TIDMREC
RNS Number : 2861U
Record PLC
22 November 2019
RECORD plc
22 November 2019
INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS TO 30 SEPTEMBER
2019
Record plc, the specialist currency manager, today announces its
unaudited results for the six months to 30 September 2019.
Financial headlines:
-- Growth in AUME([1]) of 4.6% in USD terms to $59.9bn (31 March
2019: $57.3bn) and 10.6% in GBP terms to GBP48.6bn (31 March 2019:
GBP44.0bn)
-- Positive net inflows of $2bn (six months to 30 September
2018: $nil)
-- Continued growth in client numbers to 70 (31 March 2019:
65)
-- Management fees declined by 3% to GBP11.1m (six months to 30
September 2018: GBP11.4m)
-- No performance fees in period (six months to 30 September
2018: GBP1.0m)
-- Operating margin of 27% (six months to 30 September 2018:
32%) reflects no performance fees offset by ongoing cost
control
-- Profit before tax of GBP3.2m (six months to 30 September
2018: GBP4.0m)
-- Basic EPS of 1.29 pence (six months to 30 September 2018:
1.63 pence)
-- Strong financial position with shareholders' equity of
GBP26.4m (30 September 2018: GBP26.4m)
-- Interim dividend of 1.15 pence per share will be paid on 27
December 2019 (interim dividend in respect of six months to 30
September 2018: 1.15 pence per share)
Key developments:
-- Continuing innovation - introduction of the Dynamic Macro
Currency strategy, complementary to our more systematic
return-seeking currency strategies
-- Expanding capabilities in managing derivatives and derivative
overlays in asset classes other than currency
-- Distribution capability - further progress in developing
North American platform
-- New Group Profit Scheme rules with improved link to Group and
individual performance
Commenting on the results, James Wood-Collins, Chief Executive
Officer of Record plc, said:
"It's pleasing to announce growth in AUME to almost $60 billion,
including net inflows in the period of $2 billion, and continued
growth in client numbers to 70. This momentum reflects demand for
our innovative currency management solutions.
"The period has seen positive investment performance across our
Enhanced Passive Hedging and Dynamic Hedging products, as well as
our Multi-Strategy product which now boasts a long-term
risk-adjusted return in the top quartile of its peer group. The
first half also saw continued innovation in our institutional
offering including developing capabilities in adjacent asset
classes.
"We continue to see an encouraging range of new business
opportunities across a broad range of products and geographies,
balanced against continued competition and fee pressure. To stay
ahead we recognise the ongoing need to invest in the source of our
advantage: our people and technology.
"We remain confident of making further progress in the current
financial year. Over the longer term, the Group will continue to
benefit from our established industry position, investment
expertise, and operational scalability."
Analyst briefing
There will be a presentation for analysts at 9.30am on Friday 22
November 2019 at Cenkos plc offices: 6-8 Tokenhouse Yard, London,
EC2R 7AS. A conference call facility will be available on the
morning and an audio webcast will be made available later that day
on the Group's website at www.recordcm.com.
Conference call:
UK Toll-Free: 0800 3589 473
UK: +44 3333 000 804
PIN: 40299582#
For additional details and registration for the analyst
briefing, please contact the team at Buchanan as detailed
below.
For further information, please contact:
Record plc +44 1753 852 222
Neil Record - Chairman
James Wood-Collins - Chief Executive Officer
Steve Cullen - Chief Financial Officer
Buchanan +44 20 7466 5000
Giles Stewart record@buchanan.uk.com
Victoria Hayns
Henry Wilson
Chief Executive Officer's statement
AUME grew over the six months to 30 September 2019 in both US
dollar terms and to an even greater degree in sterling terms,
reflecting positive net inflows and market movement. We continued
to grow our customer base, building on our high levels of customer
loyalty. Management fees grew modestly compared to the second half
of last year but declined modestly compared to the first half of
last year. Whilst investment performance was broadly positive no
performance fees were earned during the period.
Performance overview
Enhanced Passive Hedging added value over some fixed-tenor
benchmarks, as shown for a representative account in the "Product
investment performance" section. For US Dynamic Hedging clients,
performance over the period was positive as the US dollar generally
strengthened.
Record's Currency for Return strategies performed well across
the board, emphasising our ability to deliver risk-adjusted returns
to our clients. Performance was positive for the Forward Rate Bias
and Emerging Market strategies. Positive performance overall for
Multi-Strategy has helped contribute to an attractive long-term
risk-adjusted return in the top quartile of its peer group.
An overview of the market environment that contributed to this
performance can be found in the "Market overview" section.
Asset flows
AUME grew over the period by 4.6% in US dollar terms to $59.9
billion, and by 10.6% in sterling terms to GBP48.6 billion. Net
flows were positive over the period, with net inflows in each of
Dynamic Hedging ($0.2 billion), Passive Hedging ($1.6 billion) and
Currency for Return ($0.2 billion), attributable both to inflows
from existing clients and to new clients. Market and exchange rate
movements also contributed to growth in AUME over the period, as
set out in more detail in the "AUME development" section.
Products and product innovation
We have maintained our practice of enhancing established
products, in addition to innovating new products and strategies, in
order both to meet our clients' needs and expectations and to
generate value for shareholders. This period has seen continued
adoption of enhanced Passive Hedging amongst our clients, as well
as the ongoing incorporation of Range-Trading into Multi-Strategy
mandates.
We continue to invest in our core markets with the strengthening
of our team in New York, including through hiring John Floyd, a
twenty-plus year veteran of the FX markets. John's experience
includes managing his Dynamic Macro strategy, complementary to
Record's more systematic return-seeking currency strategies. Our
Record Currency Multi-Strategy Fund now has allocations to both
strategies.
In addition to building momentum in our core currency management
business, we are also broadening our capabilities in managing
derivatives and derivative overlays in asset classes other than
currency. We recognise that our core investment management
capabilities are applicable in adjacent markets; we have long
managed equity and other asset class futures for clients who wish
to generate a synthetic return on cash held to meet hedging cash
flows, and we are now extending this capability to other asset
classes. We anticipate that clients may employ these capabilities
to achieve short-term goals, and the associated fees will be
reported within "Other investment services income".
Delivering new products and strategies will require enhanced
capabilities supported by technology, and the maintenance of our IT
resilience, robustness and security. Achieving these will require
measured technology investment.
Clients and distribution
Client numbers have grown 8% over the period, from 65 to 70.
Political and economic uncertainty, and the resulting market
volatility, continued to provide an opportunity for us to engage
with new and existing clients. We have continued to broaden our
distribution reach, with modest growth in employee numbers in both
our New York and Zürich offices. This growth has come about in part
from internal transfers, and in part from local hires including
that of John Floyd referred to above.
Brexit and regulation
Our approach to Brexit continues to be as set out in Record's
Annual Report 2019, namely that we expect to be able to continue to
serve all our current EU27 clients thereafter, irrespective of
whether and how the UK leaves the European Union. At the time of
writing a UK general election is scheduled for 12 December 2019,
and the Article 50 notice period has been extended until no later
than 31 January 2020. The manner and timing of the UK's departure
from the European Union is likely to be dependent on the outcome of
the general election.
We have also continued our preparations for the implementation
of the Senior Managers & Certification Regime, under which
Record is classified as a "Core" firm. Our plans are in place for
implementation from 9 December 2019.
