients on a monthly basis. Performance fees are invoiced on the
basis agreed with the client, and can include quarterly,
six-monthly or annual performance periods.
Management fees
Management fees earned during the year increased by 3% to
GBP23.5 million (2017: GBP22.7 million), notwithstanding the impact
of sterling strength during the year on the conversion of
non-sterling denominated fees.
The year-on-year growth in Passive Hedging continues, with
Passive Hedging management fees increasing by 56% over the last
three years, and totalling GBP12.6 million for the year (2017:
GBP12.1 million). Passive Hedging management fees comfortably cover
the annual personnel costs of GBP7.9 million and the majority of
the non-personnel costs (excluding variable remuneration) of GBP5.4
million. The increase in Passive Hedging management fees was
primarily driven by the full-year effect of net AUME inflows
totalling $2.5 billion in the prior year, alongside growth in
equity and other market levels (+$1.7 billion) over the year
increasing the underlying size of these mandates.
Dynamic Hedging management fees reduced by 8% to GBP5.1 million
(2017: GBP5.6 million). Net outflows totalled $1.7 billion over the
year.
Inflows of $0.6 billion into Currency for Return mandates in the
year, alongside the full year effect of inflows of $0.3 billion in
the prior year, resulted in an 80% increase to related management
fees which totalled GBP1.8 million for the year. Total
Multi-product management fees remained at GBP4.0 million for the
year with fees from inflows of +$0.3 billion early in the year
offsetting the reduced fees arising from net outflows of $0.5
billion in the latter half of the prior year.
Management fees by product (GBPm) 2018 2017
Dynamic Hedging 5.1 5.6
Passive Hedging 12.6 12.1
Currency for Return 1.8 1.0
Multi-product 4.0 4.0
----- -----
Total 23.5 22.7
----- -----
Average management fee rates for all product lines have remained
broadly constant throughout the year ended 31 March 2018.
Average management fee rates by product (bps) 2018 2017
Dynamic Hedging 14 12
Passive Hedging 3 4
Currency for Return 16 15
Multi-product 18 20
----- -----
Aggregate Currency for Return fee rates on AUME can change as a
result of increasing or decreasing portfolio sizes for mandates
with defined volatility targets, where the fee rate is linked to
the target volatility. Certain Multi-Strategy portfolio sizes have
been increased as volatility in the underlying strategies has
fallen and as diversification between strategies has become
greater, reducing the volatility of the aggregate return to the
client. This effect may reverse in future periods. Fee rates based
on volatility targets have not changed during the period.
Performance fees
Performance fees can be earned from Currency for Return, Dynamic
Hedging and now more recently from some enhanced Passive Hedging
programmes, dependent on the individual client agreement. Record
had two Dynamic Hedging mandates during the year incorporating a
performance fee component, both of which were for UK-based clients.
As reported in October 2017, Record's remaining UK-based Dynamic
Hedging programmes ceased without any accrued performance fees. The
first performance fees capable of being earned under the enhanced
Passive Hedging programmes will be earned in the year ended 31
March 2019. There was no performance fee earned in the year (2017:
nil).
Other currency services income
Other currency services income totalled GBP0.3 million (2017:
GBP0.3 million) and consists of fees from ancillary currency
management services including revenue from the licensing agreement
with WisdomTree. Gains or losses made on derivative financial
instruments employed by the Group's seed funds or as a result of
hedging activities, and other FX adjustments which were previously
included within revenue as "other income" have been re-presented in
expenditure as "other income or expense". Details of the effect of
this presentational change are provided in note 29 to the financial
statements.
Expenditure
Operating expenditure
The Group continues to invest in personnel and resources to
maintain its innovative approach and its premium products and
levels of service. The enhanced Passive Hedging service has been
developed with a view to saving costs and adding value for those
Passive Hedging clients with the flexibility to take advantage of
the episodic nature of the opportunities arising. This additional
capability requires higher technical expertise and resource than
the core Passive Hedging product alone.
Group operating expenditure (excluding variable remuneration)
increased by 13% to GBP13.1 million for the year (2017: GBP11.6
million). Personnel costs for the year increased to GBP7.9 million,
an increase of 11% over the prior year reflecting the growth in
employee numbers, which rose from an average of 73 last year to 81
this year. The increase in non-personnel costs of 15% was driven
predominantly by the full-year impact of the increase in occupancy
costs associated with the new lease on larger offices for Record's
headquarters in Windsor and the move of the US office from Atlanta
to New York, both at higher market rentals than was previously the
case. The Group also signed a lease for the new office in Zürich
during the year (see note 23 of the financial statements for
further detail). One-off costs of GBP0.2 million were incurred in
the year relating to the Tender Offer in July 2017.
Group Profit Share Scheme
The Group operates a Group Profit Share Scheme such that a
long--term average of 30% of underlying 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 2018, the Group Profit Share Scheme is 30% of
pre--GPS operating profit. This represents GBP3.1 million, a
decrease of 6% over the previous financial year and in line with
Group financial performance. 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.
Operating profit and margins
Notwithstanding the increase to management fees and revenue for
the year, the continued investment in resources and the increase in
non-personnel costs has resulted in a 6% decrease in operating
profit for the year to GBP7.3 million, and a decrease in the Group
operating margin to 31% (2017: 34%).
Cash flow
The Group's year end cash and cash equivalents stood at GBP12.5
million (2017: GBP19.1 million). The cash generated from operating
activities before tax was GBP4.3 million (2017: GBP8.7 million);
the majority of the decrease year on year is the decrease in cash
of GBP4.1 million following the loss of "control" and subsequent
deconsolidation of the Record Currency - Emerging Market Currency
Fund (see note 12 for further details). GBP1.6 million was paid in
taxation (2017: GBP1.6 million) and GBP6.8 million paid in
dividends (2017: GBP3.6 million). During the year the Group
repurchased 22.3 million shares via a Tender Offer for cash of
GBP10 million.
At the year end, the Group held money market instruments with
maturities between three and twelve months, worth GBP10.2 million
(2017: GBP18.1 million). These instruments are managed as cash by
the Group but are not classified as cash under IFRS rules (see note
16 of the financial statements for more details).
Dividends
Shareholders received an interim ordinary dividend of 1.15 pence
per share paid on 22 December 2017, equivalent to GBP2.3 million.
As disclosed in the Chairman's statement, the Board is recommending
an increased ordinary dividend in line with the progressive
dividend policy and in addition a special dividend returning the
excess of this year's earnings over the total ordinary dividend and
increased capital requirements, to shareholders.
Consequently, the Board recommends paying a final ordinary
dividend of 1.15 pence per share, equivalent to GBP2.3 million, and
taking the overall ordinary dividend to 2.30 pence per share.
Simultaneously, the Board is also paying a special dividend of 0.5
pence per share (equivalent to GBP1.0 million), making the total
dividends paid for the year of GBP5.6 million equivalent to 92% of
total earnings of 3.03 pence per share. The total ordinary and
special dividend paid in respect of the prior year ended 31 March
2017, were 2.00 pence per share, and 0.91 pence per share
respectively.
Subject to shareholder approval, the final ordinary dividend
will be paid simultaneously with the special dividend on 1 August
2018 to shareholders on the register on 29 June 2018, the
ex--dividend date being 28 June 2018. All ordinary and special
dividends for the financial year will be fully covered by
earnings.
For the current and future financial years, the Board intends to
continue to pursue a progressive dividend policy and to consider
the return of excess earnings over ordinary dividends to
shareholders, potentially in the form of special dividends. On this
basis, such distributions to shareholders will be considered on a
"total distribution" basis, such that the total distribution for
any one financial year will at least be covered by earnings, whilst
always being subject to market conditions at the time, and to any
further excess capital assessed as required by the Board.
Financial stability and capital management
The Group's balance sheet is strong and liquid with total net
assets of GBP26.6 million at the end of the year, including current
assets managed as cash totalling GBP22.7 million. The business
remains cash generative, with net cash inflows from operating
activities of GBP2.7 million for the year.
The Board's capital policy is to retain minimum capital (being
equivalent to shareholders' funds) within the business broadly
equivalent to twelve months' worth of future estimated operating
expenses (excluding variable remuneration), plus capital assessed
as sufficient to meet regulatory capital requirements and working
capital purposes, and for investing in new opportunities for the
business. 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.
In July 2017, the Group returned GBP10 million of excess capital
to shareholders by a repurchase of shares via a Tender Offer,
whilst retaining a significant capital buffer in the business over
its regulatory requirements in line with the capital policy.
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. Both RCML and the Group submit semi--annual capital
adequacy returns to its regulator (FCA), and held significant
surplus capital resources relative to the regulatory financial
resource requirement throughout the year.
The Board has concluded that the Group is adequately capitalised
both to continue its operations effectively and to meet regulatory
requirements, due to the size and liquidity of 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 resources (GBPm) 2018 2017
Core Tier 1 capital 26.6 36.8
Deductions: intangible assets (0.2) (0.2)
------ ------
Regulatory capital resources 26.4 36.6
------ ------
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.
Viability statement
In accordance with the UK Corporate Governance Code, the
Directors have performed a robust assessment of the viability of
the Group considering the business model, the Group's expected
financial position, Board strategy and risk appetite, the Group's
solvency and liquidity and its principal risks. Based on this
assessment, the Directors have a current and reasonable expectation
that the Group will continue to operate and meet its liabilities as
they fall due up to 31 March 2021.
The Directors review the financial forecasts and position of the
Group on an ongoing basis. The capital and dividend policy reflects
the stated objectives of maintaining a strong balance sheet whilst
allowing the Group the flexibility to adapt its products and
services to market conditions, or to take advantage of emerging
business opportunities. The Group's strategy and principal risks
are assessed and reviewed regularly by the Board, as well as by the
Executive Committee and operational sub-committees within the
Group.
In assessing the viability of the Group the Directors have
considered the principal risks affecting the Group, which underpin
the basis for the stress testing of the business plan conducted as
part of the Group's Internal Capital Adequacy Assessment Process
("ICAAP"). The ICAAP uses severe but plausible stress scenarios
assuming the crystallising of a number of these principal risks to
assess the options for mitigating the impact on the Group, and for
ensuring that the ongoing viability of the Group is sustained.
