TIDMREC
RNS Number : 8438H
Record PLC
29 November 2022
Record plc
29 November 2022
INTERIM RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2022
Material profit growth and diversification of products and
revenues supports strong financial position and dividend
increase
Record plc ("Record" or "the Company"), the specialist currency
and asset manager, today announces its unaudited results for the
six months ended 30 September 2022 ("H1-23").
Financial headlines:
-- Revenue growth of 35% to GBP22.1m (H1-22: GBP16.3m)
-- Profit before tax increased by 46% to GBP7.5m (H1-22: GBP5.2m)
-- Interim dividend increased by 14% to 2.05 pence per share (H1-22: 1.80 pence per share)
-- AUME ([1]) in USD terms of $80.8bn (H1-22: $84.1bn)
-- Increased operating profit margin of 34% (H1-22: 32%)
-- Basic EPS increased by 57% to 3.27 pence (H1-22: 2.08 pence)
-- Strong financial position with shareholders' equity of GBP28.0m (H1-22: GBP25.2m)
Key developments:
-- Significant growth in management fees (H1-22: +18%) and
performance fees (FY-22: +468%) underpinned by strong performance
across all product strands
-- Ongoing diversification into higher revenue and more scalable
products continues to support increased operating margin and
dividend growth
-- Awarded a BaFin licence in Germany and launched our
Luxembourg Fund range, expanding our activities and opportunities
in Europe
-- Exceptional performance across several business strands
including Record's Dynamic Hedging product, G10 and EM Currency
Multi-Strategy and the Company's Emerging Market Sustainable
Finance ("EMSF") Fund
-- Record Digital Asset Ventures ("RDAV") launched in April,
with the intention of investing in start-up and early-stage
entities that aim to disrupt the financial services sector
Commenting on the results, Leslie Hill, Chief Executive Officer
of Record plc, said:
"Our growth trajectory continues as planned supported by solid
product performance over the period and with good progress made in
our plans for diversification.
"We have close engagement with our clients, listening to their
concerns and understanding their needs - further reinforcing
already strong relationships and leading to new ideas for future
collaboration and opportunities for diversification.
"The Group remains well positioned financially, with increased
cash generation and a strong Balance Sheet to support its future
growth plans. The Board remains confident in the strategy to
deliver future growth, an outlook which is reflected by an increase
in the interim dividend."
Analyst presentation
There will be a presentation for analysts at 9.30am today held
via a Zoom call. Please contact the team at Buchanan via
record@buchanan.uk.com for further details. A copy of the
presentation will be made available on the Group's website at
www.recordcm.com .
For further information, please contact:
Record plc +44 (0) 1753 852222
Neil Record - Chairman
Leslie Hill - Chief
Executive Officer
Steve Cullen - Chief
Financial Officer
Buchanan +44 (0) 20 7466 5000
Simon Compton record@buchanan.uk.com
Henry Wilson
George Beale
Chief Executive Officer's statement
Our plans for diversification, modernisation and succession are
all going smoothly despite headwinds caused by inflation, events on
the global stage and residual work disruption left over from the
pandemic.
Against this backdrop, we are seeing growth in revenue and
profits broadly in line with expectations, our modernisation
programme is on course and on budget, and we have now implemented a
Long Term Incentive Plan ("LTIP") scheme to help us with our
succession planning, talent retention, and to further reward those
team members who are willing to take a leading role in our growth
and development trajectory.
To avoid repeating past statements, I would like to focus on the
following three important areas in more detail: investment
performance, Record Asset Management (our European subsidiary) and
Record Digital Asset Ventures.
Currency products and investment performance
While a lot of our future growth might come from products other
than pure currency, traditional currency products are and will
remain a cornerstone of our brand and our reputation. Promisingly,
we are seeing some growth in our traditional business and expect
this to continue whilst mindful these are at lower fee rates than
other areas of focus. Nonetheless, especially given the turbulence
in the currency markets in recent years, it is encouraging to see
strong performance from our Dynamic Hedging product, our hedging
product with active tenor management (on which we earn performance
fees), G10 and EM Currency Multi-Strategy, and our Emerging Market
Sustainable Finance ("EMSF") Fund.
In addition, there are interesting developments in our Currency
for Return product range, where we have trialled (with our own
capital) adding machine learning features to our Currency for
Return strand and, as this is showing good results so far, it has
now been adopted by certain of our clients as an enhancement to our
offering. While we are devoted to diversification as a source of
growth and improved margins, we would not want our investors or
stakeholders to forget our currency roots.
Record Asset Management
Record Asset Management is our relatively new subsidiary based
in Germany that will enable us to offer much more to our clients
whilst continuing to build on our existing offering. With the award
of our BaFin licence in Germany and the launch of our Luxembourg
Fund range, we are now able to expand our activities in Europe.
This is starting to bear fruit and will begin to have a bigger
impact on our bottom line in the coming year. Led by our Global
Head of Sales Dr Jan Witte, we are working with partners such as
AGL (the syndicated loan manager in New York) and VTeam (the Supply
Chain Finance business based in SE Asia) to create blended products
for our clients, such as the recently launched Municipal Loan Fund
in Germany. There are good opportunities for us here and our team
based in Zurich, Amsterdam and Düsseldorf is growing in line with
the growth in revenue.
Record Digital Asset Ventures ("RDAV")
Last April we launched RDAV with the express intent to invest in
start-up and early-stage companies across the globe that aim to
disrupt the financial services sector (including the digital asset
economy) in a form we felt would be relevant to Record. Spearheaded
by our CTO Rebecca Venis, we started by setting out an investment
thesis: we look to invest in financial technology differentiated
through the creation of a new economy, and defensible through
network effects. We wish to apply a modest proportion of our excess
capital, putting it to work in venture capital investments which
will enable us to: 1) learn more about this area; 2) get a "seat at
the table" with key people in this evolving industry; and 3) make a
return for our stakeholders and investors.
The funds to which we have committed capital include Hack VC,
Castle Island and Fasanara VC, as well as investing directly into
companies including Block Scholes and Lake Parime, the latter of
which was invested just after the period end in October 2022. While
these are still early days, we are very encouraged by the results
so far and the opportunities to partner with and offer our services
to this sector. More on this to come.
It is crucial to remember that all the elements above are part
of a plan to diversify Record and make us a meaningful asset
management business, fit for the next generation, and well balanced
between opportunity, risk and return. No single revenue line is
ever intended to dominate, and we are always very much aware of the
Board's measured approach to risk appetite in everything we do.
Financial performance and dividends
As stated above, we continue along the path we set ourselves in
the full year (FY-22) results back in June, which is to achieve
revenue of approximately GBP60 million by the year ending March
2025 (FY-25).