Financial highlights
Management fees of GBP11.1 million represented a 3% decline on
the first half of last year, and 2% growth on the second half, as
sterling's depreciation combined with some recovery from prior
period outflows. No performance fees were earned during the period,
notwithstanding widespread positive investment performance. As a
result, revenues declined by 10% compared to the first half of last
year, and by 8% compared to the second half, to GBP11.4
million.
Continued focus on costs saw administrative expenses held
essentially flat at GBP8.2 million, leading to an operating margin
of 27% (H1-19: 32% and H2-19: 31%) and profit before tax of GBP3.2
million. This represented a 22% decline against the first half of
last year and a 20% decline against the second half, largely
attributable to the absence of performance fees.
Administrative expenses include Record's principal variable
remuneration scheme, known as the Group Profit Share (GPS). This
period saw the first implementation of the changes to GPS described
in Record's Annual Report 2019, intended to better balance
rewarding individual contribution as well as firm-wide performance.
As a result the GPS pool has been determined as 31.1% of operating
profits, within the established 25% to 35% range, with the increase
above 30% largely recognising progress in generating new business
and strengthening prospective client relationships. The total cost
of the GPS payments, at GBP1.4 million, is 17% less than for the
first half of last year, and 15% less than for the second half, in
line with the decline in operating profit.
Further details on financial performance in the period can be
found in the Financial Review.
Dividend
An interim dividend of 1.15 pence per share (H1-19: 1.15 pence
per share), will be paid on 27 December 2019 to shareholders on the
register at 6 December 2019.
Outlook
As a profitable business with a 36 year track record,
established reputation, broad solution suite and extensive
distribution we approach the future from a great vantage point. The
market fundamentals are highly attractive, as institutional clients
globally seek to maximise and safeguard their investments in an
ever-changing geopolitical environment. As a Board and management
team we recognise that future success will continue to depend in
large part on our responsiveness to client demand and market
opportunities. This responsiveness combined with economic,
political and market uncertainty, means that we are seeing an
encouraging range of new business opportunities across products and
geographies. Taking advantage of these opportunities will require a
maintained investment in people across the Record Group, and
increasingly in technology to provide flexible, responsive
offerings for our clients.
All of the Group's management and staff are working hard to
convert these opportunities into profitable business. On behalf of
the Board, I would like to thank our clients for their continued
support, and our staff for their commitment and hard work.
James Wood--Collins
Chief Executive Officer
21 November 2019
Interim management review
Market overview
The six months to 30 September 2019 saw a new trend of central
bank easing emerge, both across developed and emerging markets. In
particular, the US Federal Reserve, the Reserve Bank of Australia,
and the Reserve Bank of New Zealand all cut policy rates twice. In
the Eurozone, the European Central Bank cut its policy rate further
into negative territory and restarted its asset purchase program.
Other negative-rate central banks, including the Swiss National
Bank and Bank of Japan considered similar actions.
Central bank easing was driven by a re-escalation of trade
tensions between the US and China, following a short-lived truce.
The economic uncertainty that followed began to have visible
effects on global activity and trade during the period. The
uncertain global outlook, combined with still-evident US economic
outperformance, meant that the US dollar strengthened against most
other developed market currencies. There were some exceptions to
this including the Japanese yen, which benefited from worsening
risk sentiment. The US dollar appreciated by approximately 3.5%
against a basket of developed market currencies.
Operating review
Product investment performance
Record's enhanced Passive Hedging service aims to reduce the
cost of hedging by introducing flexibility into the implementation
of currency hedges, without changing the hedge ratios.
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 since
Half year inception
return p.a.
--------------------------------- ---------- -------------
Value added by enhanced Passive
Hedging programme relative to
a fixed-tenor benchmark[2] 0.04% 0.12%
--------------------------------- ---------- -------------
During the period, US-based Dynamic Hedging clients experienced
a strengthening of the US dollar against developed market
currencies. The Dynamic Hedging programmes responded as expected;
hedge ratios varied systematically in response to currency
movements and hedging returns in the programmes were positive.
The FTSE Currency FRB10 Index performed positively with gains
largely attributable to appreciation in the US dollar on the basis
of stronger economic performance relative to other developed
markets.
The Emerging Market strategy also performed positively over the
period, primarily due to the appreciation of higher-yielding
currencies in the strategy, including the Turkish lira, Russian
rouble, and Indonesian rupiah.
Investment performance in Record's Multi-Strategy offerings
produced positive returns over the period.
Volatility
Return since since
Half year inception inception
Fund name Gearing return p.a. p.a.
---------------------------------- -------- ---------- ------------- -----------
Record Currency - FTSE
FRB10 Index Fund[3] 1.8 0.27% 1.70% 6.73%
Record Currency - Emerging
Market Currency Fund[4] 1.0 3.67% 1.63% 6.33%
Record - Currency Multi-Strategy
Fund[5] 5.5 0.77% (1.72%) 9.33%
---------------------------------- -------- ---------- ------------- -----------
Volatility
Return since since
Half year inception inception
Index/composite returns return p.a. p.a.
--------------------------------- ---------- ------------- -----------
FTSE Currency FRB10 GBP excess
return[6] 0.02% 2.18% 4.50%
Record Multi-Strategy Composite
[7] 2.38% 1.52% 2.80%
--------------------------------- ---------- ------------- -----------
AUME development
AUME increased over the period by 4.6% to $59.9 billion in US
dollar terms, and increased in sterling terms by 10.6% to GBP48.6
billion. The AUME movement over the six month period is analysed as
follows:
AUME movement analysis in the six months to 30 September
2019
$ billion
------------------------------------------------ ----------
AUME at 1 April 2019 57.3
Net client flows +2.0
Equity and other market impact +1.3
Foreign exchange impact and mandate volatility
scaling -0.7
AUME at 30 September 2019 59.9
------------------------------------------------ ----------
Net client flows by product in the six months to 30 September
2019
$ billion
--------------------- ----------
Passive Hedging +1.6
Dynamic Hedging +0.2
Currency for Return +0.2
Multi-Product 0.0
--------------------- ----------
Total flows +2.0
--------------------- ----------
Hedging
Passive Hedging net inflows of +$1.6 billion for the period
included some new clients, although the net inflows predominantly
arose from adjustments to existing clients' mandates. Other
movements impacting Passive Hedging AUME included market factors
(+$1.3 billion) and movements in exchange rates (-$0.7 billion)
with a net impact of +$0.6 billion. Similarly, Dynamic Hedging also
saw adjustments in respect of existing clients' mandates with net
inflows of +$0.2 billion, slightly offset by market and exchange
rate movements of --$0.1 billion.
Currency for Return and Multi-product
Currency for Return AUME increased by +$0.2 billion over the
period, represented by net inflows to existing clients'
mandates.
Multi-product AUME finished the period +$0.1 billion higher due
to market movements.
Equity and other market performance
Record's AUME is affected by movements in equity and other
markets because the Passive and Dynamic Hedging mandates, and some
of the Multi-product mandates, are linked to equity holdings or
other asset types such as bonds or real estate.
Additional details on the composition of assets underlying the
Hedging and Multi-product mandates are provided below to help
illustrate more clearly the impact of equity and fixed income
market movements on these mandate sizes.