Some of the stress scenarios include the following factors and
assumptions:
-- Market downturn - causing a decrease to AUME (whether through
outflows or a reduction in value due to the link to other financial
markets) and hence revenue and profitability;
-- Operational risk event - causing AUME outflows and potentially reputational damage; and
-- Market intervention - by a government or regulatory body
rendering some of the Group's products ineffective and hence a
reduction in AUME.
The scenarios assume mitigating actions including the potential
for non-critical cost reductions and reassessing the dividend
policy, although any mitigating actions would need to be reassessed
depending on the specific circumstances and expected duration of
the factors affecting the business model at the time. The
possibility that the impact and timing of factors potentially
affecting the viability of the Group could be more severe than
assumed plausible for the above testing should also be noted.
The market and regulatory environment in which the Group
operates continues to evolve at a pace. The Directors consider a
three year horizon over which to assess the viability of the Group
to be appropriate under such circumstances, since any further
planning horizon provides a greater level of uncertainty to
financial projections. This approach is consistent with that of the
ICAAP.
Upon review of the results of the stress testing, the Directors
concluded that the Group would have sufficient capital and liquid
resources to withstand the stressed scenarios and ensure its
ongoing viability, based on current information and the three-year
viability horizon.
Our business model and Brexit
The British government invoked Article 50 on 29 March 2017,
beginning the two year countdown to the UK withdrawing from the
European Union. Notwithstanding the more recent progress made in
negotiations, uncertainty remains on the possible outcomes and
timeframes for many aspects of the withdrawal.
Approximately 90% of our revenue was sourced from clients based
outside of the EU27, so any decrease in our current EU27-sourced
revenue would prove challenging, although not fundamental to our
ability to continue to operate. However, the Group intends to take
all reasonable steps to maintain its ability to continue to service
current EU clients and to gain more EU clients in the future. In
this respect, we continue to closely monitor the progress of
negotiations, and have made sufficient progress with contingency
plans that we would expect would allow us to achieve this
objective, no matter what the outcome of the negotiations,
including any transition period.
For this reason, we consider Brexit to represent a level of risk
to the continued operation and viability of the business that is
lower than those principal risks used for the stress scenarios and
modelled through the ICAAP.
Consolidated statement of comprehensive income
Year ended 31 March
Restated
2018 2017
Note GBP'000 GBP'000
----- --------- ---------
Revenue 3 23,834 22,952
Cost of sales (311) (298)
----- --------- ---------
Gross profit 23,523 22,654
Administrative expenses (16,424) (15,067)
Other income or expense 173 157
----- --------- ---------
Operating profit 4 7,272 7,744
Finance income 66 112
Finance expense (10) -
----- --------- ---------
Profit before tax 7,328 7,856
Taxation 6 (1,182) (1,540)
----- --------- ---------
Profit after tax and total comprehensive
income for the year 6,146 6,316
Earnings per share for profit
attributable to the equity holders
of the Group during the year
Basic earnings per share 7 3.03p 2.91p
Diluted earnings per share 7 2.98p 2.90p
----- --------- ---------
The comparative period has been restated. A reconciliation of
the previously published statement of comprehensive income to the
restated statement is provided in note 29.
Consolidated statement of financial position
As at 31 March
Restated
2018 2017
Note GBP'000 GBP'000
----- -------- ---------
Non--current assets
Property, plant and equipment 10 910 881
Intangible assets 11 228 245
Investments 12 1,115 -
Deferred tax assets 13 86 102
----- -------- ---------
Total non--current assets 2,339 1,228
----- -------- ---------
Current assets
Trade and other receivables 14 6,775 6,972
Derivative financial assets 15 266 53
Money market instruments with maturities > 3 months 16 10,198 18,102
Cash and cash equivalents 16 12,498 19,120
----- -------- ---------
Total current assets 29,737 44,247
----- -------- ---------
Total assets 32,076 45,475
----- -------- ---------
Current liabilities
Trade and other payables 17 (2,630) (3,013)
Corporation tax liabilities 17 (399) (804)
Financial liabilities 18 (2,467) (4,779)
Derivative financial liabilities 15 (29) (48)
Total current liabilities (5,525) (8,644)
Total net assets 26,551 36,831
----- -------- ---------
Equity
Issued share capital 19 50 55
Share premium account 2,237 1,971
Capital redemption reserve 26 20
Retained earnings 24,238 34,785
----- -------- ---------
Total equity 26,551 36,831
----- -------- ---------
The comparative period has been restated. A reconciliation of
the previously published statement of financial position to the
restated statement is provided in note 29.
Consolidated statement of changes in equity
Year ended 31 March 2018
Called up share Share premium Capital redemption Retained earnings Total equity
capital account reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------------------- ------------------- ------------------ -------------
As at 1 April 2017 55 1,971 20 34,785 36,831
Profit and total
comprehensive
income for the
year - - - 6,146 6,146
Dividends paid - - - (6,810) (6,810)
Share buy-back and
cancellation (5) - 6 (10,000) (9,999)
Own shares acquired
by EBT - - - (952) (952)
Release of shares
held by EBT - 266 - 1,241 1,507
Share-based payment
reserve movement - - - (172) (172)
------------------- ------------------- ------------------- ------------------ -------------
Transactions with
shareholders (5) 266 6 (16,693) (16,426)
As at 31 March 2018 50 2,237 26 24,238 26,551
------------------- ------------------- -------------------
Year ended 31 March 2017 (restated)
Called up share Share premium Capital redemption Retained earnings Total equity
capital account reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------------------- ------------------- ------------------ -------------
As at 1 April 2016 55 1,899 20 31,715 33,689
Profit and total
comprehensive
income for the
year - - - 6,316 6,316
Dividends paid - - - (3,592) (3,592)
Own shares acquired
by EBT - - - (775) (775)
Release of shares
held by EBT - 72 - 992 1,064
Share-based payment
reserve movement - - - 129 129
------------------- ------------------- ------------------- ------------------ -------------
Transactions with
shareholders - 72 - (3,246) (3,174)
As at 31 March 2017 55 1,971 20 34,785 36,831
------------------- ------------------- ------------------- ------------------ -------------
The comparative period has been restated. A reconciliation of
the previously published statement of changes to equity to the
restated statement is provided in note 29.
Consolidated statement of cash flows
Year ended 31 March
Restated
2018 2017
Note GBP'000 GBP'000
----- --------- ---------
Net cash inflow from operating activities 24 2,746 7,107
Cash flow from investing activities
Purchase of intangible software (82) (189)
Purchase of property, plant and
equipment (236) (899)
Sale/(purchase) of money market
instruments with maturity > 3 months 7,904 (5,082)
Interest received 77 112
----- --------- ---------
Net cash inflow/(outflow) from investing
activities 7,663 (6,058)
Cash flow from financing activities
Exercise of share options - 28
Purchase of own shares (10,367) (221)
Dividends paid to equity shareholders 8 (6,810) (3,592)
----- --------- ---------
Cash outflow from financing activities (17,177) (3,785)
----- --------- ---------
Net decrease in cash and cash equivalents
in the year (6,768) (2,736)
Effect of exchange rate changes 146 136
Cash and cash equivalents at the
beginning of the year 19,120 21,720
Cash and cash equivalents at the
end of the year 12,498 19,120
Closing cash and cash equivalents
consist of:
Cash 4,411 7,457
Cash equivalents 8,087 11,663
----- --------- ---------
Cash and cash equivalents 16 12,498 19,120
----- --------- ---------
The comparative period has been restated. A reconciliation of
the previously published statement of cash flows to the restated
statement is provided in note 29.
Company statement of financial position
As at 31 March
2018 2017
Note GBP'000 GBP'000
----- -------- --------
Non--current assets
Investments 12 5,288 4,197
----- -------- --------
Total non--current assets 5,288 4,197
----- -------- --------
Current assets
Cash and cash equivalents 16 2 2
----- -------- --------
Total current assets 2 2
----- -------- --------
Total assets 5,290 4,199
----- -------- --------
Current liabilities
Trade and other payables 17 (1,093) (11)
Corporation tax liabilities 17 - (67)
----- -------- --------
Total current liabilities (1,093) (78)
----- -------- --------
Total net assets 4,197 4,121
----- -------- --------
Equity
Issued share capital 19 50 55
Share premium account 1,809 1,809
Capital redemption reserve 26 20
Retained earnings 2,312 2,237
----- -------- --------
Total equity 4,197 4,121
----- -------- --------
The Company's total comprehensive income for the year (which is
principally derived from intra-group dividends) was GBP16,688,038
(2017: GBP3,855,425).
Company statement of changes in equity
Year ended 31 March 2018
Called Share premium Capital Retained Total shareholders'
up share account redemption earnings equity
capital reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- -------------- ------------ ---------- ---------------------
As at 1 April
2017 55 1,809 20 2,237 4,121
Profit and
total comprehensive
income for
the year - - - 16,688 16,688
Share buy back (5) - 6 (10,000) (9,999)
Dividends paid - - - (6,810) (6,810)
Share option
reserve movement - - - 197 197
---------- -------------- ------------ ---------- ---------------------
Transactions
with shareholders (5) - 6 (16,613) (16,612)
As at 31 March
2018 50 1,809 26 2,312 4,197
---------- -------------- ------------ ---------- ---------------------
Year ended 31 March 2017
Called Share Capital
up share premium redemption Retained Total shareholders'
capital account reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- ------------ ---------- --------------------
As at 1 April
2016 55 1,809 20 1,773 3,657
Profit and total
comprehensive
income for the
year - - - 3,855 3,855
Dividends paid - - - (3,592) (3,592)
Share option
reserve movement - - - 201 201
---------- --------- ------------ ---------- --------------------
Transactions
with shareholders - - - (3,391) (3,391)
As at 31 March
2017 55 1,809 20 2,237 4,121
---------- --------- ------------ ---------- --------------------
Company statement of cash flows
Year ended 31 March
2018 2017
Note GBP'000 GBP'000
----- --------- --------
Net cash inflow from operating activities 24 1,015 -
Cash flow from investing activities
Dividends received 16,810 3,592
Investment in subsidiaries (16) -
Investment in seed funds (1,000) -
Interest received 1 -
----- --------- --------
Net cash inflow from investing activities 15,795 3,592
Cash flow from financing activities
Purchase of own shares 19 (10,000) -
Dividends paid to equity shareholders 8 (6,810) (3,592)
----- --------- --------
Cash outflow from financing activities (16,810) (3,592)
----- --------- --------
Net increase in cash and cash equivalents in the year - -
Cash and cash equivalents at the beginning of the year 2 2
----- --------- --------
Cash and cash equivalents at the end of the year 2 2
----- --------- --------
Closing cash and cash equivalents consist of:
Cash 2 2
Cash equivalents - -
----- --------- --------
Cash and cash equivalents 2 2
----- --------- --------
Notes to the financial statements
For the year ended 31 March 2018
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 provide 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 italic text.