Compared to the same period last year, our revenue has increased
by 35% to GBP22.1 million and our operating profit of GBP7.5
million is 46% higher. The return to performance fees seen in the
second half of last year has continued with GBP2.8 million for this
six-month period (FY -- 22: GBP0.5 million) and going forward is
one we hope to be less episodic than has historically been the
case, but as always subject to market conditions.
As expected, we have seen an increase in our cost base resulting
from our continued investment in the modernisation of our business,
albeit this has been exacerbated by the current high inflationary
environment. Notwithstanding this, it is still pleasing to report
an increase in our operating margin from 31% for FY-22 to 34% for
this six-month period, and we continue to focus on ensuring the
right balance between good cost control and in ensuring the
business is appropriately resourced to support its growth
trajectory.
The Board remains confident in the strategy and the ability of
the business to deliver against its plan for growth. In line with
the capital and distribution policies, which target progressive and
sustainable dividend growth, the Board has decided to pay an
increased interim dividend for HY-23 of 2.05 pence per share
(HY-22: 1.80 pence) on 30 December to shareholders on the register
at 9 December 2022.
Leslie Hill
Chief Executive Officer
28 November 2022
Interim management review
Heightened volatility and inflationary pressure underscores the
relevance of our products, offering new opportunities for growth
and diversification.
Market review
The six months to 30 September 2022 were characterised by a
volatile geopolitical environment in light of Russia's continued
aggressions in Ukraine and its impact on global energy security.
Although supply chain stress showed signs of improvement,
policymakers quickly abandoned the "transitory" narrative of
inflation as energy prices drove up the cost of living in most
economies. Faced with the possibility of unanchored inflation
expectations, central banks had the unenviable task of tightening
monetary conditions into slowing growth, which drove global yields
higher and equities lower. How well countries fared during the
period was a function of energy and geographical insulation to the
conflict in Ukraine. The US benefited in particular as
uninterrupted energy supply and a relatively closed economy allowed
the post-covid-19 recovery to continue more or less unabated. As a
result, 275 basis points of cumulative rate hikes in combination
with risk-off market sentiment - not helped by China's
zero-covid-19 policy, its real estate downturn and rising tensions
with Taiwan - saw the US dollar appreciate against all developed
market currencies, including the Swiss franc and Japanese yen which
also normally benefit in risk-off markets.
Throughout the period there were a range of interventionist
policies enacted by governments and central banks seeking to manage
financial market volatility. Steadfast easy policy from the Bank of
Japan and a rising energy import bill culminated in a de facto loss
of the currency's safe -- haven status; Japan's Ministry of Finance
intervened to stem volatility in the currency. In Europe, resolute
military support for Ukraine saw gas flows from Russia slow to less
than a fifth of pre-invasion levels; fearing "financial
fragmentation" should the ECB tighten policy, the governing council
introduced its "Transmission Protection Instrument" to contain risk
premia, though the euro still ended the period below parity. In the
UK, newly appointed Prime Minister Truss' "mini-budget" led to a
sell-off in long Gilt rates, putting the UK pension system in
jeopardy as a result of collateral calls on liability -- driven
investment strategies; the Bank of England, although on a similar
rate path to the US, was forced to abandon quantitative tightening
and instead backstopped the Gilt market with new purchases.
Elsewhere in developed markets the Canadian dollar fared better
for its similarities to the US in energy security, while the
Australian dollar, after initially benefiting from rising commodity
prices, eventually succumbed to concerns around global growth. The
Swiss National Bank, in an unusual twist, intervened to strengthen
the franc in an attempt to mitigate inflation pressures, helping
the franc outperform on a relative basis. The same loose rules that
applied to developed markets also applied to emerging markets.
Latin America as a region was resilient on the back of early and
decisive hiking cycles as well as positive impacts from commodity
prices. Assets in Central Eastern European countries sold off as
Russia sought to punish their allegiances with Ukraine through
energy supply, and as inflation rose to double digits. Asian
currencies were mixed with some showing resilience, including the
Indonesian rupiah and Indian rupee, while the low-yielders faced
pressure from rising developed market rates.
Operating review
Our focus remains on growing the business through
diversification of both our product range and specialist skill
sets, whilst continuing to invest in our technology. Our more
traditional hedging products have proved to be robust during a
particularly volatile period, with net inflows of $8.9 billion and
which provide a strong and reliable source of revenue to support
our growth. Our targeted but flexible approach of working with
clients and other specialist providers to collaborate on new
products in changing market environments means we are able to offer
differentiated and relevant products to suit individual client
demand. This offers new opportunities for more scalable products
with higher revenue margins than we've seen historically and we
continue to make good progress, more information on which is given
below.
Products
As stated in the Market review, the first half of the fiscal
year saw elevated market, and specifically currency, volatility as
the threats of rising inflation, energy prices and interest rates
rose their heads against the backdrop of the war in Ukraine.
Pronounced trends have led to extended valuations, notably USD
strength and EUR, JPY and GBP weakness. Against this backdrop, risk
management has been at the forefront of investors' minds, resulting
in numerous conversations with institutional allocators and asset
managers alike, across both passive and active FX hedging
strategies. Extending the run from the previous fiscal year,
Record's Dynamic Hedging performed strongly, adding significant
value for our USD base clients and allowing embedded asset gains to
run for those in other bases. While not as exceptional, Currency
Multi -- Strategy saw steady gains over the period.
Record's pioneering Emerging Markets Sustainable Finance Fund
("EMSF") extended its strong outperformance of competitors and
typical comparator indices as all emerging markets asset classes
suffered in the turbulent market environment.
Of particular note, one of Record's bespoke derivatives overlays
for a US client delivered stellar returns, exploiting the
demand-supply mismatch for UK inflation protection.
Another key area of focus for the team has been on a number of
significant projects in the yield and sustainable yield space.
First out of the blocks is our European municipal loans fund which
launched with seed capital at the end of September. The expectation
is for these products, ranging from sustainable lending to
infrastructure, to launch over the next twelve months, responding
to strong demand for yield from existing and prospective clients.
The core appeal of these strategies is the stable return streams
derived from the real-world economy, delivered to clients' exacting
requirements in attractive structures.
People
We continue to invest in our people. This means hiring talented
people throughout our business and providing opportunities for our
talented colleagues to increase their levels of responsibility,
while providing support in the form of coaching, learning and
development. Our new remuneration policy was approved by
shareholders at our AGM in July and we are now implementing the
policy. We have made awards under the LTIP scheme to our senior
managers, to incentivise delivery of long-term performance and
strategy delivery and align interests with shareholders, and have
made share option awards to key staff. Whilst focus on good cost
control remains paramount, a one-off allowance of GBP3,000 was made
to all staff below Board level in October, following the period
end, to help our employees with the recent increases in the cost of
living linked to higher inflation. Our investment made in providing
new serviced offices in London has proved extremely successful in
helping us to attract new talent to the business.