Class of assets underlying mandates by product as at 30
September 2019
Fixed
Equity income Other
% % %
----------------- ------- -------- ------
Passive Hedging 29 42 29
Dynamic Hedging 100 - -
Multi-product - - 100
----------------- ------- -------- ------
Forex
Approximately 88% of the Group's AUME is non--US dollar
denominated. Therefore, foreign exchange movements may have an
impact on AUME when expressing non--US dollar AUME in US Dollars,
although this movement does not have an equivalent impact on the
sterling value of fee income. Exchange rate movements decreased
AUME by -$0.7 billion in the period.
Product mix
The product mix has remained broadly constant during the period,
as shown in the table below.
AUME composition by product
30 Sep 19 30 Sep 18 31 Mar 19
------------ ------------ ------------
$bn % $bn % $bn %
--------------------- ------ ---- ------ ---- ------ ----
Passive Hedging 50.4 84 51.7 84 48.2 84
Dynamic Hedging 3.2 5 4.4 7 3.1 5
Currency for Return 2.9 5 2.4 4 2.7 5
Multi-product 3.1 5 3.0 5 3.0 5
Cash and other 0.3 1 0.3 - 0.3 1
--------------------- ------ ---- ------ ---- ------ ----
Total 59.9 100 61.8 100 57.3 100
--------------------- ------ ---- ------ ---- ------ ----
Client numbers
Client numbers increased by five clients since the financial
year end, closing at 70 clients
(H1-19: 66).
Financial review
Revenue
Record's revenue derives from the provision of currency
management services, which can be charged through management fee
only or management plus performance fee structures, which are
available across Record's product range. Management fee only
mandates are charged based on the AUME of the product, and
management fee plus performance fee structures include a lower
percentage fee applied, and a proportional share of the specific
product performance measured over a defined period.
Performance fees can be earned over time periods which may not
align with financial reporting periods. As a result, there is not
necessarily a direct relationship between positive investment
performance and performance fees earned in any single period.
Record's total revenue including performance fees decreased over
the equivalent period last year by 10% to GBP11.4 million (H1-19:
GBP12.6 million) and by 8% compared to the second half of last year
(H2-19: GBP12.4 million).
The aggregate management fee income reduced by 3% to GBP11.1
million for the period
(H1-19: GBP11.4 million), although increased by 2% when compared
to H2-19 (GBP10.9 million), assisted by sterling's depreciation
over the period. No performance fees were earned in the period
(H1-19: GBP1 million). Other investment services income increased
to GBP0.3 million
(H1-19: GBP0.2 million).
Passive Hedging management fees of GBP5.9 million decreased by
2% over the equivalent period last year (H1-19: GBP6.0 million),
but represent an increase of 5% over the second half of last year
(H2-19: GBP5.6 million). This recovery reflects the net inflows
into Passive Hedging AUME during the period assisted by both growth
in clients' mandates due to market movements, and sterling weakness
over the period. Passive Hedging management fees remained at 53% of
total management fees, broadly in line with prior periods.
Dynamic Hedging management fees decreased by 15% to GBP2.0
million compared to the same period last year (H1-19: GBP2.3
million), reflecting the impact of the reduction to client mandates
(-$1.1 billion) arising from the tactical changes to realise gains
for clients in March 2019, slightly offset by the net inflows
(+$0.2 billion) during this subsequent period. Consequently,
Dynamic Hedging fees now represent 18% of total management fees,
reduced from approximately 21% in prior periods.
Currency for Return management fees remained broadly consistent
with prior periods with the full fee impact of the net inflow of
$0.2 billion expected in subsequent periods.
Revenue from the Multi-product category has remained broadly
constant, and generated management fees of GBP2.3 million in the
period, including a slight increase over prior periods due to
market growth assisted by sterling weakness.
Revenue analysis (GBPm)
Year
Six months ended Six months ended ended
30 Sep 19 30 Sep 18 31 Mar 19
---------------------------------- ----------------- ----------------- ----------
Management fees
Passive Hedging 5.9 6.0 11.6
Dynamic Hedging 2.0 2.3 4.6
Currency for Return 0.9 0.9 1.8
Multi-product 2.3 2.2 4.3
---------------------------------- ----------------- ----------------- ----------
Total management fees 11.1 11.4 22.3
Performance fees - 1.0 2.3
Other investment services income 0.3 0.2 0.4
---------------------------------- ----------------- ----------------- ----------
Total revenue 11.4 12.6 25.0
---------------------------------- ----------------- ----------------- ----------
Other investment services income consists of fees from ancillary
investment management services.
Average management fee rates by product (bps p.a.)
The average management fee rates for most product lines have
remained broadly constant over the six months ended 30 September
2019.
Expenditure
Expenditure analysis (GBPm)
Six months Six months Year
ended ended ended
30 Sep 19 30 Sep 18 31 Mar 19
------------------------------ ----------- ----------- ----------
Personnel costs 4.2 4.1 8.2
Non-personnel costs 2.6 2.5 5.1
Administrative expenditure
excluding Group Profit
Share 6.8 6.6 13.3
Group Profit Share 1.4 1.7 3.4
------------------------------ ----------- ----------- ----------
Total administrative
expenditure 8.2 8.3 16.7
------------------------------ ----------- ----------- ----------
Other income and expenditure - 0.1 -
Total expenditure 8.2 8.4 16.7
------------------------------ ----------- ----------- ----------
Cost discipline has been maintained, with the total
administrative expenditure for the period of GBP8.2 million being
broadly unchanged on the equivalent period in the prior year
(H1-19: GBP8.3 million), and representing a decrease of GBP0.2
million compared to H2-19 (GBP8.4 million).
Personnel costs excluding Group Profit Share ("GPS") are broadly
unchanged on equivalent expenditure in prior periods and negligible
movement in average employee numbers.
Non-personnel costs for the period of GBP2.6 million are in line
with expectations based on the prior comparative period and the
second half of last year.
Group Profit Share ("GPS") Scheme
The cost of the GPS scheme is GBP1.4 million for the period,
decreasing in line with operating profit. The GPS cost is
calculated as 31% of operating profits, which is within the
previously established range of 25% to 35% of pre-GPS operating
profit. Further information on the GPS scheme is given in the Chief
Executive Officer's statement.
Operating profit and margins
Notwithstanding continued cost discipline, the absence of
performance fees in the period has resulted in a reduced operating
profit and operating profit margin.
Operating profit for the period was GBP3.1 million, a decrease
of GBP0.9 million and GBP0.8 million on the equivalent period and
second half of last year respectively.
Cash flow
The Group's ability to generate cash continues, with GBP3.6
million of cash generated from operating activities after tax
during the period (H1-19: GBP3.5 million). Taxation paid during the
period increased to GBP0.7 million compared to GBP0.4 million for
the same period last year due primarily to performance fees earned
in the prior year.
The Group paid dividends totalling GBP3.6 million in the period
(H1-19: GBP3.3 million), more information for which is given in
note 5 to the financial statements.
Dividends and capital
In line with the Board's capital and dividend policy, the Group
will pay an interim dividend of 1.15 pence per share in respect of
the six month period equating to a distribution of GBP2.3 million,
following which the business will retain cash and money market
instruments on the balance sheet which are significantly in excess
of financial resource requirements required for regulatory
purposes.
