REG - Polar Capital Hldgs - Group Audited Results for year ended 31 March 2022
27/06/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220627:nRSa2096Qa&default-theme=true
RNS Number : 2096Q Polar Capital Holdings PLC 27 June 2022
POLAR CAPITAL HOLDINGS plc
Group Audited Results for the year ended 31 March 2022
"Strong growth in core operating profit allows a 15% increase in total
dividend" Gavin Rochussen, CEO
Highlights
• Assets under Management (AuM) at 31 March 2022 up 6% to £22.1bn
(2021: £20.9bn)
• Average AuM for the year up 37% to £22.8bn (2021: £16.7bn)
• Core operating profit(†) up 35% to £69.4m (2021: £51.5m)
• Pre-tax profit down 18% to £62.1m (2021: £75.9m) due to lower
contribution from performance fee profits compared to last year's near record
high.
• Basic earnings per share of 50.8p (2021: 67.2p) and adjusted
diluted total earnings per share(†) down 10% to 56.0p (2021: 62.2p)
• Second interim dividend of 32.0p per share (2021: 31.0p) bringing
the total dividend for the year to 46.0p per share (2021: 40.0p), a 15%
increase. The dividend payment date is 29 July 2022, with an ex-dividend date
of 7 July 2022 and a record date of 8 July 2022.
• On 30 September 2021, the Group launched the Polar Capital Smart
Energy Fund which seeks to take advantage of companies at the forefront of the
global transition towards a cleaner, more efficient and sustainable energy
future.
• On 30 September 2021, the Group launched the Polar Capital Smart
Mobility Fund which seeks to invest in a portfolio of companies worldwide that
support, through their technology solutions and services, the decarbonisation
and transformation of the global transportation sector.
† The non-GAAP alternative performance measures shown here are described and
reconciled to IFRS measures in the Alternative Performance Measures (APM)
section.
Gavin Rochussen, Chief Executive Officer, commented:
"As we progressed through the second year of the pandemic our staff continued
to operate effectively, partly remotely as guidance was altered, to service
our clients and other stakeholders."
"Investment performance has been more challenging than the prior year when our
portfolios benefited from
many of the so called 'Covid-19 winners'. Over the two 'pandemic years' our
fund performance has held up well."
"As at 31 March 2022, 84% of our UCITS fund's AuM were in the top two
quartiles against the Lipper peer group
over three years. Over five years, as at 31 March 2022, 93% of AuM was in the
first two quartiles against the Lipper peer group with 100% of AuM in the top
two quartiles since inception of the respective funds."
"Despite the current more volatile market backdrop, net inflows over the full
year were resilient, although in line with industry sentiment turning
negative, the last quarter was the first quarter of net outflows since early
2020. There has been notable success in the funding of institutional
segregated mandates of £745m, bringing total segregated AuM to £1.1bn, 5% of
total AuM."
"At times of uncertainty and volatility, communicating with our clients is
especially important and something we always strive to achieve. It was
pleasing therefore to see that Polar Capital ranked 6(th) out of 72 fund
groups for 'keeping clients informed' and 7(th) for 'client orientated
thinking' in Broadridge's research programme of UK fund buyers. I would like
to thank our clients for their ongoing support."
"Strategic progress has continued under the 'growth with diversification'
mantra. Three of our six largest investment teams by AuM were acquired or
launched in the last 5 years."
"The arrival, in the last quarter of 2021, of the experienced team focused on
sustainable investing and the launch of the Polar Capital Smart Energy and
Polar Capital Smart Mobility, both Article 9 funds as defined by SFDR,
provides significant capacity in active sustainable equities. The strategy
level AuM managed by the team at year end was £116m, signalling good support
from investors, with a positive pipeline in place."
"The Group's strong balance sheet and range of differentiated fund strategies,
supported by our performance led approach and our strong culture, positions us
well to weather the current backdrop of inflationary pressures, macro
uncertainty, rising interest rates and market volatility."
For further information please contact:
Polar Capital +44 (0)20 7227 2700
Gavin Rochussen (Chief Executive Officer)
Samir Ayub (Finance Director)
Numis Securities Limited - Nomad and Joint Broker +44 (0)20 7260 1000
Giles Rolls
Charles Farquhar
Stephen Westgate
Peel Hunt LLP- Joint Broker +44 (0)20 3597 8680
Andrew Buchanan
Rishi Shah
Camarco +44 (0)20 3757 4995
Ed Gascoigne-Pees
Jennifer Renwick
Phoebe Pugh
Assets under Management (AuM)
AuM split by type
31 March 2022 31 March 2021
£bn % £bn %
Open ended funds 16.6 75% Open ended funds 16.6 79%
Investment Trusts 4.4 20% Investment Trusts 3.9 19%
Segregated mandates 1.1 5% Segregated mandates 0.4 2%
Total 22.1 Total 20.9
AuM split by strategy
Ordered according to launch date
31 March 2022 31 March 2021
£bn % £bn %
Technology 9.2 42% Technology 10.2 49%
European Long/Short 0.1 0.3% European Long/Short 0.2 1%
Healthcare 3.7 17% Healthcare 2.9 14%
Global Insurance 1.9 9% Insurance 1.7 8%
Financials 0.6 3% Financials 0.3 1%
Emerging Markets Income - - Emerging Markets Income 0.1 0.5%
Convertibles 0.8 4% Convertibles 0.8 4%
North America 0.8 4% North America 0.8 4%
Japan Value 0.2 0.5% Japan Value 0.1 0.5%
European Income 0.1 0.3% European Income 0.2 1%
UK Value 1.6 7% UK Value 1.4 7%
Emerging Markets and Asia 1.1 5% Emerging Markets and Asia 0.4 2%
Phaeacian* 0.5 2% Phaeacian 0.5 2%
European Opportunities 1.2 5% European Opportunities 1.1 5%
European Absolute Return 0.1 0.3% European Absolute Return 0.1 0.5%
Global Equity 0.1 0.3% Global Equity 0.1 0.5%
Sustainable Thematic Equities 0.1 0.3% Sustainable Thematic Equities - -
Total assets 22.1 100% Total assets 20.9 100%
* The Phaeacian Accent International Value Fund and the Phaeacian Global Value
Fund were closed down in May 2022.
Chair's Statement
Introduction
This is my second report to the shareholders of Polar Capital and, as we all
know, it has been an extraordinary
two years. In the conclusion of my report last year, I said that it felt
inevitable that the impact of Covid-19 would be uneven across the various
regions and sectors of the economy. As so it has proved, as the world seeks to
reopen following the pandemic and struggles with the problems of interruptions
to supply chains across the globe.
In addition, the tragic events unfolding in Ukraine, and the actions taken by
central banks to combat the pressures from rising inflation, have combined to
create increased uncertainty in equity markets.
Against this background, it has been a more challenging year for the Group,
and the asset management sector more
generally, as risk assets were sold-off and market volatility increased in
response to rising interest rates. The overall impact has created a less
conducive environment for the majority of our investment teams, who typically
look to
invest in more growth focused sectors and companies.