Technology
We continue to support flexible working across the business,
including remote working, office-based and hybrid working patterns
enabled for all staff. Remote access systems and security controls
have continued to be enhanced as we deliver greater flexibility and
functionality to our staff whilst maintaining the greatest levels
of security and protection. The continuous improvement and
development of our technology stack is critical to improving how we
support clients and deliver our products and services effectively.
As part of our ongoing and continuous development, Record's Board
has maintained an elevated IT-related budget relative to our
historic expenditure. This spending is assigned across three core
areas: software development to improve functionality and
capability; infrastructure to improve security and resilience; and
data management to provide greater insights and value around our
investment services.
Product investment performance
Hedging
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.
Passive Hedging
Record has developed and runs an enhanced Passive Hedging
service, which aims to reduce the cost of hedging by introducing
additional flexibility into the implementation of currency hedges
without changing the hedge ratio. While the investment process 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.
After a period of sustained low global interest rates from early
2020 to early 2022, the last six months have seen continued high
interest rate volatility. In response to global inflationary
pressures, central banks have furthered their progress in their
interest rate hiking cycles in an effort to combat price level
increases. The market is continuing to price in further interest
rate hikes for the majority of currencies. As such, FX forward
pricing has been very volatile (as these are priced based off the
respective interest rates of currencies), which has resulted in an
expanded opportunity set from which the team can potentially add
value. Therefore, performance for this half of the year has been
strong as the portfolio managers have positioned the portfolio to
take advantage of the current volatile environment. Generally, the
portfolios have been managed with excess durations to their
benchmarks.
The table below shows the total value added relative to a
fixed-tenor benchmark for an enhanced Passive Hedging programme for
a representative account (base currency is Swiss francs).
Half-year Return
return since inception
----------------------------------------------- --------- ----------------
Value added relative to a fixed-tenor benchmark 0.11% 0.10% p.a
----------------------------------------------- --------- ----------------
Dynamic Hedging
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
and hedge ratios rose systematically in response to currency
movements. Consequently, hedging returns in the programmes were
positive, helping to protect against foreign currency weakness.
Half-year Return
return since inception
---------------------------------------- --------- ----------------
Value added by Dynamic Hedging programme 6.48% 0.95% p.a.
---------------------------------------- --------- ----------------
Currency for Return
Record's Currency for Return suite of products includes both
discretionary and systematic investment styles. The Record EM
Sustainable Finance Fund uses a more discretionary approach, whilst
the Currency Multi-Strategy product is a more systematic offering
combining five individual strategies.
Record EM Sustainable Finance Fund
The new Record EM Sustainable Finance Fund, launched on 28 June
2021, is a result of the strategic partnership between Record and
UBS Wealth Management. The Fund aims to stabilise currencies in
developing economies, improve the flow of development finance and
enhance financing projects in illiquid markets. The strategy
targets positive sustainability outcomes across a multidimensional
investment process, whereby it trades liquid and illiquid EM
currencies designed to help stabilise exchange rates and to absorb
currency risk. It further invests in an underlay of sustainable
development bonds issued by Multilateral Development Banks ("MDBs")
and other Development Finance Institutions ("DFIs") with a strong
presence in low and middle-income economies, alongside an active
stakeholder engagement that promotes better policies and practices
among investees and trading counterparties.
The Fund returned -2.70% for the half year to 30 September 2022,
outperforming major market EM sovereign debt indices. Exposures
across emerging market currencies suffered in light of relentless
dollar strength, with notable return detractions from the
currencies of some Central and Eastern European economies, as the
spill-over of the Russia-Ukraine war diffused and raised particular
concern around regional trade and energy supply, adding pressure on
growth and inflation. Latin America proved a mixed bag, with some
idiosyncratic risks and political surprises weighing on certain
currencies as signs of stagflation haunted select economies, but
tactful discretionary allocation allowed the Fund to add value
throughout the period as high carry opportunities in the region
cushioned currency performance versus global peers. Performance
across Asia was mixed too - the latter half of the period saw
tighter global financial conditions, combined with a more bearish
outlook for the Chinese economy and areas of heightened
geopolitical tensions weighing on regional markets and investor
sentiment. Frontier performance was mixed, although a net negative
contributor in the aggregate. The diversified funding basket of
developed market currencies added materially to the Fund's strong
outperformance throughout the period, providing a countercyclical
buffer as risk appetite dissipated.
The USD-denominated bonds in the portfolio experienced
challenging conditions throughout the half year, as the beginning
of the period brought with it a regime change with the first rate
hike in what would become a progressively more aggressive
tightening cycle, adding 275bps in cumulative hikes throughout the
period, as policymakers wrestled with, and reiterated their
commitment to addressing, persistently high above-target inflation.
A short-duration strategy alongside a portfolio of highly rated
issuers contributed to protect the Fund from further losses.
Half-year Return
return since inception
--------------------------------------- --------- ----------------
Record EMSF Fund USD Share Class (2.70%) (3.61%)
JP Morgan GBI EM Global Diversified(1) (12.95%) (23.46%)
--------------------------------------- --------- ----------------
1. Source: JP Morgan.
Currency Multi-Strategy
Record's Currency Multi-Strategy product combines a number of
diversified return streams, which include:
-- Forward Rate Bias ("FRB", also known as "carry") and Emerging
Market ("EM") strategies which are founded on market risk premia
and as such perform more strongly in "risk on" environments;
and
-- Momentum, Value and Range-Trading strategies which are more
behavioural in nature, and as a result are less risk sensitive.
Currency Multi-Strategy returned positively during the period,
driven by the outperformance in the EM, Momentum and Range-Trading
modules. Short Asian EM FX exposures boded well for the EM strand
as higher USD rates kept pressure on their capital accounts and
given a relatively muted response on rates policy whilst the long
LatAm FX exposures benefited from favourable nominal and real
carry. Carry detracted from returns due to positioning changes
driven by central bank policy divergence despite a long US dollar
exposure.
Value returned negatively on the back of long exposures in JPY
and EUR, with both currencies coming under marked pressures on the
back of widening interest rate differentials versus the US, whilst
the bloc currency was further exposed to the conflict and gas
supply vulnerabilities. The Momentum strand returned positively on
the back of multi-month trends in the period, particularly
benefiting from the US dollar cycle. Range-Trading returned
positively over the six-month period, largely driven by gains from
AUD, NZD, GBP and CHF pairs. Developed Market Classification
("DMC") was also introduced during this period to replace
Range-Trading and Momentum modules, returning positively since
inception.
Half-year Return Volatility
return since inception since inception
----------------------------------- --------- ---------------- ----------------
Record Multi-Strategy Composite(2) 1.71% 0.96% p.a. 3.04%
----------------------------------- --------- ---------------- ----------------
2. 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.
Scaling
The Currency for Return product group allows clients to select
the level of exposure they desire in their currency programmes in
addition to the level of scaling and/or the volatility target.