The Group has no debt and its capital and dividend policy aims
to ensure continued balance sheet strength for the Group.
Shareholders' funds were GBP26.4 million at 30 September 2019
(H1-19: GBP26.4 million).
Principal risks and uncertainties
The principal risks currently facing the Group and those that we
anticipate the Group will be exposed to in the short term remain
the same as those outlined in the Annual Report 2019.
These risks are:
-- Strategic risk - including the risk of failure to deliver
strategy and margin compression risk.
-- Business risk - including concentration risk, people and
employment risk, the risk of regulatory change and market liquidity
risk.
-- Operational risk - including technology and information
security risk and the risk associated with the operational control
environment.
-- Investment risk - the risk of product underperformance.
Brexit
The Group continues to closely monitor developments with respect
to Brexit. At the time of signing our Annual Report in June 2019, a
change in the UK Prime Minister was imminent, the Withdrawal
Agreement had not been endorsed by Parliament and the Article 50
notice period had been extended to 31 October. More recently, a
further extension to the Article 50 notice period to no later than
31 January 2020 has been granted and a general election has been
called for 12 December 2019. Notwithstanding the sustained
uncertainty, we remain confident of being able to continue to
provide our services to all current EU27 clients post-Brexit.
Further information is given in the Chief Executive's statement,
and the 2019 Annual Report.
Statement of Directors' responsibilities
The interim financial report is the responsibility of the
Directors who confirm that to the best of their knowledge:
-- the condensed set of consolidated financial statements has
been prepared in accordance with IAS 34 "Interim Financial
Reporting" as endorsed and adopted by the EU;
-- the interim management review includes a fair review of the information required by:
o DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of consolidated financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
o DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the Annual Report 2019 that could do so.
The Directors of Record plc are listed on the Record plc website
at recordcm.com/about-us/our-people/board-of-directors.
Neil Record Steve Cullen
Chairman Chief Financial Officer
21 November 2019 21 November 2019
Independent review report to Record plc
Report on the consolidated financial statements
Our conclusion
We have reviewed Record plc's consolidated financial statements
(the "interim financial statements") in the Interim Report 2019 of
Record plc for the 6 month period ended 30 September 2019. Based on
our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in
all material respects, in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Consolidated statement of financial position as at 30 September 2019;
-- the Consolidated statement of comprehensive income for the period then ended;
-- the Consolidated statement of cash flows for the period then ended;
-- the Consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Report
2019 have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim Report 2019, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the Interim
Report 2019 in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim Report 2019 based on our
review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim
Report 2019 and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Reading
21 November 2019
Financial statements
Consolidated statement of comprehensive income
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 19 30 Sep 18 31 Mar 19
Note GBP'000 GBP'000 GBP'000
----------------------------------------------------------------------- ----- ----------- ----------- ----------
Revenue 3 11,385 12,624 24,973
Cost of sales (119) (194) (385)
----------------------------------------------------------------------- ----- ----------- ----------- ----------
Gross profit 11,266 12,430 24,588
Administrative expenses (8,232) (8,295) (16,704)
Other income or expense 50 (138) (8)
Operating profit 3,084 3,997 7,876
Finance income 92 52 135
Finance expense (9) (11) (22)
----------------------------------------------------------------------- ----- ----------- ----------- ----------
Profit before tax 3,167 4,038 7,989
Taxation (652) (822) (1,559)
----------------------------------------------------------------------- ----- ----------- ----------- ----------
Profit after tax 2,515 3,216 6,430
----------------------------------------------------------------------- ----- ----------- ----------- ----------
Total comprehensive income for the period 2,515 3,216 6,430
----------------------------------------------------------------------- ----- ----------- ----------- ----------
Profit and total comprehensive income for the period attributable to:
Owners of the parent 2,543 3,216 6,430
Non-controlling interests 11 (28) - -
----------------------------------------------------------------------- ----- ----------- ----------- ----------
2,515 3,216 6,430
----------------------------------------------------------------------- ----- ----------- ----------- ----------
Earnings per share for the period (expressed in pence per share)
Basic earnings per share 4 1.29p 1.63p 3.27p
Diluted earnings per share 4 1.29p 1.61p 3.25p
----------------------------------------------------------------------- ----- ----------- ----------- ----------
Consolidated statement of financial position
Unaudited Unaudited Audited
As at As at As at
30 Sep 19 30 Sep 18 31 Mar 19
Note GBP'000 GBP'000 GBP'000
----------------------------------------------------- ----- ---------- ---------- ----------
Non-current assets
Property, plant and equipment 838 816 761
Right of use assets 6 1,401 - -
Investments 7 1,152 1,075 1,112
Intangible assets 357 321 288
Deferred tax assets - 34 -
----------------------------------------------------- ----- ---------- ---------- ----------
Total non-current assets 3,748 2,246 2,161
----------------------------------------------------- ----- ---------- ---------- ----------
Current assets
Trade and other receivables 6,678 8,425 7,562
Derivative financial assets 10 132 178 164
Money market instruments with maturities > 3 months 8 13,860 9,804 10,735
Cash and cash equivalents 8 9,576 12,962 12,966
----------------------------------------------------- ----- ---------- ---------- ----------
Total current assets 30,246 31,369 31,427
----------------------------------------------------- ----- ---------- ---------- ----------
Total assets 33,994 33,615 33,588
----------------------------------------------------- ----- ---------- ---------- ----------
Current liabilities
Trade and other payables (2,629) (3,930) (2,736)
Corporation tax liabilities (604) (772) (692)
Financial liabilities 7 (2,721) (2,361) (2,621)
Derivative financial liabilities 10 (58) (153) (109)
----------------------------------------------------- ----- ---------- ---------- ----------
Total current liabilities (6,012) (7,216) (6,158)
----------------------------------------------------- ----- ---------- ---------- ----------
Non-current liabilities
Lease liabilities 6 (1,391) - -
Deferred tax liabilities (61) - (29)
----------------------------------------------------- ----- ---------- ---------- ----------
Total non-current liabilities (1,452) - (29)
----------------------------------------------------- ----- ---------- ---------- ----------
Total net assets 26,530 26,399 27,401
----------------------------------------------------- ----- ---------- ---------- ----------
Equity
Issued share capital 11 50 50 50
Share premium account 2,243 2,243 2,243
Capital redemption reserve 26 26 26
Retained earnings 24,059 24,080 25,022
----------------------------------------------------- ----- ---------- ---------- ----------
Equity attributable to owners of the parent 26,378 26,399 27,341
----------------------------------------------------- ----- ---------- ---------- ----------
Non-controlling interests 12 152 - 60
----------------------------------------------------- ----- ---------- ---------- ----------
Total equity 26,530 26,399 27,401
----------------------------------------------------- ----- ---------- ---------- ----------
Approved by the Board on 21 November 2019 and signed on its
behalf by:
Neil Record Steve Cullen
Chairman Chief Financial Officer
Consolidated statement of changes in equity
Equity
attributable
Called Share Capital to owners