Despite these headwinds, the business, with its investment and performance led
culture, has been nimble and the fund managers have adhered to their processes
and continued to focus on producing good risk adjusted returns.
Hence, I and the Board are confident that the outlook for the business remains
very positive. We have a proven strategy, supported by a strong balance sheet,
and led by an exceptionally talented executive team working with some of the
best investment management people. And the reality is that the world has
recovered from economic and geopolitical challenges before and can be expected
to eventually do so again.
Strategy
I am pleased to be able to report on the further progress that has been made
in pursuit of the 'Growth with
Diversification' strategy. During the year, net inflows into more recently
launched strategies exceeded inflows into the more established strategies,
thus reducing concentration in the core Technology funds, whilst helping to
widen our investment offering.
The integration of the acquisition of Dalton Strategic Partnership LLP is now
complete and the core Melchior
European Opportunity Fund, a Luxembourg SICAV, has grown since the
acquisition.
The arrival of a high calibre experienced sustainable equities team during the
year has had a good start at Polar Capital with £120m of net inflows since
the launch of the sustainable thematic equities strategy in the last calendar
quarter of 2021.
Culture
Our culture is fundamental to the success of our business. At heart of our
business are our people with a focus on fund performance. Whilst our
investment teams are independent and act with investment autonomy, we believe
there is an alignment of interest between fund managers delivering long term
superior returns and the interests of clients.
Following the successful vaccine rollout in the UK and the lifting of all
Covid-19 related restrictions earlier this year, staff have returned to the
office, albeit with flexible working arrangements in place, and we are already
seeing some of the positive impact as all our staff return to a collaborative
face-to-face environment.
A number of events have been held across the business to engender and promote
the benefits of in-person collaboration and help to integrate our new joiners,
who found themselves beginning their careers at Polar Capital under remote
working conditions. With almost a quarter of our current staff joining during
the last two years, this return to the office has proved invaluable in helping
to integrate everyone into a business that prides itself on a strong culture.
Results
Despite the challenges described above, the business performed well with
average AuM increasing by 37% and
AuM at 31 March 2022 rising 6% to £22.1bn from £20.9bn a year earlier.
Performance fee profit† declined from
£19.5m, a level that is significantly higher than average for Polar Capital,
to £4.1m. This meant that core operating profit† increased by 35% compared
to a 24% increase in the prior year and the lower contribution from
performance fees resulted in profit before tax for the year of £62.1m (2021:
£75.9m), diluted EPS of 48.7p (2021: 64.0p) and adjusted diluted EPS† of
56.0p (2021: 62.2p).
Dividend
In line with our policy, the second interim dividend per share will be 32.0p
(2021: 31.0p) to be paid in July 2022. Together with the first interim
dividend per share of 14.0p paid in January 2022, the total dividend per share
for the year amounts to 46.0p (2021:40.0p).
Board Changes
Following a successful search for a new non-executive director, I am pleased
to report that we were able to make two new appointments during the year.
Laura Ahto and Anand Aithal bring different and varied perspectives to the
Board and have already made a positive contribution. I am also very pleased to
welcome Samir Ayub as Finance Director to the Board. Samir has been with Polar
Capital for 12 years and his appointment is very much deserved.
These changes are an important part of the continuing preparation for the
transition from the early founders of the Group to the next generation of
leaders. As part of the transition, John Mansell, who has been an Executive
Director since the establishment of Polar Capital in 2001, will step off the
Board at the AGM in September 2022. As much as we will miss his experience and
knowledge on the Board, I am very pleased that John has agreed to remain in an
executive role, so we will continue to have the benefit of his advice for some
time to come. In addition, Jamie Cayzer-Colvin, who has also been a Director
since the formation of Polar Capital and was a key driver of the establishment
and founding of the business in 2001, will retire from the Board at the end of
the year.
We are very lucky to have had such long and beneficial service from both John
and Jamie over the period since
the Group started. They have been exceptional Directors over an extended
number of years and will be sorely
missed on the Board. On behalf of the Board, our shareholders, employees and
our fund managers, I would like to thank them for everything they have done
for the Group over the last 21 years. Polar Capital simply would not be here
if it were not for their contribution.
Annual General Meeting
We are planning to hold the Company's forthcoming Annual General Meeting
('AGM') as a physical meeting at 2.30pm on Wednesday 7 September 2022, at the
Company's registered office.
Shareholders are encouraged to submit any questions to our company secretary
before the meeting (by using Investorrelations@polarcapital.co.uk, and using
the subject title 'PCH AGM') who will arrange for a response to be provided to
the questions. There will not be a presentation at the meeting, but a video of
the CEO and Finance Director presenting the results will be available on the
Company's website. The notice of meeting is also available on
the Company's website.
Thank you
Last year, I began my Chair's statement with a thank you to Gavin and his
executive team, our fund managers, and our staff, for their efforts in what
was the first year of the pandemic. Today, I would like to repeat those
thanks. This has been another extraordinarily challenging year. Despite this,
everyone at Polar Capital has performed exceptionally well once again. On
behalf of the Board and myself, thank you.
David Lamb
Chair
24 June 2022
† The non-GAAP alternative performance measures mentioned here are described
and reconciled in the APM section.
Chief Executive's Report
The financial year to 31 March 2022 was a year characterised by gradual
relaxation of Covid-19 induced restrictions and, following a highly successful
vaccine programme in the UK, enabled us all to return to the workplace in
early 2022. It has been a year when we transitioned to a 'living with
Covid-19' mindset.
As we progressed through the second year of the pandemic, our staff continued
to operate effectively, partly remotely as guidance was altered, to service
our clients and other stakeholders. It is a testament to the commitment of our
colleagues, people at Polar Capital and our outsourced service providers, that
we continued to make progress toward our strategic objectives. Perhaps not a
year of two halves, but one of three quarters and one quarter. Markets
continued to rise for the large part of 2021 on the back of accommodative
economic policy until the
spectre of rapidly rising inflation, supply chain bottlenecks resulting from
the shut down in China and concern about slowing global growth became a
concern and investors moved abruptly to a risk-off mindset in early 2022. The
unfolding of the tragic events in Ukraine in February 2022 with no near-term
solution or ceasefire expected, led to equity risk by investors further
reduced. Central Banks continued to raise interest rates, and signal further
future rises, to dampen a rapid spike in inflation, but with the consequence
of stalling economic recovery, dampening growth, and the dangers of a
stagflation environment.
It was against this backdrop that Polar Capital delivered solid financial
performance with a 35% increase in
core operating profit(†) on the back of average assets under management
increasing by 37% from £16.7bn to
£22.8bn. Assets under management peaked at £25bn in early January 2022 and
then declined as markets sold off in the March 2022 quarter. A transition to a
rising interest environment severely impacted the valuations of growth
companies and technology stocks sold off, together with small and mid-cap
companies, as investors rotated into more value driven and larger cap liquid
stocks. Assets under management were £22.1bn at the financial year end, a 6%
increase over the year.