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 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 2018. 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 set out in 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.
Restatement of prior year financial statements
Management has reviewed the basis of preparation of the Group's
consolidated financial statements, and has implemented two changes,
which have a material impact on the presentation of the primary
statements. The first change relates to the classification of the
external investment in the seed funds (formerly classified as
non-controlling interest) and the second change to the presentation
of other income.
Although the changes give rise to material changes on the face
of the statement of comprehensive income, the statement of
financial position and the statement of changes in equity, there is
no change to profit attributable to owners of the parent, earnings
per share or equity attributable to owners of the parent.
A reconciliation of the primary financial statements for the
previously published comparative period (year ended 31 March 2017)
to the restated primary statements is provided in note 29, together
with a reconciliation of the primary financial statements for the
year ended 31 March 2018 prepared under the historic basis of
interpretation to the primary financial statements under the new
basis of interpretation.
Impact of new accounting standards
There have been no new or amended standards adopted in the
financial year beginning 1 April 2017 which have had a material
impact on the Group or Company.
The following standards and interpretations relevant to the
Group's operations were issued by the IASB but are not yet
mandatory:
IFRS 9 - Financial Instruments
IFRS 9 is effective for annual periods beginning on or after 1
January 2018. IFRS 9 replaces the classification and measurement
models for financial instruments in IAS 39 "Financial Instruments:
recognition and measurement" with three classification categories:
amortised cost, fair value through profit or loss and fair value
through other comprehensive income.
Under IFRS 9, the Group's business model and the contractual
cash flows arising from its investments in financial instruments
will determine the appropriate classification. The Group has
assessed its balance sheet assets in accordance with the new
classification requirements, and does not anticipate any changes in
the classification and measurement for any of the Group's financial
assets or liabilities.
In addition, IFRS 9 introduces an expected loss model for the
assessment of impairment of financial assets. The current (incurred
loss) model under IAS 39 requires the Group to recognise impairment
losses when there is objective evidence that an asset is impaired.
Under the expected loss model, impairment losses are recorded if
there is an expectation of credit losses, even in the absence of a
default event. This model is not applicable for investments held at
fair value through profit or loss. Therefore the assets on the
Group's balance sheet to which the expected loss model applies are
receivables (note 14), which do not have a history of credit risk
or expected future recoverability issues. Therefore, no change to
the carrying values of the Group's assets is expected as a result
of adoption of the new standard.
The new hedging requirements under IFRS 9, which are optional to
adopt, provide increased flexibility in relation to hedge
effectiveness in order to better align hedge accounting with a
company's risk management policies. The Group has not applied hedge
accounting in the past, and does not anticipate applying the IFRS 9
hedge accounting requirements in the future.
The Group does not anticipate that IFRS 9 will have a material
impact on its reported results but notes that IFRS 9 also requires
increased disclosures in relation to the Group's risk management
strategy.
IFRS 15 - Revenue from Contracts with Customers
IFRS 15 is effective for annual periods beginning on or after 1
January 2018, replacing IAS 18 "Revenue" and related
interpretations. IFRS 15 establishes a single, principles-based
revenue recognition model to be applied to all contracts with
customers. The core principle of IFRS 15 is that an entity should
recognise revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the entity expects to be entitled to in exchange for those
goods or services. IFRS 15 introduces a five-step approach to
revenue recognition:
(1) identify the contract with the customer;
(2) identify the performance obligations in the contract;
(3) determine the transaction price;
(4) allocate the transaction price to the performance obligations in the contract; and
(5) recognise revenue when or as the entity satisfies a performance obligation.
IFRS 15 is more prescriptive in terms of its recognition
criteria, with certain specific requirements in respect of variable
fee income such that it is only recognised where the amount of
revenue would not be subject to significant future reversals. New
disclosure requirements are also introduced.
The Group has assessed how these changes impact the timing of
management and performance fee recognition in the context of its
existing investment management agreements. Management fee revenues
are recorded on a monthly basis as the underlying currency
management service occurs, there are no performance or other
obligations (excluding standard duty of care requirements).
Performance fee revenues are not considered to be highly probable
until the end of a contractual performance period and therefore are
not recognised until they crystallise, at which time they are
payable by the client and cannot be clawed-back. There are no other
performance obligations or services provided which suggest these
have been earned either before or after crystallisation date.
As a result of this assessment the Group has not identified any
material changes to current revenue recognition principles.
The Group does not anticipate that IFRS 15 will have a material
impact on its reported results.
IFRS 16 - Leases
IFRS 16 is effective for annual periods beginning on or after 1
January 2019 and replaces IAS 17 "Leases" and related
interpretations. This introduces a comprehensive model for the
identification of lease arrangements and accounting treatment for
both lessors and lessees, which distinguishes leases and service
contracts on the basis of whether an identified asset is controlled
by a customer. There is substantially no change to the accounting
requirements for lessors. IFRS 16 requires operating leases, where
the Group is the lessee, to be included on the Group's balance
sheet, recognising a right-of-use ("ROU") asset and a related lease
liability representing the present value obligation to make lease
payments. Certain optional exemptions are available under IFRS 16
for short-term (less than 12 months) and low-value leases. The ROU
asset will be assessed for impairment annually (incorporating any
onerous lease assessments) and depreciated on a straight-line
basis, adjusted for any remeasurements of the lease liability. The
lease liability will subsequently be adjusted for lease payments
and interest, as well as the impact of any lease modifications.
IFRS 16 also requires extensive disclosures detailing the impact of
leases on the Group's financial position and results.
The adoption of IFRS 16 will result in a significant gross-up of
the Group's reported assets and liabilities on the balance sheet.
The operating lease expense which is currently recognised within
Operating lease rentals costs in the Group's income statement (note
23) will no longer be incurred and instead depreciation expense (of
the ROU asset) and interest expense (unwind of the discounted lease
liability) will be recognised. This will also result in a different
total annual expense profile under the new standard (with the
expense being front-loaded in the earlier years of the lease term
as the discount unwind on the lease liability reduces over
time).
The Group has considered the available transition options, and
has provisionally decided to apply modified retrospective option 1
and currently estimates that the impact will be a gross-up of up to
GBP1.6 million for ROU lease assets and GBP1.8 million in relation
to lease liabilities, with GBP0.2 million deducted from
brought-forward reserves on transition date in 2019. The initial
reserves impact will be offset over time by a lower annual Group
income statement charge, as the total charge over the life of each
lease is the same as under the current IAS 17 requirements.
No other standards or interpretations issued and not yet
effective are expected to have an 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 its subsidiaries drawn up to 31 March 2018.
Subsidiaries are entities controlled by the Company and are
included from the date that control commences until the date that
control ceases. 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.
An Employee Benefit Trust has been established for the purposes
of satisfying certain share-based awards. As the Group has "de
facto" control over this special purpose entity, the trust is fully
consolidated within the financial statements.
The Group has investments in four 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 financial statements. 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.
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. In the case of the funds
controlled by the Group, the interests of any external investor is
recognised as a financial liability as investments in the fund are
not considered to be equity instruments.
The financial statements 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
financial statements incorporate the financial performance of the
seeded funds in the year ended 31 March 2018 and the financial
position of the seeded funds as at 31 March 2018.
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's total comprehensive income for
the year includes a profit of GBP16,688,038 attributable to the
Company (2017: GBP3,855,425).
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 the functional currency of the parent company. Foreign currency
transactions are translated into the functional currency of the
parent company using prevailing exchange rates which are updated on
a monthly basis. 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 (par) value 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 1.b. describes the basis which the Group uses to determine
whether it controls seed funds, further detail on consolidation of
seed funds is provided in note 12. Note 20 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.
Other currency services income includes fees from signal hedging
and fiduciary execution.
2018 Restated 2017
Revenue by product type GBP'000 GBP'000
-------- --------------
Management fees
Dynamic Hedging 5,111 5,542
Passive Hedging 12,569 12,130
Currency for Return 1,803 1,025
Multi-Product 4,014 4,021
Total management fee income 23,497 22,718
Performance fee income - -
Other currency services income 337 234
Total revenue 23,834 22,952
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.
2018 Restated
2017
Revenue by geographical region GBP'000 GBP'000
-------- ---------
Management and performance fee income
UK 2,834 3,863
US 6,478 4,979
Switzerland 10,404 11,576
Other 3,781 2,300
-------- ---------
Total management and performance fee income 23,497 22,718
-------- ---------
Other currency services income 337 234
-------- ---------
Total revenue 23,834 22,952
-------- ---------
Other currency services income is 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 2018, three clients individually
accounted for more than 10% of the Group's revenue. The three
largest clients generated revenues of GBP4.0 million, GBP3.4
million and GBP2.9 million in the year (2017: four largest clients
generated revenues of GBP3.7 million, GBP3.4 million, GBP2.9
million and GBP2.5 million in the year).