It should be emphasised that in this case "scaling" refers to
the multiple of the aggregate notional value of forward contracts
in the currency programme which is limited by the willingness of
counterparty banks to take exposure to the client. The AUME of
those mandates where scaling or a volatility target is selected is
represented in Record's AUME at the scaled value of the mandate, as
opposed to the mandate size.
AUME development
AUME decreased over the period by 2.8% to $80.8 billion in US
dollar terms, and increased in sterling terms by 14.6% to GBP72.3
billion. Total net inflows for the period were $8.6 billion, of
which $5.6 billion arose from new client mandates.
The AUME movement over the six-month period is analysed as
follows:
AUME movement analysis in the six months to 30 September
2022
$bn
------------------------------------------------------- -----
AUME at 1 April 2022 83.1
Net client flows 8.6
Equity and other market impact (4.8)
Foreign exchange impact and mandate volatility scaling (6.1)
------------------------------------------------------- -----
AUME at 30 September 2022 80.8
------------------------------------------------------- -----
Product mix
The product mix has remained broadly constant when compared to
the year end.
AUME composition by product
30 Sep 22 30 Sep 21 31 Mar 22
----------- ----------- -----------
$bn % $bn % $bn %
-------------------- ------ --- ------ --- ------ ---
Passive Hedging 62.2 77 63.0 76 62.8 76
Dynamic Hedging 10.0 12 10.3 12 10.6 13
Currency for Return 4.3 6 5.4 6 5.0 6
Multi-product 4.2 5 5.2 6 4.5 5
Cash and other 0.1 - 0.2 - 0.2 -
-------------------- ------ --- ------ --- ------ ---
Total 80.8 100 84.1 100 83.1 100
-------------------- ------ --- ------ --- ------ ---
Equity and other market performance
Record's AUME is affected by movements in equity and other
markets because 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 2022
Fixed
Equity income Other
% % %
---------------- ------ ------ -----
Passive Hedging 21 29 50
Dynamic Hedging 90 - 10
Multi-product - - 100
---------------- ------ ------ -----
Forex
Approximately 80% 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 $6.1 billion in the period and changes to mandate
underlying asset values decreased AUME by $4.8 billion.
Financial review
The financial benefits arising from the change in strategy at
the start of FY-21 are now significantly more evident compared to
the same period last year. Material increases in revenue linked to
aggregate AUME net inflows of $11 billion over the last six
quarters, plus the impact of the return of performance fees, have
outweighed the rise in costs linked to the continued investment in
technology and resources, plus increases due to inflationary
pressures. Consequently, the Group is reporting material increases
in revenue and operating profit for the first half year (H1-23)
when compared to both the first and second halves of FY-22.
Overview
Total revenue for the period increased by 35% to GBP22.1
million, including GBP2.8 million of performance fees. The increase
in operating profit to GBP7.5 million represents an increase of 46%
over the prior year equivalent (H1-22: GBP5.2 million) and 32% over
the second half of last year (H2-22: GBP5.6 million).
Operating expenses, excluding variable remuneration, increased
by 36% to GBP10.8 million (H1-22: GBP7.9 million) representing an
increase of 7% over the second half of last year (H2-22: GBP10.1
million). Variable remuneration increased by 36% to GBP3.8 million
(H1-22: GBP2.8 million). The Group's operating profit margin
increased to 34% (H1-22: 32% and FY-22: 31%) with profit before tax
for the half year increasing by 46% to GBP7.5 million (H1-22:
GBP5.2 million and H2-22: GBP5.7 million).
Revenue
Total revenue of GBP22.1 million represents a 35% increase from
H1-22 (GBP16.3 million) and by 17% compared to the second half of
last year (H2-22: GBP18.8 million), broadly reflecting both the
full impact of higher AUME at the start of the period plus the net
inflows over the period more than offsetting the impact of
decreases in AUME related to market movements over the period.
Performance fees of GBP2.8 million were earned in the period
compared to GBP0.5 million for FY-22, reflecting increased
opportunities seen in our Passive Hedging mandates including tenor
management, to take advantage of lower costs for our clients linked
to continuing interest rate differentials.
Passive Hedging management fees of GBP6.3 million were GBP0.5
million higher than the equivalent period last year (H1-22: GBP5.8
million) and GBP0.3 million higher compared to the second half of
last year (H2-22: GBP6.0 million), linked to the net inflows seen
over the final quarter of FY-22 ($1.3 billion) and net inflows of
$7.2 billion partially offset by negative market movements of $2.5
billion in the period.
Dynamic Hedging management fees increased by 21% to GBP5.8
million compared to the same period last year and by GBP0.6 million
versus H2-22 (GBP5.2 million), predominantly driven by the full
impact of net inflows of $1.4 billion in FY-22.
Currency for Return management fees of GBP3.6 million increased
by 71% (GBP1.5 million) compared to H1-22 (H1-22: GBP2.1 million)
and were GBP0.1 million higher than H2-22, predominantly due to the
full impact of inflows of $1.2 billion in FY-22 into the EM
Sustainable Finance Fund which attracts a higher marginal fee
rate.
Management fees of GBP3.3 million from the Multi-product
category are GBP0.1 million lower than the same period last year
(H1-22: GBP3.4 million) and broadly in line with the second half of
last year (H2-22: GBP3.4 million).
Currency services income of GBP0.3 million is GBP0.1 million
higher than the same period last year (H1-22: GBP0.2 million) and
in line with the second half of FY-22.
Revenue analysis (GBPm)
Six months Six months Year
ended ended ended
30 Sep 30 Sep 31 Mar
22 21 22
--------------------------------- ---------- ---------- ------
Management fees
Passive Hedging 6.3 5.8 11.8
Dynamic Hedging 5.8 4.8 10.0
Currency for Return 3.6 2.1 5.5
Multi-product 3.3 3.4 6.8
--------------------------------- ---------- ---------- ------
Total management fees 19.0 16.1 34.1
--------------------------------- ---------- ---------- ------
Performance fees 2.8 - 0.5
Other investment services income 0.3 0.2 0.5
--------------------------------- ---------- ---------- ------
Total revenue 22.1 16.3 35.1
--------------------------------- ---------- ---------- ------
Other investment services income consists of fees from ancillary
investment management services.
Expenditure
Expenditure analysis (GBPm)
Six months Six months Year
ended ended ended
30 Sep 30 Sep 31 Mar
22 21 22
-------------------------------------------------------- ---------- ---------- ------
Personnel costs 6.3 5.0 10.8
Non-personnel costs 4.5 2.9 7.2
-------------------------------------------------------- ---------- ---------- ------
Administrative expenditure excluding Group Bonus scheme 10.8 7.9 18.0
Group Bonus 3.8 2.8 5.7
-------------------------------------------------------- ---------- ---------- ------
Total administrative expenditure 14.6 10.7 23.7
-------------------------------------------------------- ---------- ---------- ------
Other income and expenditure - 0.3 0.4
-------------------------------------------------------- ---------- ---------- ------
Total expenditure 14.6 11.0 24.1
-------------------------------------------------------- ---------- ---------- ------
Our strategy is focused on growth through modernisation and
diversification and we continue to invest in technology and systems
to enhance our offerings and operational efficiency, and to plan
for succession.