Investment performance has been more challenging than the prior year when our
portfolios benefited from
many of the so called 'Covid-19 winners'. Over the two 'pandemic years' our
fund performance has held up well.
As at 31 March 2022, 84% of our UCITS fund's AuM were in the top two quartiles
against the Lipper peer group
over three years. Over five years, as at 31 March 2022, 93% of AuM was in the
first two quartiles against the Lipper peer group with 100% of AuM in the top
two quartiles since inception of the respective funds. 50% of our UCITS funds
were in the top quartile over three years with 70% of our UCITS funds in the
top two quartiles in this period. Over a five-year period 53% of the UCITS
funds are in the first quartile and 80% in the top two quartiles.
Growth in assets under management and net inflows in the 2021 financial year
were a record for Polar Capital and
was always going to be a challenge to improve upon. In the event, AuM in the
financial year increased by 6% from £20.9bn to £22.1bn, with a combination
of net inflows of £391m and market performance of £867m.
Despite the current more volatile market backdrop, net inflows over the full
year were resilient, although in line with industry sentiment turning
negative, the last quarter was the first quarter of net outflows since early
2020. There has been notable success in the funding of institutional
segregated mandates of £745m, bringing total segregated AuM to £1.1bn, 5% of
total AuM. The diversification strategy continued to progress with net inflows
in the last quarter of £228m into our sustainable Emerging Markets Stars and
Sustainable Thematic Equities strategies, the latter which was launched in
September 2021. Over the year, there has been progress in increasing the
exposure Polar Capital has in strategies other than its core Technology funds.
While there were net outflows of £1.3bn from the Technology funds compared to
£1.8bn of net inflows in the prior
year, these outflows have been more than offset by net inflows of £873m into
the sustainable Polar Capital Emerging
Market Stars strategy, £561m into the Healthcare strategies, £143m into the
alternative Convertible Bond funds, £85m into the European Opportunities fund
and, pleasingly, £120m into the recently launched Sustainable Thematic
Equities strategy.
Financial performance for the year in terms of core operating profit(†) was
robust with a 35% increase over the prior year and 37% increase in average
AuM. Performance fee profit(†) reduced over the year following a stronger
than average performance fee profit in the prior year. As a result, profit
before tax decreased by 18%, diluted EPS and adjusted diluted total EPS(†)
decreased by 24% and 10% respectively. The increase in core operating
profit(†) has enabled an increase in the total dividend from 40.0p per share
to 46.0p representing a 15% pay-out which is at the higher end of the pay-out
range reflecting the lower component of performance fee profit.
Strategic progress has continued under the 'growth with diversification'
mantra. Following a multi-year project
to configure our middle office processes, we are able to efficiently service
increasing numbers of segregated mandates. We now have ten mandates with
£1.1bn of AuM representing 5% of total AuM.
The integration of the acquisition of Dalton Strategic Partnership LLP, which
completed on 1 March 2021, has
progressed well with full integration being achieved and growth in AuM for the
Melchior European Opportunities
Fund.
The Phaeacian partnership which was announced in October 2020 is currently
under review due to a change
in circumstances for key team members. The Board of the two mutual funds
managed by Phaeacian decided to close the funds with effect from 26 May 2022.
As a result, a post balance sheet adjustment has been recorded to derecognise
the related intangible asset, the corresponding deferred liability and
reorganisation costs in relation to the closure of the funds resulting in a
one off exceptional cost of £1.6m. The closure of the funds remains
immaterial to the ongoing core profitability of the Group.
We have continued to develop our U.S. footprint with experienced business
development capability covering the
major regions within the U.S.
The arrival, in September 2021, of the experienced team focused on sustainable
investing and the launch of the Polar Capital Smart Energy and Polar Capital
Smart Mobility, both Article 9 funds as defined by SFDR, provides significant
capacity in active sustainable equities.
Sustainability is a key focus and over the past year, we have placed more
emphasis on sustainability than
ever before. New EU regulation has driven rapid change in approaches to
sustainable investment across the industry and we continue to raise our
ambitions for responsible and sustainable investment.
Building on the establishment of the Polar Capital Sustainability Committee in
2021, we have established a Responsible Investment Working Group which
provides a forum across our 15 teams for sharing approaches and best practice
enabling collaboration on shareholder engagement, voting, and developing
climate change strategy and net zero framework. We have invested in the
central sustainability team resource and have significantly enhanced our data
capabilities.
ESG and climate change metrics have been incorporated into Polar Capital's
central monitoring and oversight of portfolio risks, alongside factors
including liquidity, macro, and behavioural analysis. We support the new UK
Stewardship Code and became a signatory to the Code during this year.
Polar Capital is delighted to be partnering with Westminster City School to
launch the Polar Capital Aspire Scheme (PCAS) which supports Westminster City
School students throughout their time at university. We firmly believe in the
power of education and are excited to be able to provide these opportunities
for the younger members of our local community.
The outlook is constructive within the context of inflationary pressures,
macro uncertainty, rising interest rates and market volatility. Against this
backdrop, we believe that the Group's strong balance sheet and range of
differentiated fund strategies positions us well for the future, supported by
our performance led approach and our strong culture.
Gavin Rochussen
Chief Executive Officer
24 June 2022
† The non-GAAP alternative performance measures mentioned here are described
and reconciled in the APM section.
Business Review
Assets under Management and Fund Flows
On 31 March 2022, our assets under management (AuM) stood at £22.1bn (2021:
£20.9bn), an increase of 6% over the financial year. We recorded net inflows
of £391m in the reporting period (or 31% of the total asset growth), the
balance attributable to global market and investment performance. The average
AuM for the year was £22.8bn, compared to £16.7bn the previous year.
The financial year began as the prior year had ended, with investors
undeterred by a wide array of headwinds - the global pandemic, new Covid-19
variants, rising inflation and worldwide supply chain issues to name but a few
- industry fund flows remained strong and Polar Capital recorded three
consecutive quarters of positive net inflows (totalling £0.8bn from 1 April
to 31 December 2021). However, as the headwinds continued to accumulate -
quantitative tapering, increasingly aggressive central bank rate hikes,
conflict between Russia and Ukraine - investors were finally pushed into a
risk-off stance and we experienced our first negative quarter for fund flows
(£(0.4)bn from 1 January to 31 March 2022) since the first quarter of 2020.
Despite a more challenging end to the financial year, 13 of our UCITS/SICAV
sub-funds recorded net inflows over the
reporting period, led by Polar Capital Emerging Market Stars Fund and Polar
Capital Asian Stars Fund (£743m), Polar Capital Biotechnology Fund (£263m),
Polar Capital Global Convertible Fund (£91m), Melchior European Opportunities
Fund (£86m) and Polar Capital Global Absolute Return Fund (£52m).
Outflows over the period were dominated by our Technology Funds (£1.3bn), as
investors initially rotated from growth to value and then de-risked in the
wake of prevailing uncertainty and rising market volatility (2021: net inflows
of £1.8bn).
The rotation in markets saw renewed interest in the Polar Capital Global
Financials Trust, driving £276m in new share issuance (£154m from the
Trust's Treasury account and a further £122m in a successful C Share capital
raise).
