Good morning!

A few things to look at today:




Record (LON:REC)

  • Share price: 33.4p (+15%)
  • No. of shares: 199 million
  • Market cap: £66 million

Final Results

(Please note that I have a long position in REC.)

After a period of what feels like relentless decline, it's nice to finally see some positive results at Record.

I've described this as a low-conviction holding - see my discussions at the last trading update and in more detail at the interim results.

It's a currency manager, helping dozens of institutional clients to deal with their currency exposures.

In recent years, it has suffered from competitive pressures on pricing and overall growth has been very limited, particularly when it comes to client numbers. Performance fees have withered.

However, I took the view that downside risk was limited by Record's fortress-like balance sheet, and that its highly-invested managers and motivated staff might come up with ways to reinvigorate it. But it was impossible for me to have a strong belief in this!

Results

Today's results show almost everything moving in the right direction.

Fees - The company's pricing model has changed, so that certain products which used to charge a management fee only, now charge a reduced management fee but also come with a performance fee.

It turns out that this has increased the total fees charged, at least for FY 2019.

Record's long-term track record of outperforming its benchmark (in the "Enhanced Passive Hedging" product) suggests to me that there is scope for the performance fee element to increase in future years. It outperformed its benchmark by 5bps in 2019, but the 5-year average is 12bps per annum.

On a big-picture view, "Average management fee rates for most product lines have remained broadly constant throughout the year ended 31 March 2019" - it's hard to deny that there is still some pressure on fees.

Clients - This number of clients is unchanged since the recent Q1 update. 65 clients is encouraging vs. 60 at the previous year-end. Three commercial relationships were lost,…

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