up share premium redemption Retained of the Non-controlling Total
capital account reserve earnings parent interests equity
Unaudited Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ---- ---------- ---------- ------------ ---------- -------------- ----------------- ---------
As at 31 March
2018 50 2,237 26 24,238 26,551 - 26,551
Profit and
total
comprehensive
income
for the
period - - - 3,216 3,216 - 3,216
Dividends
paid 5 - - - (3,252) (3,252) - (3,252)
Own shares
acquired
by Record
plc
Employee
Benefit
Trust
("EBT") - - - (620) (620) - (620)
Release of
shares
held by EBT - 6 - 463 469 - 469
Share-based
payments - - - 35 35 - 35
---------------- ---- ---------- ---------- ------------ ---------- -------------- ----------------- ---------
Transactions
with
shareholders - 6 - (3,374) (3,368) - (3,368)
---------------- ---- ---------- ---------- ------------ ---------- -------------- ----------------- ---------
As at 30
September
2018 50 2,243 26 24,080 26,399 - 26,399
---------------- ---- ---------- ---------- ------------ ---------- -------------- ----------------- ---------
Profit and
total
comprehensive
income
for the
period - - - 3,214 3,214 - 3,214
Dividends
paid 5 - - - (2,265) (2,265) - (2,265)
Issue of
shares
in Trade
Record
Ltd - - - - - 60 60
Own shares
acquired
by EBT - - - (273) (273) - (273)
Release of
shares
held by EBT - - - 214 214 - 214
Share-based
payments - - - 52 52 - 52
---------------- ---- ---------- ---------- ------------ ---------- -------------- ----------------- ---------
Transactions
with
shareholders - - - (2,272) (2,272) 60 (2,212)
---------------- ---- ---------- ---------- ------------ ---------- -------------- ----------------- ---------
As at 31 March
2019 50 2,243 26 25,022 27,341 60 27,401
---------------- ---- ---------- ---------- ------------ ---------- -------------- ----------------- ---------
Profit and
total
comprehensive
income
for the
period - - - 2,543 2,543 (28) 2,515
Dividends
paid 5 - - - (3,619) (3,619) - (3,619)
Issue of
shares
in Trade
Record
Ltd - - - - - 120 120
Own shares
acquired
by EBT - - - (115) (115) - (115)
Release of
shares
held by EBT - - - 340 340 - 340
Share-based
payments - - - (15) (15) - (15)
IFRS16
opening
adjustment 6 - - - (97) (97) - (97)
Transactions
with
shareholders - - - (3,506) (3,506) 120 (3,386)
---------------- ---------- ---------- ------------ ---------
As at 30
September
2019 50 2,243 26 24,059 26,378 152 26,530
---------------- ---- ---------- ---------- ------------ ---------- -------------- ----------------- ---------
Consolidated statement of cash flows
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 19 30 Sep 18 31 Mar 19
Note GBP'000 GBP'000 GBP'000
---------------------------------------------------------------------- ----- ----------- ----------- ----------
Net cash inflow from operating activities after tax 9 3,638 3,526 7,026
Cash flow from investing activities
Purchase of property, plant and equipment (194) (16) (72)
Purchase of intangible assets (124) (124) (134)
(Purchase)/sale of money market instruments with maturity > 3 months (3,125) 394 (537)
Interest received 93 42 110
---------------------------------------------------------------------- ----- ----------- ----------- ----------
Net cash (outflow)/inflow from investing activities (3,350) 296 (633)
Cash flow from financing activities
Subscription for shares in subsidiary 120 - 40
Principle element of lease repayments (299) - -
Purchase of own shares - (380) (653)
Dividends paid to equity shareholders 5 (3,619) (3,252) (5,517)
---------------------------------------------------------------------- ----- ----------- ----------- ----------
Cash outflow from financing activities (3,798) (3,632) (6,130)
---------------------------------------------------------------------- ----- ----------- ----------- ----------
Net (decrease)/increase in cash and cash equivalents in the period (3,510) 190 263
---------------------------------------------------------------------- ----- ----------- ----------- ----------
Effect of exchange rate changes 120 274 205
Cash and cash equivalents at the beginning of the period 12,966 12,498 12,498
---------------------------------------------------------------------- ----- ----------- ----------- ----------
Cash and cash equivalents at the end of the period 9,576 12,962 12,966
---------------------------------------------------------------------- ----- ----------- ----------- ----------
Closing cash and cash equivalents consists of:
Cash 8 2,097 2,042 2,150
Cash equivalents 8 7,479 10,920 10,816
---------------------------------------------------------------------- ----- ----------- ----------- ----------
Cash and cash equivalents 8 9,576 12,962 12,966
---------------------------------------------------------------------- ----- ----------- ----------- ----------
Notes to the consolidated financial statements
These consolidated financial statements exclude disclosures that
are immaterial and judged to be unnecessary to understand our
results and financial position.
1 Basis of preparation
The condensed set of consolidated financial statements included
in this interim financial report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union. The financial
information set out in this interim report does not constitute
statutory accounts as defined in Section 434 of the Companies Act
2006. The Group's statutory financial statements for the year ended
31 March 2019 (which were prepared in accordance with IFRSs as
adopted by the European Union) have been delivered to the Registrar
of Companies. The auditor's report on those financial statements
was unqualified and did not contain statements under Section 498(2)
or Section 498(3) of the Companies Act 2006.
The accounting policies for recognition, measurement,
consolidation and presentation as set out in the Group's Annual
report and accounts for the year ended 31 March 2019 have been
applied in the preparation of the IFRS condensed consolidated half
year financial information except as noted below.
Application of new standards
One new standard and a number of amendments to standards became
applicable for the current reporting period, and the Group had to
change its accounting policies and make adjustments as a result of
adopting IFRS 16, "Leases".
The impact of the adoption of the leasing standard, IFRS 16 -
"Leases", and the new accounting policies are disclosed in note 6
below. The other amendments to standards did not have any impact on
the Group's accounting policies and did not require retrospective
adjustments.
Going concern
The Directors are satisfied that the Group has adequate
resources with which to continue to operate for the foreseeable
future, and therefore these financial statements have been prepared
on a going concern basis.
Consolidation
The accounting policies adopted in these interim financial
statements are identical to those adopted in the Group's most
recent annual financial statements for the year ended 31 March 2019
with the exception of accounting for leases. An explanation of the
impact of applying the new standard for accounting for leases is
provided in note 6.
The consolidated financial information contained within the
financial statements incorporates financial statements of the
Company and entities controlled by the Company (its subsidiaries)
drawn up to 30 September 2019. Control is achieved where the
Company has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities.
Where the Company controls an entity, but does not own all the
share capital of that entity, the interests of the other
shareholders are stated within equity as non-controlling interests
or within current liabilities as financial liabilities depending on
the characteristic of the investment, being the proportionate share
of the fair value of identifiable net assets on date of acquisition
plus the share of changes in equity since the date of
consolidation.
An Employee Benefit Trust ("EBT") has been established for the
purposes of satisfying certain share-based awards. The Group has
'de facto' control over this entity. This trust is fully
consolidated within the financial statements (see note 11 for
further details).
Throughout the period, the Group had investments in four funds,
three of which it was in a position to control. These fund
investments are held by Record plc and represent seed capital
investments by the Group. The funds controlled by the Group have
been consolidated on a line-by-line basis from the time that the
Group gained control over the fund.