Segregated accounts have been a source of significant net new inflows over the
reporting period. A total of seven new accounts were onboarded, across four
investment teams, with combined AuM of £769m.
Communicating with our clients
After the enforced period of remote working and client servicing, we were
delighted to be back in the office with
colleagues and meeting clients in-person once again. Our distribution and fund
management teams have been back on the road, and we have held a number of
safe, Covid-19 secure events, including the return of our successful London
based annual investor conference.
We aim to provide our clients with exceptional service and support and we
believe that face-to-face engagement remains a key element of that provision.
Pleasingly, and testament to this commitment, we ranked in 6th place out of 72
of all fund managers in the UK for 'keeping clients informed' in a research
programme of professional fund buyers conducted by Broadridge*.
However, in a trend that was accelerated by the pandemic, the way in which
clients are engaging with us has changed and for many of them that engagement,
at least initially, is increasingly digital.
In response, we continue to focus on and invest in our digital marketing
capabilities, aiming to further enhance and expand the way in which we engage
and communicate with our clients. Our goal is to configure and optimize our
client services and marketing so that it is increasingly tailored to specific
client segments and geographies.
This is fast becoming a point of differentiation and a way for smaller asset
management firms to compete with larger groups beyond simply price and
investment performance.
By successfully combining our sales and digital marketing capabilities we can
extend the reach of our distribution to accelerate growth.
* Source: Broadridge, Fund Brand 50, March 2022
Growth with diversification
Our distribution strategy remains growth with diversification, by product,
client segment and geography.
Expanding our reach into the institutional channel remains a key priority,
providing significant potential
for growth. We have made good progress over the past year, winning seven new
segregated mandates as noted above. Of these, one was from a UK institution
and the rest were from investors based overseas.
We see significant opportunities outside our home market of the UK. We
continue to broaden and deepen our
presence and support in Continental Europe and the Nordic region, focusing on
seven core markets for growth, namely Switzerland, Germany and Austria,
France, Benelux, Spain, Italy and Scandinavia.
Our approach to wider global expansion is both targeted and measured. Our
primary focus remains on the U.S. and on south-east Asia. We are extending our
reach to the Australian market, where we recently won our first institutional
mandate.
Overall, almost £10bn of our AuM is from clients based overseas, a 117%
increase over the past three years (£4.5bn as at 29 March 2019).
Fund performance review to 31 March 2022
Polar Capital's prior financial year, to 31 March 2021, captured almost
exactly the equity market rally from its Covid-19 low, leading to exceptional
returns across our range of strategies. The year to 31 March 2022 has followed
a different path, as higher interest rate and inflation expectations have led
to more volatile equity and bond markets, and a change in market leadership.
The period began with the late stages of a value rally, precipitated by
Covid-19 vaccine discovery, and by expectations that the new Biden
administration would enact measures to stimulate the U.S. economy. As the
summer of 2021 progressed, these influences faded.
Large U.S. technology companies continued to perform well, although early
stage and higher growth tech companies suffered as higher market interest
rates impacted their valuation. Now, value styles are once again in the
ascendant, although in large part due to rising share prices in the energy and
material sectors.
Polar Capital's range of investment strategies spans both value and growth;
there is no central 'house view', and diversity of opinion on investment
approach is an important part of Polar Capital's ethos. The corollary is that
there
has been performance dispersion across Polar Capital's range of funds over the
past year, due to style and size effects in portfolios, and due to the market
declines in the first quarter of 2022.
Four of the five strategies run by Polar Capital's healthcare team
outperformed in the year to end March 2021. Large
pharmaceutical companies proved resilient in the market falls of early 2022,
which was a headwind for the all cap
Polar Capital Healthcare Opportunities Fund, but the Polar Capital Healthcare
Blue Chip Fund, the Polar Capital Global Healthcare Trust, the Polar Capital
Healthcare Discovery Fund (which is measured against a small/mid cap
benchmark), and the Polar Capital Biotechnology Fund all delivered returns in
excess of their benchmark. Polar Capital Healthcare Blue Chip Fund and Polar
Capital Biotechnology Fund sit in the first quartile of their respective peer
groups for the year.
The Polar Capital Global Insurance Fund delivered a strong absolute return
(+21.0%), outperformed its benchmark
over the year, and also ranks first quartile versus peers. It invests
predominantly in non-life insurance companies, which have been able to
generate good net asset value growth due to strong underwriting results, and
due to their investment portfolios benefiting from rising interest rates. The
Polar Capital Financials Trust, and its open-ended sister fund the Polar
Capital Financial Opportunities Fund, which invest mainly in banks, performed
less well versus their benchmarks as the strong performance of bank stocks
began to unwind due to bond yield curves flattening between two and ten years.
Polar Capital's two European equity strategies outperformed their benchmarks
in the year. The European ex-
UK Income strategy has been rewarded in the first quarter of 2022 as its
stable, income-generating investments have started to outperform more
highly-valued sectors of the market. This strategy outperformed its benchmark
by 6% in the first quarter of 2022 and by 3% over the year as a whole. The
Melchior European Opportunities Fund, managed by Polar Capital following the
acquisition of Dalton Strategic Partnership LLP, outperformed by 0.8%.
Polar Capital's Technology strategies performed less well, after a period of
very strong returns versus benchmark
in the challenging conditions of 2020. With technology sector performance
dominated by the very large household
names at one end of the spectrum, and by technology's value plays, namely
semiconductors, at the other end, Polar Capital's Global Technology Fund and
Polar Capital Technology Trust, which typically focus on higher growth,
mid-sized companies, lagged their benchmarks. The stay-at-home beneficiaries,
from which the funds had benefited in 2020, reversed course during 2021. The
Polar Capital Automation and Artificial Intelligence Fund, a specific theme
strategy, also lagged its World Equity benchmark due to its significant
exposure to technology investments.
Polar Capital's Emerging Market Stars strategies, with sustainability at their
core and which are now approaching
their fourth anniversary at Polar Capital, have good long-term performance
versus their benchmarks, but fared
less well in the year under review. The Emerging Market Stars strategy
underperformed by 3% and the Polar Capital China Stars Fund by 4%, although
Polar Capital Asian Stars Fund was 1% ahead of its performance benchmark, the
difference is attributable to the fact that the Emerging Market fund was
underweight across parts of Latin America and the resource sector which
performed well.
Polar Capital launched two new strategies at the end of September 2021, Smart
Energy and Smart Mobility, which invest in companies at the forefront of the
transition to a more efficient and sustainable energy future, and support
the decarbonisation and transformation of the global transport sector. Both
have Article 9 classification under SFDR.
In addition to its thematic and regional strategies, Polar Capital also runs
country strategies for the UK, U.S. and
Japan. The UK stock market has been one of the strongest performers in early
2022 due to the dominance of oil and resource companies in the index. Polar
Capital's UK Opportunities strategy focuses on small and midsized companies
with attractive valuation attributes, but this led to underperformance of 8%
versus the broad index. The North America strategy faced similar headwinds, in
this case due to large tech companies' sustained outperformance, and
underperformed by 7%. Both UK Opportunities and North America had performed
well in 2021.