Total administrative expenditure (excluding Group Bonus scheme)
of GBP10.8 million for the period represents an increase of 36%
(H1-22: GBP7.9 million) compared with the equivalent prior year
period, and an increase of 7% versus the second half of last year
(H2-22: GBP10.1 million).
Personnel costs of GBP6.3 million (excluding Bonus) increased by
26% versus the same period in the prior year (H1-22: GBP5.0
million) and increased by 9% compared to the second half of last
year (H2-22: GBP5.8 million). The increases reflect further
investment made in acquiring a more diversified range of skill sets
required to manage new technology and products, plus internal
promotions and reorganisations in line with our succession plans.
Costs have also been impacted by a higher inflationary environment
which we expect to continue into the second half of the current
financial year (H2-23).
In line with our investment in additional resources explained
above, as expected our non-personnel costs for the period have also
increased. Total non-personnel costs of GBP4.5 million for the
period represent an increase of 55% over the same period last year
(H1-22: GBP2.9 million) and by 5% versus the second half of FY-22
(H2-22: GBP4.3 million). These reflect the increased investment in
the provision of external technical expertise and consultancy
linked to the modernisation of our systems and technology.
Group Bonus Scheme
The cost of the Bonus Scheme was GBP3.8 million for the period,
increasing in line with operating profit. The cost is calculated as
33% (H1-22: 35% and FY-22: 34%) of operating profit, which is
within the previously established range of 25% to 35% of pre-Bonus
operating profit.
Cash flow
The Group generated GBP6.8 million of cash from operating
activities before tax during the period (H1-22: GBP6.3 million).
Taxation paid during the period increased to GBP1.0 million
compared to GBP0.3 million for the same period last year.
During the period an investment of GBP1.7 million in impact
bonds matured and GBP1.3 million was reinvested before the period
end.
The Group paid dividends totalling GBP5.2 million in the period
(H1-22: GBP3.1 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 policies targeted
at sustained and progressive dividend growth, the Group will pay an
interim dividend of 2.05 pence per share in respect of the
six-month period, equating to a distribution of approximately
GBP4.0 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 is cash-generative with capital and
dividend policies aimed at ensuring continued balance sheet
strength to support future growth. Shareholders' funds were GBP28.0
million at 30 September 2022 (H1-22: GBP25.2 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 2022.
These risks are:
-- strategic - principally concentration risk and competitive
threats, but also risk of failure to deliver strategy, regulatory
trends and exogenous threats (the greatest of which being the
global inflationary environment);
-- operational and systems - primarily trade configuration and
execution, as well as information security and cyber risks;
-- investment risk - we naturally embrace the risk that our
products underperform, while market liquidity is a risk we
continually review; and
-- people - key person and succession, and talent acquisition and retention.
Cautionary statement
This Interim Report contains certain forward-looking statements
with respect to the financial condition, results, operations and
business of Record. These statements involve risk and uncertainty
because they relate to events and depend upon circumstances that
will occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from
those expressed or implied in this Interim Report. Nothing in this
Interim Report should be construed as a profit forecast.
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 UK-adopted IAS 34 - "Interim
Financial Reporting"; and
-- the Interim management review includes a fair review of the information required by:
-- 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
-- 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 2022 that could do so. Related party
transactions are disclosed in note 10.
The Directors of Record plc are listed on the Record plc website
at https://recordfg.com/team-member-groups/record-plc-board/
Neil Record
Chairman
Steve Cullen
Chief Financial Officer
28 November 2022
Independent review report to Record plc
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2022 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2022 which comprises the consolidated
statement of comprehensive income, the consolidated statement of
financial position, the consolidated statement of changes in
equity, the consolidated statement of cash flows and the notes to
the financial statements, including a summary of significant
accounting policies.
Basis for conclusion
We conducted our review in accordance with the International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). 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.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the Directors have inappropriately
adopted the going concern basis of accounting or that the Directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the Group to cease to continue as a going concern.
Responsibilities of Directors
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the Directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, UK
28 November 2022
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Consolidated statement of comprehensive income
Six months ended 30 September 2022
Unaudited Unaudited
Six months Six months Audited
ended ended Year
30 Sep 30 Sep ended
22 21
GBP'000 GBP'000 31 Mar
22
Note GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------- ---- ---------- ---------- --------
Revenue 3 22,059 16,333 35,152
Cost of sales (3) (206) (219)
--------------------------------------------------------------------- ---- ---------- ---------- --------
Gross profit 22,056 16,127 34,933
Administrative expenses (14,561) (10,713) (23,726)
Other income or expense 21 (264) (372)
--------------------------------------------------------------------- ---- ---------- ---------- --------
Operating profit 7,516 5,150 10,835
Finance income 61 21 44
Finance expense (33) (17) (23)
--------------------------------------------------------------------- ---- ---------- ---------- --------
Profit before tax 7,544 5,154 10,856
Taxation (1,334) (1,156) (2,225)
--------------------------------------------------------------------- ---- ---------- ---------- --------
Profit after tax 6,210 3,998 8,631
--------------------------------------------------------------------- ---- ---------- ---------- --------
Total comprehensive income for the period 6,210 3,998 8,631
--------------------------------------------------------------------- ---- ---------- ---------- --------
Profit and total comprehensive income for the period attributable to
Owners of the parent 6,210 3,998 8,631
--------------------------------------------------------------------- ---- ---------- ---------- --------
6,210 3,998 8,631
--------------------------------------------------------------------- ---- ---------- ---------- --------
Earnings per share for the period (expressed in pence per share)
Basic earnings per share 4 3.27p 2.08p 4.52p
Diluted earnings per share 4 3.16p 2.01p 4.37p
--------------------------------------------------------------------- ---- ---------- ---------- --------
The notes are an integral part of these consolidated financial
statements.