2 Critical accounting estimates and judgements
The accounting policies, presentation and methods of computation
applied in the interim financial statements are consistent with
those applied in the financial statements for the year ended 31
March 2019, with the exception of accounting for leases. Note 6
describes how the Group has changed the way it accounts for leases
following the application of IFRS 16 - "Leases" which was
implemented on 1 April 2019. The Group's incremental borrowing rate
should be used to calculate the present value of lease payments,
however as the Group has no borrowings it has estimated the
incremental borrowing rate (see note 6 for further detail).
3 Revenue
Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the provision of currency management services.
Our revenues typically arise from charging management fees or
performance fees and both are accounted for in accordance with IFRS
15 "Revenue from contracts with customers".
Management fees are recorded on a monthly basis as the
underlying currency management service occurs. There are no other
performance obligations. Management fees are calculated as an
agreed percentage of the assets under management equivalents
("AUME") denominated in the client's chosen base currency. The
percentage varies depending on the nature of services and the level
of AUME. Management fees are typically invoiced to the customer
quarterly with receivables recognised for unpaid invoices.
The Group is entitled to earn performance fees from some clients
where the performance of the clients' mandates exceeds defined
benchmarks over a set time period, and are recognised when the fee
amount can be estimated reliably and it is highly probable that it
will not be subject to significant reversal.
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 are not subject to any claw back
provisions. There are no other performance obligations or services
provided which suggest these have been earned either before or
after crystallisation date.
a) Revenue from contracts with customers
The following table provides a breakdown of revenue from
contracts with customers, with management fees analysed by product.
Other investment services income includes fees from signal hedging
and fiduciary execution.
Six months Six months Year
ended ended ended
30 Sep 19 30 Sep 18 31 Mar 19
Revenue by product type GBP'000 GBP'000 GBP'000
----------------------------- ----------- ----------- ----------
Management fees
Passive Hedging 5,880 5,999 11,610
Dynamic Hedging 1,994 2,351 4,598
Currency for Return 958 899 1,775
Multi-Product 2,301 2,172 4,325
----------------------------- ----------- ----------- ----------
Total management fee income 11,133 11,421 22,308
Performance fee income - 1,048 2,333
Other investment services
income 252 155 332
----------------------------- ----------- ----------- ----------
Total revenue 11,385 12,624 24,973
----------------------------- ----------- ----------- ----------
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.
Six months Six months Year
ended ended ended
30 Sep 19 30 Sep 18 31 Mar 19
Revenue by geographical region GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ----------- ----------
UK 1,157 1,142 2,239
US 2,996 3,260 6,439
Switzerland 4,717 5,985 11,401
Other 2,515 2,237 4,894
-------------------------------- ----------- ----------- ----------
Total revenue 11,385 12,624 24,973
-------------------------------- ----------- ----------- ----------
4 Earnings per share
Basic earnings per share is calculated by dividing the profit
for the financial period by the weighted average number of ordinary
shares in issue during the period.
Diluted earnings per share are calculated as for the basic
earnings per share with a further adjustment to the weighted
average number of ordinary shares to reflect the effects of all
potential dilution.
There is no difference between the profit for the financial
period used in the basic and diluted earnings per share
calculations.
Six months Six months Year
ended ended ended
30 Sep 19 30 Sep 18 31 Mar 19
---------------------------------------------------------------------------- ------------ ------------ ------------
Weighted average number of shares used in calculation of basic earnings per
share 196,424,001 196,859,947 196,655,224
Effect of potential dilutive ordinary shares - share options 532,520 2,780,948 1,462,554
---------------------------------------------------------------------------- ------------ ------------ ------------
Weighted average number of shares used in calculation of diluted earnings
per share 196,956,521 199,640,895 198,117,778
---------------------------------------------------------------------------- ------------ ------------ ------------
Basic earnings per share 1.29p 1.63p 3.27p
Diluted earnings per share 1.29p 1.61p 3.25p
---------------------------------------------------------------------------- ------------ ------------ ------------
The potential dilutive shares relate to the share options
granted in respect of the Group's Share Scheme. At the beginning of
the period, there were share options in place over 12,291,703
shares. During the six months ended 30 September 2019, options over
1,985,000 shares were granted, options over 397,917 shares were
exercised and options over 217,947 shares lapsed. As at 30
September 2019, there were share options in place over 13,660,839
shares.
5 Dividends
The dividends paid during the six months ended 30 September 2019
totalled GBP3,619,153 (1.84 pence per share) being a final ordinary
dividend in respect of the year ended 31 March 2019 of 1.15 pence
per share and a special dividend of 0.69 pence per share. An
interim dividend of GBP2,265,135 (1.15 pence per share) was paid in
the six months ended 31 March 2019, thus the full ordinary dividend
in respect of the year ended 31 March 2019 was 2.30 pence per
share. The dividend paid by the Group during the six months ended
30 September 2018 totalled GBP3,251,761 (1.65 pence per share)
being a final ordinary dividend in respect of the year ended 31
March 2018 of 1.15 pence per share, and a special dividend of 0.50
pence per share.
The interim dividend declared in respect of the six months ended
30 September 2019 is 1.15 pence per share.
6 Changes in accounting policies for leases
This note explains the impact of the adoption of IFRS 16,
"Leases", on the Group's financial statements, and it discloses the
new accounting policies that have been applied from1 April
2019.
The Group has adopted IFRS 16 retrospectively from 1 April 2019
but it has not restated comparatives for the 2019 reporting period,
as permitted under the specific transitional provisions in the
Standard. The reclassifications and the adjustments arising from
the new leasing rules are therefore recognised in the opening
balance sheet on 1 April 2019.
a) Adjustments recognised on adoption of IFRS 16
The Group has elected to recognise the cumulative effect of
initially applying the Standard to its leases retrospectively on
the date of initial application (1 April 2019), and has not
restated comparative information. The cumulative effect of
initially applying this Standard results in an adjustment to the
opening balance of retained earnings on the date of initial
application.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
"operating leases" under the principles of IAS 17, "Leases". These
liabilities were measured at the present value of the remaining
lease payments, discounted using the Group's assumed incremental
borrowing rate as of 1 April 2019. The assumed weighted average
incremental borrowing rate applied to the lease liabilities on 1
April 2019 was 4%.
The Group had three lease agreements relating to its premises in
Windsor, New York and Zürich, which were previously recognised as
operating leases.
For each lease, a right-of-use asset has been recognised at its
carrying amount as if the standard had been applied since the
commencement date of each lease.
There were no onerous lease contracts that would have required
an adjustment to the right-of-use assets at the date of initial
application.
The change in accounting policy affected the following items in
the balance sheet on 1 April 2019:
-- right-of-use assets - increase by GBP1,560,371; and
-- lease liabilities - increase by GBP1,672,994.
The net impact on retained earnings on 1 April 2019 was a
decrease of GBP97,497 after adjusting prepayments and accrual
balances pertaining to the leases which were recognised under the
previous accounting policy.
The decrease in retained earnings 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 previous IAS
17 requirements.
Earnings per share increased by 0.01 pence per share for the six
months to 30 September 2019 as a result of the adoption of IFRS
16.
b) The Group's leasing activities and how these are accounted for
The Group leases various offices. Rental contracts are typically
made for fixed periods of three to six years but they might have
extension options. Lease terms are negotiated on an individual
basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants, but leased assets
cannot be used as security for borrowing purposes.