The Polar Capital Japan Value strategy delivered performance in line with its
benchmark for the year to March 2022.
Value styles have begun to perform in Japan, but very much dominated by larger
companies; Polar Capital's fund
is focussed on small and mid cap areas of the market, where attractively
valued investments are even more plentiful, but have yet to be fully
recognised.
Polar Capital's absolute return strategies all delivered positive performance
in the period under review. The Forager (european small and mid cap) strategy,
which has a value-based approach, returned 13% and is up 8% annualised over
the three years to end March 2022. The MST European Absolute Return Fund, a
European market neutral
strategy acquired with Dalton Strategic Partnership LLP, returned 4% over one
year and is flat over three years. The Polar Capital Global Absolute Return
Fund, a convertible bond strategy run by Polar's Convertibles team, returned
2% in the year and is up 9% annualised over three years. The Convertibles
team's long biased Global Convertibles strategy performed in line with a
modestly lower performance benchmark but offers attractive risk-reward
characteristics in a world of higher volatility and weaker equity markets.
As at 31 March 2022, 84% of our UCITS fund's AuM were in the top two quartiles
against the Lipper peer group
over three years. Over five years, as at 31 March 2022, 93% of AuM was in the
first two quartiles against the Lipper peer group with 100% of AuM in the top
two quartiles since inception of the respective funds. 50% of our UCITS funds
were in the top quartile over three years with 70% of our UCITS funds in the
top two quartiles in this period. Over a five-year period 53% of the UCITS
funds are in the first quartile and 80% in the top two quartiles.
Financial Review
AuM
Open ended funds
Investment Trusts Segregated mandates
AuM movement in twelve months to 31 March 2022 (£bn) Total
AuM at 1 April 2021 16.6 3.9 0.4 20.9
Net (redemptions)/subscriptions (0.5) 0.2 0.7 0.4
Market movement and performance 0.5 0.3 - 0.8
Total AuM at 31 March 2022 16.6 4.4 1.1 22.1
A combination of net inflows, market movements and performance enabled our AuM
to increase 6% over the
financial year from £20.9bn to £22.1bn.
( )
There was notable success in the net funding of further segregated mandates
this year, which now represent around 5% of total AuM at 31 March 2022.
Average AuM increased by 37% over the financial year from £16.7bn to
£22.8bn.
Revenue
31 March 2022 31 March 2021
Management fees £'m £'m
Management and research fees 209.9 157.3
Commissions and fees payable (22.6) (15.4)
Gain on forward currency contracts - 0.6
Net management fees(†) 187.3 142.5
The increase in the average AuM of 37% translated into the Group's net
management fee(†) revenue increasing by 31% from £142.5m in 2021 to
£187.3m this year.
Net management fee yield 31 March 2022 31 March 2021
Average AuM (£bn) 22.8 16.7
Net management fees(†) (£m) 187.3 142.5
Net management fee yield(†) (bps) 82 85
Net management fee yield† over the year measured 82bps (2021: 85bps). The
decrease was slightly ahead of our stated expectation of an annual decrease of
at least 1-2bps as the product mix of the Group shifted due to a rebalancing
between the Technology strategy and the rest of the business, as well as from
the arrival of a number of institutional segregated mandates.
31 March 2022 31 March 2021
Performance fees £'m £'m
Performance fees 14.1 43.6
Following on from the significant out performance posted by our underlying
funds in the previous financial year, market conditions and performance
returns were more challenging this year. This resulted in performance fees
earned for the financial year to 31 March 2022 falling to £14.1m (2021:
£43.6m).
Operating Costs 31 March 2022 31 March 2021
£'m £'m
Salaries, bonuses and other staff costs 36.7 29.1
Core distributions(1)(†) 54.0 38.5
Share-based payments(2) 5.7 2.9
Performance fee interests(3)(†) 10.0 24.4
Total staff compensation 106.4 94.9
Other operating costs 23.1 20.8
Exceptional items 11.4 2.8
Total operating costs 140.9 118.5
1. Including share awards under deferment plan of £1.7m (2021: £1.8m).
2. Share-based payments on preference shares of £1.1m (2021: (£0.3m)), LTIPs
of £3.8m (2021: £2.4m) and equity incentive plan of £0.7m (2021: £0.8m).
Refer to Note 5 below.
3. Including LTIP award of £nil (2021: £0.9m).
† The non-GAAP alternative performance measures mentioned here are described
and reconciled in the APM section.
Total operating costs rose to £140.9m (2021: £118.5m) partly due to higher
staff compensation costs. The salaries, bonuses and other staff costs line
this year includes, a full year's worth of compensation costs for the teams
onboarded as part of the Dalton acquisition, whereas the comparative numbers
include one month's cost due to the completion date falling on 28 February
2021. Also included this year are compensation costs for the new Sustainable
Thematic Equities team that joined in September 2021.
Core distributions, which are variable compensation amounts payable to
investment teams from management fee revenue, increased partly as a
consequence of the higher average AuM and the resulting higher management fee
revenues and core profits and partly as a function of the cost of the new
teams from Dalton, Phaeacian and the Sustainable Thematic Equity team being
included.
Share-based payments have increased mainly due to an increased charge on
preference shares as the
underlying value of certain sets of shares increased. Two teams called for
conversion during the financial year (see Note 5 below for details).
Performance fee interests, which are variable compensation amounts payable to
investment teams from performance fee revenue, decreased due to the lower
amount of such fees generated this year.
Other operating, non-staff compensation related, costs increased marginally to
£23.1m (2021: £20.8m) as a result of higher operating costs associated with
the arrival of the Dalton, Phaeacian and Sustainable Thematic Equity as well
as an increase in travel cost following easing of Covid-19 restrictions over
the course of the financial year.
Exceptional items for both 2022 and 2021 comprised of significant items of
income or expenditure related to acquisitions, and were therefore expected to
be non-recurring, as well as the amortisation of acquired intangible assets.
The items are presented separately to allow a supplemental understanding of
the Group's results.
Exceptional items include non-recurring termination and reorganisation costs
related to the Dalton acquisition of £3.1m. The total amount of such costs
actually incurred post completion in February 2021 were £5.5m compared to the
£6.2m that was anticipated at the time the acquisition was announced.
The Board of the Phaeacian mutual funds determined that it was in the best
interest of investors for the funds to be closed down effective May 2022.
Therefore, as a post balance sheet date adjusting event, the related
intangible asset of £6.0m has been impaired and the deferred consideration
liability of £4.8m has been derecognised and £0.4m of further reorganisation
costs in relation to the closure of the mutual funds have been recorded with a
net impact to profit before tax of £1.6m. These have been classified as
exceptional items as they are non-recurring. A breakdown of exceptional
items is as follows:
Exceptional items 31 March 2022 31 March 2021
£'m £'m
Recorded in operating costs
Termination and reorganisation costs(4) 3.5 2.4
Amortisation of intangibles(5) 1.9 0.4
Impairment of intangibles(5) 6.0 -
11.4 2.8
Recorded in other income
Additional charge on deferred consideration - Dalton(6) 1.0 -
Derecognition of deferred consideration liability - Phaeacian(6) (4.8) -
(3.8) -
Net exceptional items recorded in the consolidated statement of profit or loss
7.6 2.8
4. Termination and reorganisation costs include £1.6m of termination costs
and £1.5m of reorganisation costs relating to the Dalton acquisition and
£0.4m of reorganisation costs relating to Phaeacian.