4. Operating profit
Operating profit for the year is stated after
charging/(crediting):
2018 2017
GBP'000 GBP'000
-------- --------
Staff costs 11,062 10,434
Depreciation of property, plant and equipment 206 99
Amortisation of intangibles 99 243
Auditor fees
Fees payable to the Group's auditor for
the audit of the Company's annual accounts 45 45
Fees payable to the Group's auditor for
the audit of subsidiary undertakings 39 40
Fees payable to the Group's auditor and
its associates for other services:
Corporation tax services - -
Audit-related assurance services 26 24
Other non-audit services 55 44
Operating lease rentals: land and buildings 596 502
(Gain)/loss on forward FX contracts held
to hedge cash flow (424) 506
Gain on derivative financial instruments
held by seed funds (53) (612)
Exchange loss/(gain) on revaluation of external
holding in seed funds 406 (420)
Other exchange losses/(gains) 265 (450)
-------- --------
5. Staff costs
The average number of employees, including Directors, employed
by the Group during the year was:
2018 2017
Corporate 8 9
Client relationships 15 14
Investment research 15 12
Operations 26 22
Risk management 5 5
Support 12 11
Annual average 81 73
The aggregate costs of the above employees, including Directors,
were as follows:
2018 2017
GBP'000 GBP'000
-------- --------
Wages and salaries 8,280 7,499
Social security costs 1,184 1,059
Pension costs 432 376
Other employment benefit costs 1,166 1,500
-------- --------
Aggregate staff costs 11,062 10,434
-------- --------
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:
2018 Restated 2017
GBP'000 GBP'000
-------- --------------
Profit before taxation 7,328 7,856
-------- --------------
Taxation at the standard rate of tax in the UK of 19% (2017: 20%) 1,392 1,571
Tax effects of:
Other disallowable expenses and non--taxable income 51 18
Capital allowances for the year higher than depreciation (20) (14)
Higher tax rates on subsidiary undertakings 5 11
Adjustments recognised in current year in relation to the current tax of prior years (10) -
Adjustments recognised in current year in relation to Research and Development claims for (240) -
the years ended 31 March 2016 and 31 March 2017
Other temporary differences 4 (46)
-------- --------------
Total tax expense 1,182 1,540
-------- --------------
The tax expense comprises:
Current tax expense 1,166 1,599
Deferred tax expense/(income) 16 (59)
-------- --------------
Total tax expense 1,182 1,540
-------- --------------
The standard rate of UK corporation tax for the year is 19%
(2017: 20%). 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 2018 was GBP1,182,498
(2017: GBP1,539,580) which was 16% of profit before tax (2017:
20%).
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.
2018 2017
Weighted average number of shares used
in calculation of basic earnings per share 202,613,441 217,401,660
Effect of potential dilutive ordinary shares
- share options 3,855,924 591,036
------------ ------------
Weighted average number of shares used
in calculation of diluted earnings per
share 206,469,365 217,992,696
------------ ------------
pence pence
Basic earnings per share 3.03 2.91
Diluted earnings per share 2.98 2.90
------ ------
The potential dilutive shares relate to the share options
granted in respect of the Group's Share Scheme (see note 20). There
were share options in place at the beginning of the year over
13,656,564 shares. During the year 1,760,583 share options were
exercised, and a further 1,527,834 share options lapsed or were
forfeited. The Group granted 3,975,000 share options with a
potentially dilutive effect during the year. Of the 14,343,147
share options in place at the end of the period, all 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
2018 totalled GBP6,810,361 (3.235 pence per share) which comprised
a final dividend in respect of the year ended 31 March 2017 of
GBP2,564,080 (1.175 pence per share), a special dividend in respect
of the year ended 31 March 2017 of GBP1,985,798 (0.91 pence per
share) and an interim dividend for the year ended 31 March 2018 of
GBP2,260,483 (1.15 pence per share).
The dividends paid by the Group during the year ended 31 March
2017 totalled GBP3,591,603 (1.65 pence per share) which comprised a
final dividend in respect of the year ended 31 March 2016 of
GBP1,790,888 (0.825 pence per share) and an interim dividend for
the year ended 31 March 2017 of GBP1,800,715 (0.825 pence per
share).
For the year ended 31 March 2018, a final ordinary dividend of
1.15 pence per share has been proposed and a special dividend of
0.50 pence per share has been declared.
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 GBP432,180 (2017:
GBP375,845).
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 to 5 years
-- Fixtures and fittings - 4 to 6 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
improvements equipment and fittings Total
2018 GBP'000 GBP'000 GBP'000 GBP'000
------------- ---------- ------------- --------
Cost
At 1 April
2017 635 542 304 1,481
Additions 26 177 33 236
Disposals - (48) (13) (61)
------------- ---------- ------------- --------
At 31 March
2018 661 671 324 1,656
------------- ---------- ------------- --------
Depreciation
At 1 April
2017 36 423 141 600
Charge for
the year 114 50 42 206
Disposals - (48) (12) (60)
------------- ---------- ------------- --------
At 31 March
2018 150 425 171 746
------------- ---------- ------------- --------
Net book
amounts
At 31 March
2018 511 246 153 910
------------- ---------- ------------- --------
At 1 April
2017 599 119 163 881
------------- ---------- ------------- --------
Leasehold Computer Fixtures
improvements equipment and fittings Total
2017 GBP'000 GBP'000 GBP'000 GBP'000
------------- ---------- ------------- --------
Cost
At 1 April
2016 534 542 244 1,320
Additions 635 106 158 899
Disposals (534) (106) (98) (738)
------------- ---------- ------------- --------
At 31 March
2017 635 542 304 1,481
------------- ---------- ------------- --------
Depreciation
At 1 April
2016 534 483 222 1,239
Charge for
the year 36 46 17 99
Disposals (534) (106) (98) (738)
------------- ---------- ------------- --------
At 31 March
2017 36 423 141 600
------------- ---------- ------------- --------
Net book
amounts
At 31 March
2017 599 119 163 881
------------- ---------- ------------- --------
At 1 April
2016 - 59 22 81
------------- ---------- ------------- --------
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 - 2 to 5 years
Amortisation periods and methods are reviewed annually and
adjusted if appropriate.
The Group's intangible assets comprises both purchased software
and the capitalised cost of software development. The carrying
amounts can be analysed as follows:
Software Total
2018 GBP'000 GBP'000
--------- --------
Cost
At 1 April 2017 1,377 1,377
Additions 82 82
Disposals (1) (1)
--------- --------
At 31 March 2018 1,458 1,458
--------- --------
Amortisation
At 1 April 2017 1,132 1,132
Charge for the year 99 99
Disposals (1) (1)
--------- --------
At 31 March 2018 1,230 1,230
--------- --------
Net book amounts
At 31 March 2018 228 228
--------- --------
At 1 April 2017 245 245
--------- --------
Software Total
2017 GBP'000 GBP'000
--------- --------
Cost
At 1 April 2016 1,189 1,189
Additions 189 189
Disposals - -
--------- --------
At 31 March 2017 1,378 1,378
--------- --------
Amortisation
At 1 April 2016 890 890
Charge for the year 243 243
Disposals - -
--------- --------
At 31 March 2017 1,133 1,133
--------- --------
Net book amounts
At 31 March 2017 245 245
--------- --------
At 1 April 2016 299 299
--------- --------
Intangible assets includes 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 GBP179,664 (2017: GBP174,941). All amortisation
charges are included within administrative expenses.
12. Investments
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.
2018 2017
GBP'000 GBP'000
-------- --------
Investment in subsidiaries (at cost)
Record Currency Management Limited 10 10
Record Group Services Limited 10 10
Record Portfolio Management Limited 10 10
Record Currency Management (US) Inc. - -
Record Currency Management (Switzerland) GmbH 16 -
Record Fund Management Limited - -
N P Record Trustees Limited - -
-------- --------
Total investment in subsidiaries (at cost) 46 30
-------- --------
Capitalised investment in respect of share--based payments
Record Currency Management (US) Inc. 77 68
Record Group Services Limited 978 789
-------- --------
Total capitalised investment in respect of share--based payments 1,055 857
-------- --------
Total investment in subsidiaries 1,101 887
-------- --------
Particulars of subsidiary undertakings
Name Nature of business
Record Currency Management Currency management services
Limited (FCA registered)
Record Group Services Limited Management services to other
Group undertakings
Record Portfolio Management Dormant
Limited
Record Currency Management US advisory and service company
(US) Inc. (SEC and CFTC registered)
Record Currency Management Swiss advisory and service
(Switzerland) GmbH company
Record Fund Management Limited Dormant
N P Record Trustees Limited Dormant trust company
--------------------------------
The Group's interest in the equity capital of subsidiary
undertakings is 100% of the ordinary share capital in all cases.
Record Currency Management (US) Inc. is incorporated in Delaware
(registered office: Corporation Service Company, 251 Little Falls
Drive, Wilmington, DE 19808) and Record Currency Management
(Switzerland) GmbH is incorporated in Zürich (registered office:
Münsterhof 14, 8001 Zürich). All other subsidiaries are registered
in England and Wales with their registered office at Morgan House,
Madeira Walk, Windsor, Berkshire, SL4 1EP, UK.
Investment in funds
In addition to the subsidiaries listed above, the Company holds
investments in several funds These funds are seed investments,
which have various investment objectives and policies and are
subject to the terms and conditions of their offering
documentation. The principal activity of each is to invest capital
from investors in a portfolio of assets in order to provide a
return for those investors.
Group
Funds are consolidated on a line by line basis where the Group
has determined that a controlling interest exists through an
investment holding in the fund, in accordance with IFRS 10
"Consolidated Financial Statements". Otherwise, investments in
funds are measured at fair value through profit or loss.
The Group has controlled both the Record Currency - FTSE FRB10
Index Fund and the Record Currency - Strategy Development Fund
throughout the year ended 31 March 2018 and the comparative year,
the year ended 31 March 2017, and both were consolidated in full,
on a line-by-line basis in the Group's financial statements
throughout these periods.
The Group was in control of the Record Currency - Emerging
Market Currency Fund until 21 March 2018, at which point the Group
no longer consolidated the fund on a line-by-line basis, but the
Group did consolidate the fund in full on a line-by-line basis
until that date.
In February 2018, the Company invested in the Record - Currency
Multi-Strategy Fund. The Group has controlled this fund since
inception and the fund is consolidated in full on a line-by-line
basis.
Company
Investments in funds are measured at fair value through profit
or loss.
All four fund investments are presented within investments in
the Company statement of financial position.
Investment in funds Group Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Record Currency - FTSE FRB10
Index Fund - - 1,116 1,146
Record Currency - Emerging Market
Currency Fund 1,115 - 1,115 1,104
Record Currency - Strategy Development
Fund - - 952 1,060
Record - Currency Multi-Strategy
Fund - - 1,004 -
-------- -------- -------- --------
Total 1,115 - 4,187 3,310
-------- -------- -------- --------
All four fund entities are sub-funds of the Record Umbrella
Fund, an open-ended umbrella unit trust authorised in Ireland.