Consolidated statement of financial position
As at 30 September 2022
Unaudited Unaudited Audited
As at As at As at
30 Sep 30 Sep 31 Mar
22 21 22
Note GBP'000 GBP'000 GBP'000
---------------------------------------------------- ---- --------- --------- -------
Non-current assets
Intangible assets 1,036 318 562
Right -- of -- use assets 1,155 440 1,421
Property, plant and equipment 380 510 401
Investments 6 3,606 3,178 3,447
Deferred tax assets 231 508 253
---------------------------------------------------- ---- --------- --------- -------
Total non-current assets 6,408 4,954 6,084
---------------------------------------------------- ---- --------- --------- -------
Current assets
Trade and other receivables 12,207 8,794 9,883
Derivative financial assets 8 11 - -
Money market instruments with maturities > 3 months 7 - 5,875 13,913
Cash and cash equivalents 7 17,714 11,408 3,345
---------------------------------------------------- ---- --------- --------- -------
Total current assets 29,932 26,077 27,141
---------------------------------------------------- ---- --------- --------- -------
Total assets 36,340 31,031 33,225
---------------------------------------------------- ---- --------- --------- -------
Current liabilities
Trade and other payables (5,512) (3,919) (4,721)
Corporation tax liabilities (1,252) (959) (924)
Provisions - (200) (75)
Lease liabilities (279) (372) (366)
Derivative financial liabilities 8 (381) (270) (124)
---------------------------------------------------- ---- --------- --------- -------
Total current liabilities (7,424) (5,720) (6,210)
---------------------------------------------------- ---- --------- --------- -------
Non-current liabilities
Deferred tax liabilities - (77) -
Provisions (122) - (125)
Lease liabilities (838) - (960)
---------------------------------------------------- ---- --------- --------- -------
Total non-current liabilities (960) (77) (1,085)
---------------------------------------------------- ---- --------- --------- -------
Total net assets 27,956 25,234 25,930
---------------------------------------------------- ---- --------- --------- -------
Equity
Issued share capital 9 50 50 50
Share premium account 1,809 1,809 1,809
Capital redemption reserve 26 26 26
Retained earnings 26,071 23,349 24,045
---------------------------------------------------- ---- --------- --------- -------
Equity attributable to owners of the parent 27,956 25,234 25,930
---------------------------------------------------- ---- --------- --------- -------
Total equity 27,956 25,234 25,930
---------------------------------------------------- ---- --------- --------- -------
Approved by the Board on 28 November 2022 and signed on its
behalf by:
Neil Record
Chairman
Steve Cullen
Chief Financial Officer
The notes are an integral part of these consolidated financial
statements.
Consolidated statement of changes in equity
Six months ended 30 September 2022
Called-up Share Capital
share premium redemption Retained Total
capital account reserve earnings equity
Unaudited Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
As at 1 April 2021 50 2,418 26 24,305 26,799
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
Restatement of release of shares held by EBT 12 - (609) - 609 -
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
Restated balance as at 1 April 2021 50 1,809 26 24,914 26,799
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
Profit and total comprehensive income for the period - - - 3,998 3,998
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
Dividends paid 5 - - - (3,089) (3,089)
Own shares acquired by EBT - - - (3,828) (3,828)
Release of shares held by EBT - - - 1,251 1,251
Share-based payment reserve movement - - - 103 103
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
Transactions with shareholders - - - (5,563) (5,563)
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
As at 30 September 2021 50 1,809 26 23,349 25,234
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
Profit and total comprehensive income for the period - - - 4,633 4,633
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
Dividends paid 5 - - - (3,423) (3,423)
Own shares acquired by EBT - - - (1,979) (1,979)
Release of shares held by EBT - - - 1,827 1,827
Share-based payment reserve movement - - - (362) (362)
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
Transactions with shareholders - - - (3,937) (3,937)
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
As at 31 March 2022 50 1,809 26 24,045 25,930
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
Profit and total comprehensive income for the period - - - 6,210 6,210
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
Dividends paid 5 - - - (5,169) (5,169)
Own shares acquired by EBT - - - - -
Release of shares held by EBT - - - 456 456
Share-based payment reserve movement - - - 529 529
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
Transactions with shareholders - - - (4,184) (4,184)
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
As at 30 September 2022 50 1,809 26 26,071 27,956
----------------------------------------------------- ---- --------- ------- ---------- -------- -------
The notes are an integral part of these consolidated financial
statements.
Consolidated statement of cash flows
Six months ended 30 September 2022
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 30 Sep 31 Mar
22 21 22
Note GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------- ---- ---------- ---------- --------
Profit after tax 6,210 3,998 8,631
Adjustments for non-cash movements
Depreciation of right-of-use assets 230 245 489
Depreciation of property, plant and equipment 170 175 357
Amortisation of intangible assets 75 102 192
Loss on asset disposals 12 - -
Share-based payments 360 155 559
Decrease in other non-cash movements 98 806 877
Finance income (61) (21) (44)
Finance expense 33 17 23
Tax expense 1,334 1,156 2,225
Change in working capital
(Increase) in receivables (2,324) (788) (1,877)
Increase on payables 752 494 1,296
(Decrease) in provisions (78) - -
--------------------------------------------------------------------- ---- ---------- ---------- --------
Net cash inflow from operating activities 6,811 6,339 12,728
Corporation tax paid (984) (303) (1,373)
--------------------------------------------------------------------- ---- ---------- ---------- --------
Net cash inflow from operating activities 5,827 6,036 11,355
Purchase of intangible software (550) - (334)
Purchase of property, plant and equipment (160) (2) (75)
Purchase of investments (1,276) (782) (1,773)
Payment to seed fund holders - (1,808) -
Sale of investments 881 - -
Sale/(purchase) of money market instruments with maturity > 3 months 13,914 7,056 (983)
Redemption of bonds 859 724 1,462
Interest received 61 21 44
--------------------------------------------------------------------- ---- ---------- ---------- --------
Net cash inflow/(outflow) from investing activities 13,729 5,209 (3,467)
Cash flow from financing activities
Lease repayments (174) (267) (540)
Lease interest payments (34) (11) (17)
Purchase of own shares - (3,355) (4,462)
Dividends paid to equity shareholders 5 (5,169) (3,089) (6,512)
--------------------------------------------------------------------- ---- ---------- ---------- --------
Cash outflow from financing activities (5,377) (6,722) (11,531)
--------------------------------------------------------------------- ---- ---------- ---------- --------
Net increase/(decrease) in cash and cash equivalents in the period 14,179 4,523 (3,643)
Effect of exchange rate changes 190 38 141
--------------------------------------------------------------------- ---- ---------- ---------- --------
Cash and cash equivalents at the beginning of the period 3,345 6,847 6,847
--------------------------------------------------------------------- ---- ---------- ---------- --------
Cash and cash equivalents at the end of the period 17,714 11,408 3,345
--------------------------------------------------------------------- ---- ---------- ---------- --------
Closing cash and cash equivalents consists of:
Cash 7 17,714 4,576 3,345
Cash equivalents 7 - 6,832 -
--------------------------------------------------------------------- ---- ---------- ---------- --------
Cash and cash equivalents 7 17,714 11,408 3,345
--------------------------------------------------------------------- ---- ---------- ---------- --------
The notes are an integral part of these consolidated financial
statements.
Notes to the consolidated financial statements for the six
months ended 30 September 2022
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 UK-adopted International Accounting Standard 34 - "Interim
Financial Reporting". 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 2022 were prepared
in accordance with UK-adopted IFRS and 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 for the year ended 31 March 2022 have been applied in the
preparation of the condensed consolidated half-year financial
information.