Until the 2019 financial year, leases of property, plant and
equipment were classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor)
were charged to profit or loss on a straight-line basis over the
period of the lease.
From 1 April 2019, leases are recognised as a right-of-use asset
and a corresponding liability at the date at which the leased asset
is available for use by the Group. Each lease payment is allocated
between the liability and finance cost. The finance cost is charged
to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability
for each period. The right-of-use asset is depreciated over the
shorter of the asset's useful life and the lease term on a
straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the lease payments less any lease incentives
receivable.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
Group's incremental borrowing rate is used, being the rate that the
Group would have to pay to borrow the funds necessary to obtain an
asset of similar value in a similar economic environment with
similar terms and conditions. As the Group has no borrowings it has
estimated the incremental borrowing rate based on interest rate
data available in the market, adjusted to reflect Record's
creditworthiness, the leased asset in question and the terms and
conditions of the lease.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date,
less any lease incentives received;
-- any initial direct costs; and
-- an estimate of costs to be incurred to restore the assets to
the conditions required by the terms and conditions of the
lease.
7 Accounting for seed investments in funds
Record plc holds seed investments in several funds. These funds
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.
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.
Record has seeded four funds which have been active during the
half year ended 30 September 2019. The Group has controlled both
the Record Currency - FTSE FRB10 Index Fund and the Record Currency
- Strategy Development Fund throughout the half year ended 30
September 2019 and the comparative periods, and both were
consolidated in full, on a line-by-line basis in the Group's
financial statements throughout these periods.
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.
Unit holdings in funds as at 30 September 2019
Record
plc
plus
Record Related related Other
plc parties parties investors
---------------------------------------- ------- --------- --------- -----------
Record Currency - FTSE FRB10 Index
Fund 71% 0% 71% 29%
Record Currency - Emerging Market
Currency Fund 30% 15% 45% 55%
Record Currency - Strategy Development
Fund 100% 0% 100% 0%
Record - Currency Multi-Strategy
Fund 30% 65% 95% 5%
---------------------------------------- ------- --------- --------- -----------
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. Since 21 March 2018, the fund has been classified
as an investment and measured at fair value through profit or
loss.
Investments
As at As at As at
30 Sep 30 Sep 31 Mar
19 18 19
GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- --------
Record Currency - Emerging Market
Currency Fund 1,152 1,075 1,112
----------------------------------- -------- -------- --------
Financial liabilities
Where a fund is consolidated on a line-by-line basis and Record
plc is not the only investor, 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. These financial liabilities are held at fair value,
which represents the mark to market value of units held by
investors other than Record in these funds, in accordance with
IFRS.
Mark to market value of external holding in seeded funds
consolidated into the accounts of the Record Group
As at As at As at
30 Sep 30 Sep 31 Mar
19 18 19
GBP'000 GBP'000 GBP'000
------------------------------------ -------- -------- --------
Record Currency - FTSE FRB10 Index
Fund 479 466 479
Record - Currency Multi-Strategy
Fund 2,242 1,895 2,142
------------------------------------ -------- -------- --------
Financial liabilities 2,721 2,361 2,621
------------------------------------ -------- -------- --------
There is no external investment in the Record Currency -
Strategy Development Fund.
The financial liabilities relate only to the fair value of the
external investors' holding in the seed funds, and should not be
construed as debt.
8 Cash management
The Group's cash management strategy employs a variety of
treasury management instruments including cash, money market
deposits and treasury bills with maturities of up to one year. We
note that not all of these instruments are classified as cash or
cash equivalents under IFRS.
IFRS defines cash and cash equivalents as cash in hand, on
demand and collateral deposits held with banks, and other
short-term highly liquid investments that are readily convertible
to a known amount of cash and are subject to an insignificant risk
of changes in value. Moreover, instruments can only generally be
classified as cash and cash equivalents where they are held for the
purpose of meeting short-term cash commitments rather than for
investment or other purposes.
In the Group's judgement, bank deposits and treasury bills with
maturities in excess of three months do not meet the definition of
short-term or highly liquid and are held for purposes other than
meeting short-term commitments. In accordance with IFRS, these
instruments are not categorised as cash or cash equivalents and are
disclosed as money market instruments with maturities greater than
three months.
The table below summarises the instruments managed by the Group
as cash, and their IFRS classification:
As at As at As at
30 Sep 19 30 Sep 18 31 Mar 19
Assets managed as cash GBP'000 GBP'000 GBP'000
----------------------------------------------------- ---------- ---------- ----------
Bank deposits with maturities > 3 months 12,563 9,804 10,735
Treasury bills with maturities > 3 months 1,297 - -
----------------------------------------------------- ---------- ---------- ----------
Money market instruments with maturities > 3 months 13,860 9,804 10,735
----------------------------------------------------- ---------- ---------- ----------
Cash 2,097 2,042 2,150
Bank deposits with maturities <= 3 months 7,479 9,020 10,816
Treasury bills with maturities <= 3 months - 1,900 -
----------------------------------------------------- ---------- ---------- ----------
Cash and cash equivalents 9,576 12,962 12,966
----------------------------------------------------- ---------- ---------- ----------
Total assets managed as cash 23,436 22,766 23,701
----------------------------------------------------- ---------- ---------- ----------
9 Cash flow from operating activities
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 19 30 Sep 18 31 Mar 19
GBP'000 GBP'000 GBP'000
--------------------------------------------------------- ----------- ----------- ----------
Operating profit 3,084 3,997 7,876
Adjustments for non-cash movements:
Depreciation of property, plant and equipment 117 110 221
Depreciation of right of use assets 282 - -
Amortisation of intangible assets 55 31 74
Share-based payments (16) 35 87
Net release of shares previously held by EBT 225 228 443
Other non-cash movements (275) (202) (172)
--------------------------------------------------------- ----------- ----------- ----------
3,472 4,199 8,529
Changes in working capital
Decrease/(increase) in receivables 754 (1,671) (772)
Increase in payables 37 1,300 106
Decrease in derivative financial assets 31 87 102
(Decrease)/increase in derivative financial liabilities (51) 124 80
Increase/(decrease) in financial liabilities 102 (106) 154
Cash inflow from operating activities 4,345 3,933 8,199
Interest paid - (11) (22)
Corporation taxes paid (707) (396) (1,151)
--------------------------------------------------------- ----------- ----------- ----------
Net cash inflow from operating activities after tax 3,638 3,526 7,026
--------------------------------------------------------- ----------- ----------- ----------
10 Fair value measurement for derivative financial instruments
The following table presents financial assets and liabilities
measured at fair value in the consolidated statement of financial
position in accordance with the fair value hierarchy based on the
significance of inputs used in measuring their fair value. The
hierarchy has the following levels:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level within which the financial asset or liability is
classified is determined based on the lowest level of input to the
fair value measurement. The financial assets and liabilities
measured at fair value in the statement of financial position are
grouped into the fair value hierarchy as follows:
Total Level 1 Level 2 Level 3
As at 30 September 2019 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------ -------- -------- -------- --------
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for seed funds 93 - 93 -
Options used for seed funds 9 - - 9
Forward foreign exchange contracts used for hedging 30 - 30 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for seed funds (22) - (22) -
Forward foreign exchange contracts used for hedging (36) - (36) -
------------------------------------------------------------ -------- -------- -------- --------
74 - 65 9
------------------------------------------------------------ -------- -------- -------- --------
Total Level 1 Level 2 Level 3
As at 31 March 2019 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------ -------- -------- -------- --------
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for hedging 106 - 106 -
Forward foreign exchange contracts used for seed funds 58 - 58 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging (109) - (109) -
55 - 55 -
------------------------------------------------------------ -------- -------- -------- --------
Total Level 1 Level 2 Level 3
As at 30 September 2018 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------ -------- -------- -------- --------
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for seed funds 154 - 154 -
Forward foreign exchange contracts used for hedging 24 - 24 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for seed funds (78) - (78) -
Forward foreign exchange contracts used for hedging (75) - (75) -
------------------------------------------------------------ -------- -------- -------- --------
25 - 25 -
------------------------------------------------------------ -------- -------- -------- --------
There have been no transfers between levels in any of the
reported periods.