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.
2018 2017
GBP'000 GBP'000
-------- --------
(Charge)/credit to income statement
in year (16) 59
Asset brought forward 102 43
-------- --------
Asset carried forward 86 102
-------- --------
The deferred tax asset consists of the tax effect of temporary
differences in respect of:
2018 2017
GBP'000 GBP'000
-------- --------
Deferred tax allowance on unvested share
options 98 191
Shortfall of taxation allowances over
depreciation on fixed assets (12) (89)
-------- --------
Total 86 102
-------- --------
At the year end the Group had deferred tax assets of GBP85,758
(2017: GBP101,606). At the year end there were share options not
exercised with an intrinsic value for tax purposes of GBP945,864
(2017: GBP1,006,095). 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.
An analysis of the Group's receivables is provided below:
2018 2017
GBP'000 GBP'000
-------- --------
Trade receivables 5,279 5,937
Accrued income 582 85
Other receivables 56 29
Prepayments 858 921
-------- --------
Total 6,775 6,972
-------- --------
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 2018. The carrying amount of
receivables whose terms have been renegotiated, that would
otherwise be past due or impaired is GBPnil (2017: 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 assets 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 other income and
expenditure.
2018 2017
Derivative financial assets GBP'000 GBP'000
-------- --------
Forward foreign exchange contracts held
to hedge non-sterling based assets 199 18
Forward foreign exchange contracts held
for trading 67 35
Total 266 53
2018 2017
Derivative financial liabilities GBP'000 GBP'000
-------- --------
Forward foreign exchange contracts held
to hedge non-sterling assets - (5)
Forward foreign exchange contracts held
for trading (29) (43)
-------- --------
Total (29) (48)
-------- --------
Derivative financial instruments held to hedge non-sterling
based assets
At 31 March 2018 there were outstanding contracts with a
principal value of GBP9,951,185 (31 March 2017: GBP7,786,158) 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 2018. The Group does
not apply hedge accounting.
The net gain or loss on forward foreign exchange contracts held
to hedge non-sterling based assets is as follows:
2018 2017
Derivative financial instruments held GBP'000 GBP'000
to hedge non-sterling based assets
-------- --------
Net gain/(loss) on forward foreign exchange
contracts at fair value through profit
or loss 424 (506)
-------- --------
Derivative financial instruments held for trading
The Record Currency - FTSE FRB10 Index Fund, the Record Currency
- Emerging Market Currency Fund and the Record - Currency
Multi-Strategy Fund, use forward foreign exchange contracts in
order to achieve a return. The Record Currency - Strategy
Development Fund may use 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
- Strategy Development, the Record Currency - FTSE FRB10 Index Fund
and the Record - Currency Multi-Strategy Fund were classified as
held for trading throughout the period. The derivative financial
instruments held by the Record Currency - Emerging Market Currency
Fund were classified as held for trading from inception until 21
March 2018 when the fund was deconsolidated from the Group
financial statements.
At 31 March 2018 there were outstanding contracts with a
principal value of GBP15,012,327 (31 March 2017:
GBP16,085,621).
The net gain or loss on derivative financial instruments held
for trading for the year was as follows:
2018 2017
Derivative financial instruments held for GBP'000 GBP'000
trading
-------- --------
Net gain on forward foreign exchange contracts
and foreign exchange options at fair value
through profit or loss 53 612
-------- --------
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 deposits and treasury bills with
maturities in excess of 3 months do not meet the definition of
short--term or highly liquid and are held for purposes other than
meeting short--term commitments. In accordance with IFRS, these
instruments are not categorised as cash or cash equivalents and are
disclosed as money market instruments with maturities >3
months.
Assets managed as cash Group Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Bank deposits with maturities
> 3 months 9,698 15,203 - -
Treasury bills with maturities
> 3 months 500 2,899 - -
-------- -------- -------- --------
Money market instruments with
maturities > 3 months 10,198 18,102 - -
-------- -------- -------- --------
Cash 4,411 7,457 2 2
Bank deposits with maturities
<= 3 months 8,087 11,663 - -
-------- -------- -------- --------
Cash and cash equivalents 12,498 19,120 2 2
-------- -------- -------- --------
Total assets managed as cash 22,696 37,222 2 2
-------- -------- -------- --------
Cash and cash equivalents Group Company
------------------ ------------------
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Cash and cash equivalents -
sterling 3,827 14,174 2 2
Cash and cash equivalents -
USD 2,680 1,026 - -
Cash and cash equivalents -
CHF 4,610 3,846 - -
Cash and cash equivalents -
other currencies 1,381 74 - -
-------- -------- -------- --------
Total cash and cash equivalents 12,498 19,120 2 2
-------- -------- -------- --------
The Group cash and cash equivalents balance incorporates the
cash and cash equivalents held by any fund deemed to be under
control of Record plc (refer to notes 1 and 12 for explanation of
accounting treatment). As at 31 March 2018, the cash and cash
equivalents held by the seed funds over which the Group had control
totalled GBP4,969,231 (31 March 2017: GBP5,140,828) and the money
market instruments with maturities > 3 months held by these
funds were GBP500,000 (31 March 2017: GBP2,899,233).
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
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Trade payables 325 418 - -
Amounts owed to Group undertaking - - 1,093 11
Other payables 4 82 - -
Other tax and social security 234 324 - -
Accruals 2,067 2,189 - -
-------- -------- -------- --------
Total 2,630 3,013 1,093 11
-------- -------- -------- --------
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
Current tax liabilities
Group Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Corporation tax 399 804 - 67
-------- -------- -------- --------
18. Financial liabilities
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. When Record plc is not the only investor in
such funds and the external investment instrument does not meet the
definition of an equity instrument under IAS 32 then the instrument
is classified as a financial liability. The financial liabilities
are measured at cost plus movement in value of the third party
investment in the fund.
Record has seeded four funds which have been active during the
year ended 31 March 2018.
The Record Currency - FTSE FRB10 Index 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
year. 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 - Emerging Market Currency Fund was under
the control of the Group until 21 March 2018, when the redemption
of units by two Record plc Directors meant that Record could no
longer control the fund as the combined holding of Record plc and
its Directors no longer constituted a majority interest from that
point onwards. This fund has therefore been consolidated into the
Group's financial statements until 21 March 2018.
In February 2018, the Company invested in the Record - Currency
Multi-Strategy Fund. The Group has controlled this fund since
inception and the fund is consolidated in full on a line-by-line
basis.
The mark to market value of units held by investors in these
funds other than Record plc are shown as financial liabilities in
the Group financial statements, in accordance with IFRS.
Mark to market value of external holding in seeded funds
consolidated into the accounts of the Record Group
Restated
2018 2017
GBP'000 GBP'000
-------- ---------
Record Currency - Emerging Market
Currency Fund - 4,308
Record Currency - FTSE FRB10 Index
Fund 459 471
Record - Currency Multi-Strategy 2,008 n/a
Fund
Record Currency - Strategy Development - -
Fund
-------- ---------
2,467 4,779
-------- ---------
The financial liabilities relate only to the fair value of the
external investors' holding in the seed funds, and are in no sense
debt.
Financial liabilities relating to the fair value of external
investors' holdings in the seed funds were previously classified in
equity as non-controlling interests. A reconciliation of the
historic presentation to the revised presentation is provided in
note 29.
19. Issued 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.
2018 2017
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 50 199,054,325 55 221,380,800
-------- ------------ -------- ------------
On 17 July 2017 a total of 22,326,475 ordinary shares were
purchased by the Company for a total cost of GBP10,000,028.15. The
share purchase was made following the Tender Offer announced on 21
June 2017 and approved by special resolution at the general meeting
on 14 July 2017. Following the share purchase, the 22,326,475
shares were cancelled.
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
2016 4,942,248
Adjustment for net sales by EBT (1,323,253)
------------
Record plc shares held by EBT as at 31 March
2017 3,618,995
Adjustment for net sales by EBT (1,225,563)
------------
Record plc shares held by EBT as at 31 March
2018 2,393,432
------------
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 20.
20. Share-based payments
During the year ended 31 March 2018 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 have been
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 allocated 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 GBP682,758 (2017: GBP733,858).
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.
Prior to 1 October 2017, if an individual elected to receive
Additional Shares, the Group simultaneously awarded a Matching
Share value amount using a multiple decided by the Remuneration
Committee. The multiple was dependent on the level of seniority of
the employee. The number of shares was 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 GBP141,078
(2017: GBP292,525).
From 1 October 2017, as a result of changes to the Group Profit
Share Scheme, Matching Shares are no longer awarded by the
group.
Shares awarded under the Group Profit Share Scheme do not
include any vesting restrictions but rather restrictions over
subsequent sale and transfer. All shares which are the subject of
share awards vest immediately and are transferred to a nominee
allowing the employee, as beneficial owner to retain full rights in
respect of the shares purchased. However, 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
-- Matching Shares, and Additional Shares received in respect of
elections made prior to 1 October 2017 - 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 clawback 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 have been 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 flotation were
determined using quoted share prices.
The Record plc Share Scheme allows deferred share awards to be
granted to employees and Directors in the Record Group. Part 1 of
the Record plc Share Scheme allows the grant of Unapproved Options
to employees and Directors and Part 2 allows the grant of HMRC
Approved Options to employees and Directors. 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 have historically
been granted with a market value exercise price in the same way as
for the Approved Options.
Options over an aggregate of 3,975,000 shares were granted under
the Share Scheme during the year (2017: 4,197,521), of which
2,261,000 were made subject to Unapproved Options and 1,714,000 to
Approved Options (2017: 3,790,000 made subject to Unapproved
Options and 407,521 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 1,662,000 Approved Options issued to employees on 26 January
2018 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.
The 328,000 Unapproved Options issued to employees on 26 January
2018 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 52,000 Approved Options issued to Directors on 26 January
2018 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 performance conditions have been
satisfied.
The 1,933,000 Unapproved Options issued to Directors on 26
January 2018 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 performance conditions have been
satisfied.