Application of new standards
There have been no new or amended standards adopted in the
financial year beginning 1 April 2022 which have a material impact
on the Group or any company within the Group.
Impact of the global macro environment during the period
The Market and Operating review sections of this Interim Report
provide information as to the broader effects seen during the
period from the Russia/Ukraine conflict. The current global
macroeconomic environment continues to provide both challenge and
opportunity for the Group: challenge in the form of managing the
risk of the increased cost of doing business linked to a high
inflationary environment (in the form of employee, energy and
supply-chain costs), and opportunity, for example in the form of
increases in interest rate differentials and clients seeking
yield-enhancing strategies. Our focus continues on making the most
of such opportunities whilst managing the balance between careful
cost control whilst ensuring the availability of sufficient and
liquid resources to support the growth trajectory of the Group.
Going concern
As part of the Directors' consideration of the appropriateness
of adopting the going concern basis for the preparation of the
interim financial statements, the Directors have assessed whether
the Group can meet its obligations as they fall due and can
continue to meet its solvency requirements over a period of at
least twelve months from the approval of this report. The Board has
considered financial projections which demonstrate the ability of
the Group to withstand market shocks in a range of scenarios,
including very severe ones. In assessing the appropriateness of the
going concern basis, the Board considered base case liquidity and
solvency projections that incorporated an estimated view of
potential macroeconomic volatility, rising inflation and recession.
Severe scenarios considered by the Board included the impact of
inflation rising to 20% and market movements leading to a reduction
in asset values by 20%.
The projections demonstrated that excess capital would remain in
the Group under the scenarios, and there is cash to run the
business in the going concern period. As a result of the above
assessment, the Directors are satisfied that the Company and the
Group have adequate resources with which to continue to operate for
the foreseeable future. In arriving at this conclusion, the
Directors have considered in detail the impact of the war in
Ukraine and the current high inflationary environment on the Group,
the market it operates in and its stakeholders. For this reason the
financial statements have been prepared on the 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
2022.
The consolidated financial information contained within the
financial statements incorporates financial statements of the Group
and entities controlled by the Group (its subsidiaries) drawn up to
30 September 2022. 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 the 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 10 for
further details).
2. Critical accounting estimates and judgements
The estimates and judgements applied in the interim financial
statements are consistent with those applied in the financial
statements for the year ended 31 March 2022.
3. Revenue
Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the provision of currency management services.
Our revenue typically arises 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 clawback
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
ended ended Year ended
30 Sep 30 Sep 31 Mar
22 21 22
Revenue by product type GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- ----------
Management fees
Passive Hedging 6,328 5,802 11,768
Dynamic Hedging 5,780 4,783 10,020
Currency for Return 3,544 2,077 5,513
Multi-product 3,308 3,446 6,782
--------------------------------- ---------- ---------- ----------
Total management fee income 18,960 16,108 34,083
Performance fee income 2,833 - 499
Other investment services income 266 225 570
--------------------------------- ---------- ---------- ----------
Total revenue 22,059 16,333 35,152
--------------------------------- ---------- ---------- ----------
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
ended ended Year ended
30 Sep 30 Sep 31 Mar
22 21 22
Revenue by geographical region GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- ---------- ----------
UK 1,237 1,158 2,775
Europe (excluding UK and Switzerland) 4,764 4,740 6,926
US 7,070 5,437 13,049
Switzerland 8,127 4,401 10,877
Other 861 597 1,525
-------------------------------------- ---------- ---------- ----------
Total revenue 22,059 16,333 35,152
-------------------------------------- ---------- ---------- ----------
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 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
period used in the basic and diluted earnings per share
calculations.
Six months Six months
ended ended Year ended
30 Sep 30 Sep 31 Mar
22 21 22
GBP'000 GBP'000 GBP'000
------------------------------------------------------------- ----------- ----------- -----------
Weighted average number of shares used in calculation 189,813,531 192,250,212 191,068,307
Effect of potential dilutive ordinary shares - share options 6,615,565 7,075,489 6,230,794
Weighted average number of shares used in calculation 196,429,096 199,325,701 197,299,101
------------------------------------------------------------- ----------- ----------- -----------
Basic earnings per share 3.27p 2.08p 4.52p
Diluted earnings per share 3.16p 2.01p 4.37p
------------------------------------------------------------- ----------- ----------- -----------
The potential dilutive shares relate to the share options, Joint
Share Ownership Plan ("JSOP") and Long Term Incentive Plan ("LTIP")
awards granted in respect of the Group's Share Scheme. At the
beginning of the period there were 13,513,045 Group Share Scheme
share awards outstanding. During the six-month period 2,985,000
share options and 2,890,000 LTIP awards were granted. During the
period 1,586,586 share options were exercised and 601,875 JSOP
awards vested. No JSOP or LTIP awards lapsed in the period. 330,832
share options lapsed in the period.
As at 30 September 2022, there were 12,673,127 share options in
place, 1,305,625 JSOP and 2,890,000 LTIP awards.
5. Dividends
The dividends paid during the six months ended 30 September 2022
totalled GBP5,169,285. The total dividend paid was 2.72 pence per
share, being a final ordinary dividend in respect of the year ended
31 March 2022 of 1.80 pence per share and a special dividend of
0.92 pence per share. An interim dividend of 1.80 pence per share
was paid in the six months ended 31 March 2022, thus the full
ordinary dividend in respect of the year ended 31 March 2022 was
3.60 pence per share.
The dividends paid during the six months ended 30 September 2021
totalled GBP3,089,258 (1.60 pence per share), being a final
ordinary dividend in respect of the year ended 31 March 2021 of
1.15 pence per share and a special dividend of 0.45 pence per
share. An interim dividend of GBP2,222,171 (1.15 pence per share)
was paid in the six months ended 31 March 2021, thus the full
ordinary dividend in respect of the year ended 31 March 2021 was
2.75 pence per share.
The interim dividend declared in respect of the six months ended
30 September 2022 is 2.05 pence per share.
6. Accounting for investments
All investments are measured at fair value through profit or
loss.