5. See Note 7 for details.
6. See Note 10 for details.
Profit before tax
31 March 2022 31 March 2021
Profits £'m £'m
Core operating profit(†) 69.4 51.5
Performance fee profit(†) 4.1 19.5
Other (loss)/income(^) (2.7) 7.4
Share-based payments on preference shares (1.1) 0.3
Net exceptional items (7.6) (2.8)
Profit before tax 62.1 75.9
† The non-GAAP alternative performance measures mentioned here are described
and reconciled on the APM page.
^ A reconciliation to reported results is given in the APM section below.
The headline profit before tax for the year has decreased by 18% to £62.1m
(2021: £75.9m).
The analysis of the three key components of profits shows that:
• Core operating profits
Increased by 35% to £69.4m (2021: £51.5m) reflecting the increase in net
management fees(†) which in turn is due to the 37% increase in average AuM.
Over time, we expect to grow core profits as a proportion of the Group's total
earnings, and thereby reduce the volatility of total earnings due to
performance fees.
• Performance fee profits
Performance fee profits decreased sharply because of more muted investment
performance during the current year, where markets were more challenging for
the Covid-19 winners from 2020.
• Other (loss)/income
In line with the reduction in performance fee profits, the decrease in other
income is a product of the more muted performance of the portfolio of seed
investments, net of hedging, held on the Group's balance sheet.
Earnings per share
Basic EPS decreased by 24% to 50.8p during the year (2021: 67.2p) and diluted
EPS decreased by 24% to 48.7p (2021: 64.0p). The effect of the adjustments
made in arriving at the adjusted diluted total EPS and adjusted diluted core
EPS figures of the Group is as follows:
(Pence) 31 March 2022 31 March 2021
Diluted earnings per share 48.7 64.0
Impact of share-based payments - preference shares 1.1 (0.3)
Impact of deferment, where staff compensation costs are deferred into future (0.8) (3.7)
periods
Impact of exceptional items 7.0 2.2
Adjusted diluted total EPS(†) 56.0 62.2
Performance fee profit and other income 2.2 21.6
Adjusted diluted core EPS(†) 53.8 40.6
Preference shares
A separate class of preference share has historically been issued by Polar
Capital Partners Limited for purchase by each new team of fund managers on
their arrival at the Group.
These shares provide each manager with an economic interest in the funds that
they run and ultimately enable the manager to convert their interest in the
revenues generated from their funds into equity in Polar Capital Holdings plc.
The equity is awarded in return for the forfeiture of their current core
economic interest and vests over three years with the full quantum of the
dilution being reflected in the diluted share count (and so diluted EPS) from
the point of conversion.
The event has been designed to be, at both the actual and the diluted levels,
earnings enhancing to shareholders.
In the year to 31 March 2022 there were two conversions of preference shares
into Polar Capital Holdings plc equity (2021: nil).
As at 31 March 2022 five sets of preference shares have the ability to call
for a conversion.
The call must be made on or before 30 November 2022 if any conversion is to
take place with effect from 31 March 2022.
No further preference shares are expected to be issued after this year and any
new teams arriving will instead be on a revenue sharing model with deferment
into equity in Polar Capital Holdings plc as the new long-term incentivisation
plan for investment teams. This revised model is not expected to change core
distributions when measured in percentage terms against net management fee
revenue and is expected to be simpler to administer compared to the preference
shares arrangement.
See Note 5 for details.
Balance sheet and cash
At the year end the cash balances of the Group were £121.1m (2021: £136.7m).
The decrease was due to reduced cash generation from lower performance fee
profits combined with the timing of the second interim dividend for 2021,
which reflected the above average performance fee profits last year, being
paid in July 2021. At the balance sheet date the Group held £48.3m of
investments in its funds (2021: £39.1m).
Capital management
The Group believes in retaining a strong balance sheet. The capital that is
retained in the business is used to seed new investment products, used as a
buffer for times of uncertainty, pay dividends and fund the EBT to buy Company
shares to reduce the dilutive effects of LTIP and option awards. As the Group
grows in size, the allocation of overall capital amongst these four categories
may change.
As at 31 March 2022 £48.3m (2021: £39.1m) of the Group's balance sheet was
invested to seed fledgling funds and during the year the Group advanced loans
to the EBT of £11.8m (2021: £10m) to buy shares in the Company.
The Group's dividend policy is to pay an annual dividend within a range of 55%
and 85% of adjusted total earnings, dependent on the scale of performance fees
in the relevant year and the anticipated trading conditions for the following
year.
As at 31 March 2022 the Group had surplus capital of £69.7m (2021: £60.4m)
above its regulatory capital requirement of £26m (2021: £25m) and July 2022
dividend commitment of £31m (2021: £29.8m).
We do not expect the implementation of IFPR and the introduction of the new
Internal Capital Adequacy and Risk Assessment regime (ICARA) to have a
material affect on the Group's regulatory capital requirements.
Going concern
The Financial Reporting Council has determined that all companies should carry
out a rigorous assessment of all the factors affecting the business in
deciding to adopt a going concern basis for the preparation of the accounts.
The Directors have reviewed and examined the financial and other processes
embedded in the business, in particular the annual budget process and the
financial stress testing inherent in the Internal Capital Adequacy Assessment
Process (ICAAP).
On the basis of such review and the significant liquid assets underpinning the
balance sheet relative to the Group's predictable operating cost profile the
Directors consider that the adoption of a going concern basis, covering a
period of at least 12 months from the date of this report, is appropriate.
Samir Ayub
Finance Director
24 June 2022
Alternative Performance Measures (APMs)
The Group uses the non-GAAP APMs listed below to provide users of the annual
report and accounts with supplemental financial information that helps explain
its results for the current accounting period.
APM Definition Reconciliation Reason for use
Core operating profit Profit before performance fee profits, other income and tax. APM reconciliation To present a measure of the Group's profitability excluding performance fee
profits and other components which may be volatile, non-recurring or non-cash
in nature.
Performance fee profit Gross performance fee income less performance fee interests due to staff. APM reconciliation To present a clear view of the net amount of performance fee earned by the
Group after accounting for staff remuneration payable that is directly
attributable to performance fee revenues generated.
Core distributions Variable compensation payable to investment teams from management APM reconciliation To present additional information thereby assisting users of the accounts in
fee revenue. understanding key components of variable costs paid out of management fee
revenue.
Performance Variable compensation payable to investment teams from performance fee APM reconciliation To present additional information thereby assisting users of the accounts in
revenue. understanding key components of variable costs paid out of performance fee
fee interests revenue.