The fair value of the services provided by employees has been
calculated indirectly by reference to the fair value of the equity
instruments granted. Fair value amounts for the options granted in
the year ended 31 March 2018 were determined using a Black-Scholes
option-pricing method and the following assumptions:
Model input Weighted
average value
Share price 43.5p
Exercise price 43.5p
Expected volatility 37%
Option life 4.0 years
Risk-free interest rate (%) 1.28%
---------------
Expected volatility is based on historical volatility.
The Group share--based payment expense in respect of the Share
Scheme was GBP197,740 for the year ended 31 March 2018 (2017:
GBP200,220).
Outstanding share options
At 31 March 2018, the total number of ordinary shares of 0.025p
outstanding under Record plc share compensation schemes was
14,343,147 (2017: 13,656,564). 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:
At 31 Earliest Latest
Date At 1 April Lapsed March vesting vesting Exercise
of grant 2017 Granted Exercised / forfeited 2018 date date(11) price
27/09/13 480,000 - (480,000) - - 27/09/17 27/09/17 GBP0.3085
27/09/13 327,500 - (302,500) (25,000) - 27/09/14 27/09/17 GBP0.3085
18/11/13 933,334 - (233,333) (233,334) 466,667 18/11/16 18/11/18 GBP0.3000
26/11/14 2,160,000 - - (720,000) 1,440,000 26/11/17 26/11/19 GBP0.3586
24/03/15 270,000 - - (42,000) 228,000 24/03/19 24/03/19 GBP0.3450
24/03/15 1,385,250 - (372,250) (268,500) 744,500 24/03/16 24/03/19 GBP0.3450
01/12/15 1,800,000 - - - 1,800,000 01/12/18 01/12/20 GBP0.2888
27/01/16 993,750 - - (75,000) 918,750 27/01/17 27/01/20 GBP0.2450
27/01/16 709,209 - - (24,000) 685,209 27/01/20 27/01/20 GBP0.2450
27/01/16 327,500 - - - 327,500 27/01/19 27/01/21 GBP0.2450
27/01/16 72,500 - - - 72,500 27/01/19 27/01/21 GBP0.2450
30/11/16 328,574 - - (40,000) 288,574 30/11/20 30/11/20 GBP0.34072
30/11/16 1,590,000 - (372,500) (100,000) 1,117,500 30/11/17 30/11/20 GBP0.34072
30/11/16 2,200,000 - - - 2,200,000 30/11/19 30/11/21 GBP0.34072
31/01/17 78,947 - - - 78,947 31/01/21 31/01/21 GBP0.38000
26/01/18 - 1,662,000 - - 1,662,000 26/01/22 26/01/23 GBP0.4350
26/01/18 - 328,000 - - 328,000 26/01/19 26/01/23 GBP0.4350
26/01/18 - 52,000 - - 52,000 26/01/21 26/01/24 GBP0.4350
26/01/18 - 1,933,000 - - 1,933,000 26/01/21 26/01/24 GBP0.4350
Total
options 13,656,564 3,975,000 (1,760,583) (1,527,834) 14,343,147
Weighted
average
exercise
price
of options GBP0.32 GBP0.44 GBP0.32 GBP0.34 GBP0.35
----------- ---------- ------------ ------------- ----------- --------- ---------- -----------
11 Under the terms of the deeds of grants, options are
exercisable for a year following the vesting date.
During the year 1,760,583 options were exercised. The weighted
average share price at date of exercise was GBP0.47. At 31 March
2018 a total of 678,500 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
2018 2017
-------------- -------------
Record plc Group Profit Share Scheme (interest in restricted share awards)
James Wood--Collins 375,408 573,568
Leslie Hill 1,008,518 759,618
Bob Noyen 324,614 374,641
Steve Cullen 361,076 380,429
-------------- -------------
Record plc Share Scheme (interest in unvested share options)
James Wood--Collins 3,286,667 2,663,334
Leslie Hill 1,800,000 1,730,000
Bob Noyen 1,800,000 1,730,000
Steve Cullen 1,405,000 1,370,000
-------------- -------------
Performance measures
Performance conditions attached to all options granted to Board
Directors differ to those granted for all other staff. All
Executive Director option awards are subject to a performance
condition and vest on each of the third, fourth and fifth
anniversaries of the date of grant subject to an earnings per share
("EPS") hurdle linked to the annualised EPS growth for the
respective three, four and five-year periods from grant. Vesting is
on a stepped basis, with 25% of each tranche vesting if EPS growth
over the relevant period is at least RPI plus 4% per annum,
increasing through 50%, 75% and with 100% vesting if EPS growth
exceeds RPI plus 13%, as shown in the table below. Options awarded
subject to EPS performance conditions are valued using a
Black-Scholes model.
Record's average EPS growth Percentage of shares subject to the award which vest
>RPI growth + 13% 100%
>RPI growth + 10%, =<RPI growth + 13% 75%
>RPI growth + 7%, =<RPI growth + 10% 50%
>RPI growth + 4%, =<RPI growth + 7% 25%
=<RPI growth + 4% 0%
-----------------------------------------------------
Approved options issued to all other staff during the year were
not subject to a Group performance measure.
Approved options issued to all other staff in prior years were
subject to performance measures linked to the Group's Total
Shareholder Return ("TSR") and vested on the fourth anniversary of
the date of grant, subject to these measures. At vesting date, a
percentage of the total options granted could vest based upon
Record's TSR performance versus the median TSR performance as
measured against the FTSE 350 General Financial - Price Index.
Options awarded subject to TSR performance conditions were valued
using a Black - Scholes model. The performance target table is
given below:
Percentage by which Record's TSR is below the median TSR
performance of the index Percentage of shares subject 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%
-----------------------------------------------------
Unapproved options issued to all other staff vest in four equal
tranches on the first, second, third and fourth anniversaries of
the date of grant, subject to the employee being employed with the
Group at the relevant vesting date and to the extent personal
performance conditions have been satisfied.
Clawback provisions
In addition to the performance measures above, both Approved and
Unapproved Options granted to Executive Directors under the Share
Scheme are subject to clawback provisions. These provisions allow
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 clawback provisions allow the Group to take various steps until
the clawback 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 40,909 free shares (2017: 49,264 free shares) to
employees. The expense charged in respect of the SIP was GBP18,833
in the year ended 31 March 2018 (2017: GBP14,838).
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.
Intercompany balances are classified as loans and receivables and
are repayable on demand. No interest is charged on these balances.
The Group has sufficient cash resources and hence management does
not believe that the Company has a material exposure to credit
risk. 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 assets managed as 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:
2018 2017
Financial assets at 31 March GBP'000 GBP'000
-------- --------
Trade receivables 5,279 5,937
Accrued income 582 85
Other receivables 56 29
Other financial assets at fair value
through profit or loss 266 53
Money market instruments with maturities
> 3 months 10,198 18,102
Cash and cash equivalents 12,498 19,120
-------- --------
28,879 43,326
-------- --------
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:
Neither impaired More than
Carrying nor past 0--3 months 3 months
amount due past due past due
At 31 March
2018 GBP'000 GBP'000 GBP'000 GBP'000
--------- ----------------- ------------ ----------
Trade receivables 5,279 4,551 726 2
Accrued income 582 582 - -
--------- ----------------- ------------ ----------
5,861 5,133 726 2
--------- ----------------- ------------ ----------
88% 12% 0%
--------- ----------------- ------------ ----------
Neither impaired More than
Carrying nor past 0--3 months 3 months
amount due past due past due
At 31 March
2017 GBP'000 GBP'000 GBP'000 GBP'000
--------- ----------------- ------------ ----------
Trade receivables 5,937 5,790 147 -
Accrued income 85 85 - -
--------- ----------------- ------------ ----------
6,022 5,875 147 -
--------- ----------------- ------------ ----------
98% 2% 0%
--------- ----------------- ------------ ----------
The Group offers standard credit terms of 30 days from invoice
date. It is the Group's policy to assess debtors for recoverability
on an individual basis and to make a provision where it is
considered necessary. In assessing recoverability the Group takes
into account any indicators of impairment up to the reporting date.
The application of this policy generally results in debts that are
0--3 months overdue not being provided for unless individual
circumstances indicate that a debt is impaired.
Trade receivables are made up of 52 debtors' balances (2017:
54). The largest individual debtor corresponds to 18% of the total
balance (2017: 16%). Debtor days, based on the generally accepted
calculation of debtor days, is 81 days (2017 (restated): 94 days).
This reflects the quarterly billing cycle used by the Group for the
vast majority of its fees. As at 31 March 2018 12.4% of debt was
overdue (2017: 2.4%). 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 22 days (2017: 33 days).
Contractual maturity analysis for financial liabilities:
Due or
due in Due between Due between
Carrying less than 1 and 3 3 months
amount 1 month months and 1 year
At 31 March 2018 GBP'000 GBP'000 GBP'000 GBP'000
--------- ----------- ------------ ------------
Trade payables 325 325 - -
Accruals 2,067 164 838 1,065
Derivative financial
liabilities 29 25 4 -
--------- ----------- ------------ ------------
Due or due Due between Due between
Carrying in less 1 and 3 3 months
amount than 1 month months and 1 year
At 31 March 2017 GBP'000 GBP'000 GBP'000 GBP'000
--------- -------------- ------------ ------------
Trade payables 418 272 27 119
Accruals 2,189 90 1,027 1,072
Derivative financial
liabilities 48 45 3 -
--------- -------------- ------------ ------------
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
held 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 2018 GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- ------------ --------
Financial assets
Trade receivables - - 5,279 5,279
Accrued income - - 582 582
Other receivables - - 56 56
Derivative financial assets
at fair value through
profit or loss - - 266 266
Money market instruments
with maturities > 3 months 10,198 - - 10,198
Cash and cash equivalents 8,087 4,411 - 12,498
-------- --------- ------------ --------
Total financial assets 18,285 4,411 6,183 28,879
-------- --------- ------------ --------
Financial liabilities
Trade payables - - (325) (325)
Accruals - - (2,067) (2,067)
Derivative financial liabilities
at fair value through
profit or loss - - (29) (29)
Financial liabilities - - (2,467) (2,467)
-------- --------- ------------ --------
Total financial liabilities - - (4,888) (4,888)
-------- --------- ------------ --------
Fixed Floating No interest Total
rate rate rate
At 31 March 2017 GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- ------------ --------
Financial assets
Trade receivables - - 5,937 5,937
Accrued income - - 85 85
Other receivables - - 29 29
Derivative financial assets
at fair value through
profit or loss - - 53 53
Money market instruments
with maturities > 3 months 18,102 - - 18,102
Cash and cash equivalents 11,663 7,457 - 19,120
-------- --------- ------------ --------
Total financial assets 29,765 7,457 6,104 43,326
-------- --------- ------------ --------
Financial liabilities
Trade payables - - (418) (418)
Accruals - - (2,189) (2,189)
Derivative financial liabilities
at fair value through
profit or loss - - (48) (48)
Financial liabilities - - (4,779) (4,779)
-------- --------- ------------ --------
Total financial liabilities - - (7,434) (7,434)
-------- --------- ------------ --------
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 held by the Record Currency -
Strategy Development Fund (formerly Global Alpha Fund). The
principal currencies giving rise to this risk are the US dollar,
the Swiss franc, the euro and the Canadian dollar.