Investments
As at As at As at
30 Sep 30 Sep 31 Mar
22 21 22
GBP'000 GBP'000 GBP'000
-------------------- ------- ------- -------
Impact bonds 1,614 2,234 2,177
Investment in funds 1,782 944 1,070
Other investments 210 - 200
-------------------- ------- ------- -------
Investments 3,606 3,178 3,447
-------------------- ------- ------- -------
7. 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 30 Sep 31 Mar
22 21 22
Assets managed as cash GBP'000 GBP'000 GBP'000
---------------------------------------------------- ------- ------- -------
Bank deposits with maturities > 3 months - 5,875 13,913
---------------------------------------------------- ------- ------- -------
Money market instruments with maturities > 3 months - 5,875 13,913
---------------------------------------------------- ------- ------- -------
Cash 8,214 4,576 3,345
Bank deposits with maturities <= 3 months 9,500 6,832 -
---------------------------------------------------- ------- ------- -------
Cash and cash equivalents 17,714 11,408 3,345
---------------------------------------------------- ------- ------- -------
Total assets managed as cash 17,714 17,283 17,258
---------------------------------------------------- ------- ------- -------
8. Fair value measurement
The following table presents financial assets and liabilities
measured at fair value in the consolidated statement of financial
position in accordance with the fair value hierarchy based on the
significance of inputs used in measuring their fair value. The
hierarchy has the following levels:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level within which the financial asset or liability is
classified is determined based on the lowest level of input to the
fair value measurement. The financial assets and liabilities
measured at fair value in the statement of financial position are
grouped into the fair value hierarchy as follows:
Total Level Level Level
1 2 3
As at 30 September 2022 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------------- ------- ------- ------- -------
Financial assets at fair value through profit or loss
Impact bonds 1,614 1,614 - -
Investment in funds 1,782 1,146 - 636
Other securities 210 - - 210
Foreign exchange contracts to hedge non-sterling assets 11 - 11 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts held to hedge non-sterling-based assets (297) - (297) -
Forward foreign exchange contracts used for hedging (84) - (84) -
--------------------------------------------------------------------------- ------- ------- ------- -------
Total 3,236 2,760 (370) 846
--------------------------------------------------------------------------- ------- ------- ------- -------
Total Level 1 Level 2 Level 3
As at 30 September 2021 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------- ------- ------- ------- -------
Financial assets at fair value through profit or loss
Impact bonds 2,234 2,234 - -
Other securities 944 888 - 56
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging (270) - (270) -
----------------------------------------------------------- ------- ------- ------- -------
Total 2,908 3,122 (270) 56
----------------------------------------------------------- ------- ------- ------- -------
Total Level 1 Level 2 Level 3
As at 31 March 2022 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------- ------- ------- ------- -------
Financial assets at fair value through profit or loss
Impact bonds 2,177 2,177 - -
Investment in funds 1,070 944 - 126
Other investments 200 - - 200
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts held to hedge non-sterling assets (15) - (15) -
Other investments (110) - (110) -
--------------------------------------------------------------------- ------- ------- ------- -------
Total 3,322 3,121 (125) 326
--------------------------------------------------------------------- ------- ------- ------- -------
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.
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. The fair value of an option
and JSOP is established using a Black-Scholes model. LTIP options
are valued using a bi-nominal model.
9. 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 at Unaudited as at Audited as at
30 Sep 22 30 Sep 21 31 Mar 22
-------------------- -------------------- --------------------
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 2021 6,296,657
Net change in holding of own shares by EBT in period 3,105,777
------------------------------------------------------ -----------
Record plc shares held by EBT as at 30 September 2021 9,402,434
Net change in holding of own shares by EBT in period 229,597
------------------------------------------------------ -----------
Record plc shares held by EBT as at 31 March 2022 9,632,031
Net change in holding of own shares by EBT in period (1,495,441)
------------------------------------------------------ -----------
Record plc shares held by EBT as at 30 September 2022 8,136,590
------------------------------------------------------ -----------
The EBT holds shares in Record plc which are used to meet the
Group's obligations to employees under the Group Bonus Scheme and
the Record plc Share Scheme. Own shares are recorded at cost and
are deducted from retained earnings.
10. Related parties
Related parties of the Group include key management personnel,
close family members of key management personnel, subsidiaries and
the EBT. There has been no change in related parties from those
disclosed in the Annual Report 2022.
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
The compensation given to key management personnel is as
follows:
Six months Six months
ended ended Year ended
30 Sep 30 Sep 31 Mar
22 21 22
GBP'000 GBP'000 GBP'000
----------------------------- ---------- ---------- ----------
Short-term employee benefits 5,061 3,825 8,457
Post-employment benefits 189 156 330
Share-based payments 1,632 926 2,467
----------------------------- ---------- ---------- ----------
6,882 4,907 11,254
----------------------------- ---------- ---------- ----------
Compensation to key management personnel has increased in line
with the profitability of the Group. It includes variable
remuneration paid through the Group Bonus Scheme as well as
inflationary increases and promotions. More detail of the Group's
financial performance is provided in the Financial review
section.
The dividends paid to key management personnel in the six months
ended 30 September 2022 totalled GBP2,278,904 (six months ended 30
September 2021: GBP1,434,256; year ended 31 March 2022:
GBP3,056,662).
11. Post reporting date events
No adjusting or significant non-adjusting events have occurred
between the reporting date and the date of approval.
12. Restatement of the share premium account and retained
earnings
Gains prior to 31 March 2022 on the release of shares from the
Employee Benefit Trust have been reclassified from share premium to
retained earnings as there was no issue of new shares. The prior
cumulative movements to 31 March 2021 of GBP609,000 have been
reclassified to retained earnings. Movements for the six months
ended 30 September 2021 and 31 March 2022, of GBP590,000 and
GBP230,000 respectively, have also been reclassified as retained
earnings. The restatement does not impact the current or previous
years' profit or loss.
Information for shareholders
Record plc
Record plc is a public limited company incorporated in the
UK.
Registered in England and Wales
Company No. 1927640
Registered office
Morgan House
Madeira Walk
Windsor
Berkshire
SL4 1EP
United Kingdom
Tel: +44 (0)1753 852 222
Fax: +44 (0)1753 852 224
Principal UK trading subsidiaries
Record Currency Management Limited
Registered in England and Wales
Company No. 1710736
Record Group Services Limited
Registered in England and Wales
Company No. 1927639
Both principal UK trading subsidiaries are based in Windsor.
Further information on Record plc can be found on the Group's
website: www.recordfg.com
Dates for 2022 interim dividend
Ex -- dividend date 8 December 2022
------------------------ ----------------
Record date 9 December 2022
------------------------ ----------------
Interim dividend payment 30 December 2022
date
------------------------ ----------------
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Further information about the Registrar is available on their
website: www.linkgroup.eu
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 segregated clients, or
the Net Asset Value where Record acts as Investment Manager to a
Fund;
-- Multi-product mandates - the chargeable mandate size for each client; and
-- 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.
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.
ends
[1] Record manages only the impact of foreign exchange and not
the underlying assets on its currency and derivatives business,
therefore its "assets under management" ("AUM") are notional rather
than real. To distinguish this from the AUM of conventional asset
managers, Record used the concept of Assets Under Management
Equivalents ("AUME").
, 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.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR VVLFLLFLLFBF
(END) Dow Jones Newswires
November 29, 2022 02:00 ET (07:00 GMT)
Record (LSE:REC)
過去 株価チャート
から 3 2024 まで 4 2024
Record (LSE:REC)
過去 株価チャート
から 4 2023 まで 4 2024