Adjusted diluted total EPS Profit after tax but excluding (a) cost of share-based payments on preference Finance review The Group believes that (a) as the preference share awards have been designed
shares, (b) the net cost of deferred staff remuneration and (c) exceptional to be earnings enhancing to shareholders adjusting for this non-cash item
items which may either be non-recurring or non-cash in nature, and in the case provides a useful supplemental understanding of the financial performance of
of adjusted diluted earnings per share, divided by the weighted average number the Group, (b) comparing staff remuneration and profits generated in the same
of ordinary shares. time period (rather than deferring remuneration over a longer vesting period)
allows users of the accounts to gain a useful supplemental understanding of
the Group's results and their comparability period on period and (c) removing
acquisition related transition and termination costs as well as the non-cash
amortisation, and any impairment, of intangible assets and goodwill provides a
useful supplemental understanding of the Group's results.
Adjusted diluted core EPS Core operating profit after tax excluding the net cost of deferred core Finance review To present additional information that allows users of the accounts to measure
distributions divided by the weighted average number of ordinary shares. the Group's earnings excluding those from performance fees and other
components which may be volatile, non-recurring or non-cash in nature.
Core operating margin Core operating profit divided by Finance review To present additional information that allows users of the accounts to measure
net management fees revenue. the core profitability of the Group before performance fee profits, and other
components, which can be volatile and non-recurring.
Net management fee Gross management fees less commissions and fees payable. Finance review To present a clear view of the net amount of management fees earned by the
Group after accounting for commissions and fees payable.
Net management fee yield Net management fees divided by average AuM. Finance review To present additional information that allows users of the accounts to measure
the fee margin for the Group in relation to its assets under management.
Summary of non-GAAP financial performance and reconciliation of APMs to
reported results
The summary below reconciles key APMs the Group measures to its reported
results for the current year and also reclassifies the line-by-line impact on
consolidation of seed investments to provide a clearer understanding of the
Group's core business operation of fund management.
Any seed investments in newly launched or nascent funds, where the Group is
determined to have control, are consolidated. As a consequence, the statement
of profit or loss of the fund is consolidated into that of the Group on a
line-by-line basis. Any seed investments that are not consolidated are fair
valued through a single line item (other income) on the Group consolidated
statement of profit or loss.
Reclassification
2022 on consolidation 2022
Reported of seed Reclassification Non-GAAP
Results investments of costs results
£'m £'m £'m £'m APMs
Management and research fees 209.9 - - 209.9
Commissions and fees payable (22.6) - - (22.6)
187.3 - - 187.3 Net management fees
Operating costs (140.9) 0.5 76.5 (63.9)
- - (54.0) (54.0) Core distributions
46.4 0.5 22.5 69.4 Core operating profit
Performance fees 14.1 - - 14.1
- - (10.0) (10.0) Performance fee interests
14.1 - (10.0) 4.1 Performance fee profit
Other income/(loss) 1.6 (0.5) (3.8) (2.7)
Share-based payments - - (1.1) (1.1)
on preference shares
Net exceptional items - - (7.6) (7.6)
Profit for the year before tax
62.1 - - 62.1
Consolidated Statement of Profit or Loss
For the year ended 31 March 2022
31 March 2022 31 March 2021
£'000 £'000
Revenue 224,107 201,508
Other income 1,561 8,306
Gross income 225,668 209,814
Commissions and fees payable (22,642) (15,389)
Net income 203,026 194,425
Operating costs (140,936) (118,510)
Profit for the year before tax 62,090 75,915
Taxation (13,166) (13,197)
Profit for the year attributable to ordinary shareholders 48,924 62,718
Earnings per share
Basic 50.8p 67.2p
Diluted 48.7p 64.0p
Adjusted basic (Non-GAAP measure) 58.4p 65.2p
Adjusted diluted (Non-GAAP measure) 56.0p 62.2p
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2022
31 March 2022 31 March 2021
£'000 £'000
Profit for the year attributable to ordinary shareholders 48,924 62,718
Other comprehensive income/(loss) - items that will be reclassified to profit
or loss statement in subsequent periods
Net movement on fair valuation of cash flow hedges - 1,173
Deferred tax effect - (223)
- 950
Exchange differences on translation of foreign operations 1,140 (1,264)
Other comprehensive income/(loss) for the year 1,140 (314)
Total comprehensive income for the year, net of tax, attributable to ordinary 50,064 62,404
shareholders
All of the items in the above statements are derived from continuing
operations.
Consolidated Balance Sheet
As at 31 March 2022
31 March 31 March
2022 2021
£'000 £'000
Non-current assets
Goodwill and intangible assets 17,100 24,998
Property and equipment 4,113 5,104
Deferred tax assets 3,475 5,783
24,688 35,885
Current assets
Assets at fair value through profit or loss 77,783 57,151
Trade and other receivables 25,430 23,924
Other financial assets 2,695 84
Cash and cash equivalents 121,128 136,718
Current tax assets 1,563 1,966
228,599 219,843
Total assets 253,287 255,728
Non-current liabilities
Provisions and other liabilities 2,871 4,123
Liabilities at fair value through profit or loss 637 4,258
Deferred tax liabilities 3,435 4,116
6,943 12,497
Current liabilities
Liabilities at fair value through profit or loss 10,023 16,124
Trade and other payables 80,054 71,598
Other financial liabilities 20 4,069
90,097 91,791
Total liabilities 97,040 104,288
Net assets 156,247 151,440
Capital and reserves
Issued share capital 2,506 2,468
Share premium 19,364 19,364
Investment in own shares (24,915) (26,579)
Capital and other reserves 12,417 11,030
Retained earnings 146,875 145,157
Total equity - attributable to ordinary shareholders 156,247 151,440
Consolidated Statement of Changes in Equity
For the year ended 31 March 2022
Issued share capital £'000 Share premium Investment in own shares Capital reserves Other reserves Retained earnings Total equity
£'000
£'000 £'000 £'000 £'000 £'000
As at 1 April 2020 2,417 19,101 (24,139) 695 7,646 110,358 116,078
Profit for the year - - - - - 62,718 62,718
Other comprehensive loss - - - - (314) - (314)
Total comprehensive income - - - - (314) 62,718 62,404
Dividends paid to shareholders - - - - - (31,907) (31,907)
Issue of shares 51 263 - - - (487) (173)
Own shares acquired - - (6,473) - - - (6,473)
Release of own shares - - 4,033 - - (1,150) 2,883
Share-based payment - - - - - 5,625 5,625
Current tax in respect of employee share options - - - - 377 - 377
Deferred tax in respect of employee share options - - - - 2,626 - 2,626
As at 1 April 2021 2,468 19,364 (26,579) 695 10,335 145,157 151,440
Profit for the year - - - - - 48,924 48,924
Other comprehensive income - - - - 1,140 - 1,140
Total comprehensive income - - - - 1,140 48,924 50,064
Dividends paid to shareholders - - - - - (43,400) (43,400)
Dividends paid to third-party interests - - - - - (3) (3)
Issue of shares 38 - - - - 143 181
Own shares acquired - - (12,773) - - - (12,773)
Release of own shares - - 14,437 - - (11,297) 3,140
Share-based payment - - - - - 7,351 7,351
Current tax in respect of employee share options - - - - 2,682 - 2,682
Deferred tax in respect of employee share options - - - - (2,435) - (2,435)
As at 31 March 2022 2,506 19,364 (24,915) 695 11,722 146,875 156,247
Consolidated Cash Flow Statement
For the year ended 31 March 2022
31 March 2022 31 March 2021
£'000 £'000
Cash flows generated from operating activities
Cash generated from operations 85,323 90,854
Tax paid (10,861) (13,606)
Interest received 307 53
Interest on lease (95) (107)