During the year ended 31 March 2018, the Group invoiced the
following amounts in currencies other than sterling:
Local Value
currency in reporting
value currency
'000 GBP'000
---------- --------------
Swiss franc (CHF) 13,045 10,053
US dollar (USD) 9,760 7,230
Euro (EUR) 2,683 2,361
Canadian dollar (CAD) 660 385
Swedish krona (SEK) 784 70
Singapore dollar (SGD) 34 19
---------- --------------
20,118
---------- --------------
The value of revenues for the year ended 31 March 2018 that were
denominated in currencies other than sterling was GBP20.1 million
(31 March 2017: GBP19.5 million).
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 settlement of these forward foreign exchange contracts is
expected to occur within the following three months. Changes in the
fair values of forward foreign exchange contracts are recognised
directly in profit or loss.
The cash denominated in currencies other than sterling (refer to
note 16), is covered by the Group's hedging process, therefore the
Directors consider that the foreign currency risk on cash balances
is not material.
Foreign currency risk - sensitivity analysis
The Group has considered the sensitivity to exchange rate
movements by considering the impact on those revenues, costs,
assets and liabilities denominated in foreign currencies as
experienced in the given period.
Impact on profit
after tax Impact on total
for the year equity
ended 31 March as at 31 March
2018 Restated 2018 Restated
2017 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- -------- ---------
Sterling weakening by 10%
against the dollar 469 469 469 469
Sterling strengthening
by 10% against the dollar (469) (469) (469) (469)
-------- --------- -------- ---------
Sterling weakening by 10%
against the Swiss franc 593 621 593 621
Sterling strengthening
by 10% against the Swiss
franc (593) (621) (593) (621)
-------- --------- -------- ---------
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 on a historical basis and market
expectations for future movement. When applied to the average
sterling/USD exchange rate of GBP/$1.34 this would result in
sterling weakening to GBP/$1.22 and sterling strengthening to
GBP/$1.49.
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 on a historical basis and market
expectations for future movement. When applied to the average
sterling/CHF exchange rate of GBP/1.29 this would result in
sterling weakening to GBP/CHF1.18 and sterling strengthening to
GBP/CHF1.44.
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.
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:
2018 Level Level Level
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Financial assets at fair value
through profit or loss
Forward foreign exchange contracts
used for hedging 199 - 199 -
Forward foreign exchange contracts
used for seed funds 67 - 67 -
Financial liabilities at fair
value through profit or loss
Forward foreign exchange contracts
used for hedging (29) - (29) -
Forward foreign exchange contracts - - - -
used for seed funds
Total 237 - 237 -
2017 Level Level Level
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Financial assets at fair value
through profit or loss
Forward foreign exchange contracts
used for hedging 18 - 18 -
Forward foreign exchange contracts
used for seed funds 35 - 35 -
Financial liabilities at fair
value through profit or loss
Forward foreign exchange contracts
used for hedging (5) - (5) -
Forward foreign exchange contracts
used for seed funds (43) - (43) -
Total 5 - 5 -
There have been no transfers between levels in the reporting
period (2017: 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
Assets Liabilities
Financial at fair at fair
liabilities value value
measured through through
Loans at amortised profit profit
and receivables cost or loss or loss
At 31 March 2018 Note GBP'000 GBP'000 GBP'000 GBP'000
----- ----------------- -------------- --------- ------------
Trade and other receivables
(excludes prepayments) 14 5,917 - - -
Money market instruments
with maturities > 3
months 16 10,198 - - -
Cash and cash equivalents 16 12,498 - - -
Derivative financial
assets at fair value
through profit or loss 15 - - 266 -
Trade payables 17 - (325) - -
Accruals 17 - (2,067) - -
Derivative financial
liabilities at fair
value through profit
or loss 15 - - - (29)
----- ----------------- -------------- --------- ------------
Total 28,613 (2,392) 266 (29)
----- ----------------- -------------- --------- ------------
Assets Liabilities
Financial at fair at fair
liabilities value value
measured through through
Loans at amortised profit profit
and receivables cost or loss or loss
At 31 March 2017 Note GBP'000 GBP'000 GBP'000 GBP'000
----- ----------------- -------------- --------- ------------
Trade and other receivables
(excludes prepayments) 14 6,051 - - -
Money market instruments
with maturities > 3
months 16 18,102 - - -
Cash and cash equivalents 16 19,120 - - -
Derivative financial
assets at fair value
through profit or loss 15 - - 53 -
Trade payables 17 - (418) - -
Accruals 17 - (2,189) - -
Derivative financial
liabilities at fair
value through profit
or loss 15 - - - (48)
----- ----------------- -------------- --------- ------------
Total 43,273 (2,607) 53 (48)
----- ----------------- -------------- --------- ------------
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 7 September 2016, the Group signed a new lease on premises at
Second and Third Floors, Morgan House, Madeira Walk, Windsor, at an
annual commitment of GBP507,603 per annum, expiring 1 September
2022.
On 16 March 2016, the Group signed a three year lease on
premises in New York City, at an average annual commitment of
$125,840 per annum.
On 1 June 2017, the Group signed a five year lease on premises
in Zürich, at an annual commitment of CHF 49,680 per annum.
The Group has considered the risks and rewards of ownership of
the leased properties, and considers that they remain with the
lessors. Consequently, all property leases are recognised as
operating leases.
At 31 March 2018 the Group had commitments under
non--cancellable operating leases relating to land and buildings as
set out below:
2018 2017
GBP'000 GBP'000
-------- --------
Not later than one year 637 608
Later than one year and not later
than five years 1,866 2,134
Later than five years - 211
-------- --------
Total 2,503 2,953
-------- --------
24. Cash flow from operating activities
Group
This note should be read in conjunction with the cash flow
statements. It provides a reconciliation to show how operating
profit, which is based on accounting rules, translates to cash
flows.
2018 Restated
2017
GBP'000 GBP'000
-------- ---------
Operating profit 7,272 7,744
Adjustments for non-cash movements:
Profit on disposal of property, plant 1 -
and equipment
Depreciation of property, plant and
equipment 206 99
Amortisation of intangible assets 99 243
Net release of shares previously held
by EBT 845 587
Share-based payments (93) 24
Decrease in cash on deconsolidation (4,062) -
of Record Currency - Emerging Market
Currency Fund (see note 12)
Other non-cash movements (270) (146)
-------- ---------
3,998 8,551
Changes in working capital
Decrease/(increase)/ in receivables 172 (1,268)
(Decrease)/increase in payables (371) 641
(Increase)/decrease in other financial
assets (204) 53
Increase in other financial liabilities 734 700
-------- ---------
Cash inflow from operating activities 4,329 8,677
Interest paid (10) -
Corporation taxes paid (1,573) (1,570)
-------- ---------
Net cash inflow from operating activities 2,746 7,107
-------- ---------
Company
2018 Restated 2017
GBP'000 GBP'000
-------- --------------
Operating (loss)/profit (123) 330
Adjustment for:
Loss/(gain) on investments 7 (193)
Other 116 (137)
Changes in working capital
Increase in payables 1,082 -
-------- --------------
Cash inflow from operating activities 1,082 -
Corporation taxes paid (67) -
-------- --------------
Net cash inflow from operating activities 1,015 -
-------- --------------
25. 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.
2018 2017
GBP'000 GBP'000
-------- --------
Amounts due to subsidiaries (1,093) (11)
Net dividends received from subsidiaries 16,810 3,592
-------- --------
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 (2017:
GBPnil). No expense has been recognised during the year in respect
of bad or doubtful debts due from related parties.
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
2018 2017
GBP'000 GBP'000
-------- --------
Short--term employee benefits 4,965 4,651
Post--employment benefits 185 184
Share--based payments 1,172 1,387
-------- --------
Total 6,322 6,222
-------- --------
The dividends paid to key management personnel in the year ended
31 March 2018 totalled GBP3,651,092 (2017: GBP1,915,103).
Directors' remuneration
2018 2017
GBP'000 GBP'000
-------- --------
Emoluments (excluding pension contribution) 2,397 2,571
Pension contribution (including payments
made in lieu of pension contributions) 166 164
Total 2,563 2,735
During the year, one Director of the Company (2017: one)
participated in the Group Personal Pension Plan, a defined
contribution scheme.
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 - FTSE FRB10 Index Fund , Record Currency -
Strategy Development Fund and Record - Currency Multi-Strategy Fund
are all related parties on this basis. Similarly, the Record
Currency - Emerging Market Currency Fund was a related party until
the divestment of two Record plc Directors resulted in Record plc
losing control over the entity as its combined holding in the fund
when considered in aggregate with its Directors no longer
constituted a majority.
The only transaction between the Company and these funds during
the year was the initial seed investment of GBP1,000,000 in the
Record - Currency Multi-Strategy Fund.