Basis for classification of financial instruments within the
fair value hierarchy
Forward foreign exchange contracts are classified as Level 2.
These instruments are traded on an active market. The fair value of
forward foreign exchange contracts is established using
interpolation of observable market data rather than a quoted
price.
Options are classified as level 3. These instruments are traded
on an active market. The fair value of option is established using
a Black-Scholes model.
11 Called up share capital
The share capital of Record plc consists only of fully paid
ordinary shares with a par value of 0.025 pence. All shares are
equally eligible to receive dividends and the repayment of capital
and represent one vote at the shareholders' meeting.
Unaudited as Unaudited as
at at Audited as at
30 Sep 19 30 Sep 18 31 Mar 19
---------------------- ---------------------- ----------------------
GBP'000 Number GBP'000 Number GBP'000 Number
--------------------- -------- ------------ -------- ------------ -------- ------------
Authorised
Ordinary shares of
0.025 pence each 100 400,000,000 100 400,000,000 100 400,000,000
Called up, allotted
and fully paid
Ordinary shares of
0.025 pence each 50 199,054,325 50 199,054,325 50 199,054,325
--------------------- -------- ------------ -------- ------------ -------- ------------
Movement in Record plc shares held by the Record plc Employee
Benefit Trust ("EBT")
The EBT was formed to hold shares acquired under the Record plc
share-based compensation plans. Under IFRS the EBT is considered to
be under de facto control of the Group, and has therefore been
consolidated into the Group financial statements.
Neither the purchase nor sale of own shares leads to a gain or
loss being recognised in the Group statement of comprehensive
income. Any such gains or losses are recognised directly in
equity.
Number
-------------------------------------------------- -----------
Record plc shares held by EBT as at 31 March
2018 2,393,432
Net change in holding of own shares by EBT
in period 382,645
-------------------------------------------------- -----------
Record plc shares held by EBT as at 30 September
2018 2,776,077
Net change in holding of own shares by EBT
in period 209,959
-------------------------------------------------- -----------
Record plc shares held by EBT as at 31 March
2019 2,986,036
Net change in holding of own shares by EBT
in period (663,868)
-------------------------------------------------- -----------
Record plc shares held by EBT as at 30 September
2019 2,322,168
-------------------------------------------------- -----------
The EBT holds shares in Record plc which are used to meet the
Group's obligations to employees under the Group Profit Share
Scheme and the Record plc Share Scheme. Own shares are recorded at
cost and are deducted from retained earnings.
12 Non-controlling interest
From time to time, Record plc may make an investment in an
entity where it is in a position to be able to control the entity
by virtue of the size of its own holding plus those of any related
party. Non-controlling interests occur when Record plc is not the
only investor in the entity. The non-controlling interest is
measured at cost plus the share of profit or loss of the third
party investment in the entity.
Investment in Trade Record
On 22 March 2019, Record plc subscribed GBP40,000 for 40 per
cent of the ordinary share capital of Trade Record Ltd. In a second
round of investment on 8 May 2019, Record plc invested a further
GBP80,000, maintaining Record plc's 40 per cent holding.
Record plc in conjunction with two of its Directors as related
parties, controls 80 per cent of the ordinary share capital, giving
the Company rights over variable returns and the power to affect
returns. Therefore the Company has the ability to control Trade
Record Ltd, which is consequently recognised as a subsidiary.
In accordance with IFRS 10, the financial results of Trade
Record are consolidated on a line-by-line basis within the
financial statements of the Group.
Six months Six months Year
ended ended ended
30 Sep 19 30 Sep 18 31 Mar 19
GBP'000 GBP'000 GBP'000
---------------------------------------------- ----------- ----------- ----------
Non-controlling interest in Trade Record Ltd 152 - 60
---------------------------------------------- ----------- ----------- ----------
13 Related parties
Related parties of the Group include key management personnel,
close family members of key management personnel, subsidiaries, the
EBT and the seed funds. There has been no change in related parties
from those disclosed in the Annual Report 2019.
Key management personnel
The compensation given to key management personnel is as
follows:
Six months Six months Year
ended ended ended
30 Sep 19 30 Sep 18 31 Mar 19
GBP'000 GBP'000 GBP'000
------------------------------ ----------- ----------- ----------
Short-term employee benefits 2,631 2,715 5,411
Post-employment benefits 120 106 204
Share-based payments 356 482 889
3,107 3,303 6,504
------------------------------ ----------- ----------- ----------
The dividends paid to key management personnel in the six months
ended 30 September 2019 totalled GBP1,914,884 (year ended 31 March
2019: GBP2,981,053; six months ended 30 September 2018:
GBP1,754,262).
14 Post reporting date events
No adjusting or significant non-adjusting events have occurred
between the reporting date and the date of approval.
AUME definition
The basis for measuring AUME differs for each product and is
detailed below:
-- Passive Hedging mandates: - the aggregate nominal amount of
passive hedges actually outstanding in respect of each client;
-- Dynamic Hedging mandates: - total amount of clients'
investment portfolios denominated in liquid foreign currencies, and
hence capable (under the terms of the relevant mandate) of being
hedged;
-- Currency for Return mandates: - the maximum aggregate nominal
amount of outstanding forward contracts for each client;
-- Multi-product mandates: - the chargeable mandate size for each client;
-- Cash: - the total set aside by clients and managed by Record.
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.
[1] As a currency manager, Record manages only the impact of
foreign exchange and not the underlying assets, therefore its
"assets under management" are notional rather than real. To
distinguish this from the AUM of conventional asset managers,
Record uses the concept of assets under management equivalents
"AUME" and by convention this is quoted in US dollars. A full
definition of AUME is provided at the end of this document.
[2] Since inception in October 2014 (unaudited).
[3] Record Currency - FTSE FRB10 Index Fund return data is since
inception in December 2010, GBP base (unaudited).
[4] Record Currency - Emerging Market Currency Fund return data
is since inception in December 2010, GBP base (unaudited).
[5] Record - Currency Multi-Strategy Fund return data is since
inception in February 2018, GBP base (unaudited).
[6] FTSE Currency FRB10 GBP excess return data is since December
1987, GBP base (unaudited).
[7] Record Multi-Strategy Composite return data is since
inception in July 2012, showing excess returns data gross of fees
in USD base and scaled to a 4% target volatility (unaudited).
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
IR DFLFLKFFEFBV
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