During the year, four Record plc Directors adjusted their seed
investment in the funds, as set out below
Related Trade date Type Value Fund
party
Neil Record 26 Feb Subscription GBP 500,000 Record - Currency
2018 Multi-Strategy Fund
Leslie Hill 22 Mar Redemption CHF 1,055,850 Record Currency -
2018 Emerging Market Currency
Fund
Leslie Hill 22 Mar Subscription CHF 1,055,850 Record - Currency
2018 Multi-Strategy Fund
Bob Noyen 22 Mar Redemption USD 836,199 Record Currency -
2018 Emerging Market Currency
Fund
Bob Noyen 22 Mar Subscription USD 836,199 Record - Currency
2018 Multi-Strategy Fund
Jane Tufnell 26 Feb Subscription GBP 100,000 Record - Currency
2018 Multi-Strategy Fund
----------- ------------- -------------- --------------------------
26. 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:
2018 2017
GBPm GBPm
----- -----
Regulatory capital 9.1 8.9
Other operating capital 13.3 24.6
----- -----
Operating capital 22.4 33.5
Seed capital 4.2 3.3
----- -----
Total capital 26.6 36.8
----- -----
Operating capital is intended to cover the regulatory capital
requirement plus capital required for day to day operational
purposes and other investment 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 25% (2017: 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 and 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.
27. Ultimate controlling party
As at 31 March 2018 the Company had no ultimate controlling
party, nor at 31 March 2017.
28. Post reporting date events
No adjusting or significant non--adjusting events have occurred
between the reporting date and the date of authorisation.
29. Restatement of previously published financial statements
The Directors have reviewed the basis of preparation of the
Group's consolidated financial statements, and have implemented the
following changes.
Classification of the external investment in the seed funds
External investment in the seed funds which are consolidated
into the Group financial statements has previously been classified
as a non-controlling interest as the investment was considered to
be an equity instrument. The Directors have reviewed this treatment
and now recognise the external investment as a financial liability.
This change in approach has a material change to the statement of
financial position affecting both current liabilities and equity.
The adjustment also affects the statement of comprehensive income
as the pro-rata share of the gains or losses derived from the seed
funds which are attributable to the external investors in the funds
are not included within operating profit as opposed to being
included in profit attributable to the non-controlling
interest.
Presentation of other income
Management has reviewed the nature of items included in revenue
in accordance with the definitions provided in IAS 1 and IAS 18.
Following the review, management has decided that a re-presentation
of certain elements would improve the clarity of the financial
statements.
Consequently, the presentation of gains or losses on hedging,
gains or losses on trading within the seed funds and gains or
losses on foreign exchange conversion which were previously
included within revenue as "other income" are now presented
separately on the face of the statement of comprehensive income as
"other income or expense".
A reconciliation of primary statements previously reported to
restated primary statements is provided below.
The effect of both changes in future periods is not disclosed as
it is not practicable to do so.
The changes described above have had no impact on the profit
attributable to owners of the parent nor on the earnings per
share.
The restated operating profit and profit before tax for the
comparative period is equivalent to the underlying operating profit
and underlying profit before tax disclosed in previous reports.
Reconciliation of consolidated statement of comprehensive income
under historic interpretation to new interpretation
Year ended Year ended
31 Mar 31 Mar
18 17
GBP'000 GBP'000
------------------------------------------------------------------ ----------- -----------
Historic presentation
Revenue 23,639 23,928
Gross profit 23,328 23,630
Other income or expense n/a n/a
Consisting of:
n/a n/a
* Gains or losses on derivative financial instruments
and foreign exchange conversion
n/a n/a
* Adjustment for gain or loss attributable to external
investors in the seed fund
Operating profit 6,904 8,563
Profit before tax 6,960 8,675
Profit after tax and total comprehensive
income for the period 5,778 7,135
Profit and total comprehensive income
for the period attributable to:
Non-controlling interests (368) 819
------------------------------------------------------------------ ----------- -----------
New presentation
Revenue 23,834 22,952
Gross profit 23,523 22,654
Other income or expense 173 175
Consisting of:
* Gains or losses on derivative financial instruments
and foreign exchange conversion (195) 976
* Adjustment for gain or loss attributable to external
investors in the seed fund 368 (819)
Operating profit 7,272 7,744
Profit before tax 7,328 7,856
Profit after tax and total comprehensive
income for the period 6,146 6,316
Profit and total comprehensive income
for the period attributable to:
Non-controlling interests - -
Differences
Revenue 195 (976)
Gross profit 195 (976)
Other income or expense 173 175
Consisting of:
* Gains or losses on derivative financial instruments
and foreign exchange conversion (195) 976
* Adjustment for gain or loss attributable to external
investors in the seed fund 368 (819)
Operating profit 368 (819)
Profit before tax 368 (819)
Profit after tax and total comprehensive
income for the period 368 (819)
Profit and total comprehensive income
for the period attributable to:
Non-controlling interests 368 (819)
------------------------------------------------------------------ ----------- -----------
The presentation of gains or losses on hedging, gains or losses
on trading within the seed funds and gains or losses on foreign
exchange conversion have been re-presented from within revenue to
other income or expense on the face of the statement of
comprehensive income.
The pro-rata share of the gains or losses derived from the seed
funds which are attributable to the external investors in the funds
are not included within operating profit as opposed to previously
being included in profit and disclosed as the profit after tax
attributable to the non-controlling interest.
Reconciliation of consolidated statement of financial position
under historic interpretation to new interpretation
As at 31 March 2018 As at 31 March 2017
GBP'000 GBP'000
--------------------------- -------------------- --------------------
Historic presentation
Financial liabilities n/a n/a
Total current liabilities (3,058) (3,865)
Total net assets 29,018 41,610
Non-controlling interests 2,467 4,779
Total equity 29,018 41,610
--------------------------- -------------------- --------------------
New presentation
Financial liabilities (2,467) (4,779)
Total current liabilities (5,525) (8,644)
Total net assets 26,551 36,831
Non-controlling interests n/a n/a
Total equity 26,551 36,831
--------------------------- -------------------- --------------------
Differences
Financial liabilities (2,467) (4,779)
Total current liabilities (2,467) (4,779)
Total net assets (2,467) (4,779)
Non-controlling interests (2,467) (4,779)
Total equity (2,467) (4,779)
The net asset value of the investment of external investors in
the seed fund has been reclassified from a non-controlling interest
in equity, to a financial liability. There is no other
non-controlling interest.
Reconciliation of consolidated statement of changes in equity
under historic interpretation to new interpretation
The statement of changes in equity is shown below as it would
appear under the historic presentation.
In the revised format there is no non-controlling interest, and
therefore no changes in non-controlling interest. As a consequence
total equity becomes equivalent to the total equity attributable to
owners of the parent.
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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- -------- ----------- --------- ------------- --------------- --------
As at 1 April 2016 55 1,899 20 31,715 33,689 4,019 37,708
Profit and total comprehensive
income for the period - - - 6,316 6,316 819 7,135
Dividends paid - - - (3,592) (3,592) - (3,592)
Own shares acquired
by EBT - - - (775) (775) - (775)
Release of shares held
by EBT - 72 - 992 1,064 - 1,064
Issue of units in funds - - - - - (59) (59)
Share-based payments - - - 129 129 - 129
------------------------------- --------- -------- ----------- --------- ------------- --------------- --------
Transactions with shareholders - 72 - (3,246) (3,174) (59) (3,233)
------------------------------- --------- -------- ----------- --------- ------------- --------------- --------
As at 31 March 2017 55 1,971 20 34,785 36,831 4,779 41,610
------------------------------- --------- -------- ----------- --------- ------------- --------------- --------
Profit and total comprehensive
income for the period - - - 6,146 6,146 (368) 5,778
Dividends paid - - - (6,810) (6,810) - (6,810)
Share buy-back (5) - 6 (10,000) (9,999) - (9,999)
Own shares acquired
by EBT - - - (952) (952) - (952)
Release of shares held
by EBT - 266 - 1,241 1,507 - 1,507
Issue of units in funds - - - - - 959 959
Divestment of non-controlling
interest - - - - - (2,903) (2,903)
Share-based payments - - - (172) (172) - (172)
Transactions with shareholders (5) 266 6 (16,693) (16,426) (1,944) (18,370)
------------------------------- --------- -------- ----------- ------------- --------
As at 31 March 2018 50 2,237 26 24,238 26,551 2,467 29,018
------------- ---------------
Reconciliation of consolidated statement of cash flows under
historic interpretation to new interpretation
Year ended Year ended
31 Mar 18 31 Mar 17
GBP'000 GBP'000
----------------------------------------------------------------- ----------- -----------
Historic presentation
Operating profit 6,904 8,563
Changes in working capital:
Increase/(decrease) in other financial liabilities 143 (60)
Cash inflow from operating activities 3,370 8,736
Net cash inflow from operating activities 1,787 7,166
Cash flow from financing activities:
Cash inflow/(outflow) from issue/(redemption) of units in funds 959 (59)
Cash outflow from financing activities (16,218) (3,844)
----------------------------------------------------------------- ----------- -----------
New presentation
Operating profit 7,272 7,744
Changes in working capital:
Increase in other financial liabilities 734 700
Cash inflow from operating activities 4,329 8,677
Net cash inflow from operating activities 2,746 7,107
Cash flow from financing activities:
Cash flow from issue/redemption of units in funds n/a n/a
Cash outflow from financing activities (17,177) (3,785)
Differences
Operating profit 368 (819)
Changes in working capital:
Movement in other financial liabilities 591 760
Cash flow from operating activities 959 (59)
Net cash flow from operating activities after tax 959 (59)
Cash flow from financing activities:
Cash flow from issue/redemption of units in funds (959) 59
Cash flow from financing activities (959) 59
----------------------------------------------------------------- ----------- -----------
As the external investment in the fund is no longer considered
to be equity, the cash flow arising on issue or redemption of
shares is not included as a financing activity but as a movement in
other financial liabilities. The adjustment to operating profit in
the revised presentation which relates to the pro-rata share of the
gains or losses derived from the seed funds which are attributable
to the external investors in the funds has an equal and opposite
effect on the movement in other financial liabilities.
There is no change to cash or cash equivalents at the period
end.
30. Statutory Accounts
This statement was approved by the Board on 14 June 2018. The
financial information set out above does not constitute the
Company's statutory accounts.
The statutory accounts for the financial year ended 31 March
2017 have been delivered to the Registrar of Companies, and those
for the year ended in 31 March 2018 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.
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFAFALFASEIM
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