Net cash inflow generated from operating activities 74,674 77,194
Cash flows generated from investing activities
Investment income 227 193
Sale of assets at fair value through profit or loss 41,240 33,292
Purchase of assets at fair value through profit or loss (70,335) (45,188)
Purchase of property and equipment (552) (156)
Cash introduced through business combination - 1,060
Payments in respect of business combination (8,120) (8,472)
Payments in respect of asset acquisition (1,257) (325)
Net cash proceeds from disposal of consolidated seed investment - (264)
Net cash outflow from investing activities (38,797) (19,860)
Cash flows generated from financing activities
Dividends paid to shareholders (43,400) (31,907)
Lease payments (1,306) (1,296)
Issue of shares 1 257
Purchase of own shares (12,383) (6,118)
Third-party subscriptions into consolidated funds 9,857 12,037
Third-party redemptions from consolidated funds (4,552) (1,289)
Net cash outflow from financing activities (51,783) (28,316)
Net (decrease)/increase in cash and cash equivalents (15,906) 29,018
Cash and cash equivalents at start of the year 136,718 107,753
Effect of exchange rate changes on cash and cash equivalents 316 (53)
Cash and cash equivalents at end of the year 121,128 136,718
Selected notes to the Consolidated Financial Statements for the year ended 31
March 2022
1. General information, Basis of Preparation and Accounting policies
Corporate information
Polar Capital Holdings plc (the 'Company') is a public limited company
registered in England and Wales whose shares are traded on the Alternative
Investment Market ('AIM') of the London Stock Exchange.
Group information
Details of operating subsidiaries, seed capital investments and indirectly
held entities consolidated into the Group are disclosed in Note 8 below.
Basis of preparation
The consolidated Group financial statements have been prepared on a going
concern basis in accordance with UK-adopted international accounting standards
and in conformity with the requirements of the Companies Act 2006.
The consolidated financial statements have been prepared under the historical
cost convention, modified by the measurement at fair value of certain
financial assets and liabilities and derivative financial instruments. The
consolidated financial statements are presented in Sterling and all values are
rounded to the nearest thousand (£'000), except when otherwise stated.
Going concern
The Directors have made an assessment of going concern taking into account
both the Group's results as well as the impact on the Group's outlook. As part
of this assessment the Directors have used information available to the date
of issue of these financial statements and considered the following key areas:
• Analysis of the Group's budget for the year ending 31 March 2023,
longer term financial projections and its regulatory capital position and
forecasts. The stress testing scenarios applied as part of the Group's ICAAP
have also been revisited to ensure they remain appropriate.
• Cash flow forecasts and an analysis of the Group's liquid assets,
which include cash and cash equivalents and seed investments.
• The operational resilience of the Group and its ability to meet
client servicing demands across all areas of the Group's business, including
outsourced functions, whilst ensuring the wellbeing and health of its staff.
The Group continues to maintain a robust financial resources position, access
to cashflow from ongoing investment management contracts and the Directors
believe that the Group is well placed to manage its business risks. The
Directors also have a reasonable expectation that the Group has adequate
resources to continue operating for a period of at least 12 months from the
date of signing the financial statements. Therefore, the Directors continue to
adopt the going concern basis of accounting in preparing the consolidated
financial statements.
Basis of consolidation
The consolidated financial statements of the Group comprise the financial
statements of the Company and its subsidiaries as at 31 March 2022.
Subsidiaries are those entities over which the Group has control. The Group
controls an investee if, and only if, the Group has:
• Power over the investee;
• Exposure, or rights, to variable returns from its involvement with
the investee; and
• The ability to use its power over the investee to affect returns.
The Group considers all relevant facts and circumstances in assessing whether
it has power over an investee, including the purpose and design of an
investee, relevant activities, substantive and protective rights, voting
rights and potential voting rights.
The financial statements of subsidiaries are either prepared for the same
reporting period as the parent company or where necessary, adjustments are
made to the financial statements of subsidiaries to bring their reporting
period and results in line with those of the Group. All intra-group
transactions, balances, income and expenses are eliminated on consolidation.
When the Group loses control over a subsidiary, it derecognises the related
assets, liabilities, third-party interest and other components of equity,
while any resultant gain or loss is recognised in profit or loss. Any
investment retained is recognised at fair value.
Seed capital investments in funds that the Group manages are accounted for as
subsidiaries, associates or financial assets at fair value through profit or
loss (FVTPL) depending on the holdings of the Group, on the level of influence
and control that the Group is judged to have and whether the Group assesses it
is acting as an agent or principal for its holdings in the seed capital
investments. There is no fixed minimum percentage at which the Group
consolidates, and each exposure is reviewed individually.
Where the Group concludes it is acting as a principal the entity is
consolidated. This assessment is based on the Group's total exposure. This
incorporates direct holdings, income earned from management and performance
fees and the assessed strength of third-party kick-out rights.
The Group concludes that it acts as an agent when the power it has over an
entity is deemed to be exercised for the benefit of third-party investors.
The Group re-assesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control. Subsidiaries are fully consolidated from the date on
which the Group obtains control and continue to be consolidated until the date
when such control ceases.
Where external investors hold redeemable shares in funds controlled by the
Group, the portion of profit or loss and net assets held by these third-party
interests is included within other income in the consolidated statement of
profit or loss and as financial liabilities at FVTPL in the consolidated
balance sheet respectively.
Net cashflows on initial consolidation or deconsolidation are presented as
investing activities within the consolidated cashflow statement. Cashflows
from third-party interests into consolidated funds are presented as financing
activities.
Investment in associates
An associate is an entity over which the Group has significant influence.
Significant influence is the power to participate in the financial and
operating policy decisions of the investee but is not control or joint control
over those policies. Generally, it is presumed that the Group has significant
influence where it has voting rights of 20% or more, but not control of an
investee.
Seed capital investments over which the Group has significant influence, but
not control, are carried on the balance sheet as assets at FVTPL as permitted
by IAS 28: Investment in Associates, with changes in fair value recognised in
the consolidated statement of profit or loss. The fair value of investments in
associates is determined by reference to the quoted price at the close of
business on the balance sheet date. The Group has no other investments in
associates and, therefore, no associates are currently accounted for using the
equity method.
Business Combination
Business combinations are accounted for using the acquisition method. The cost
of an acquisition is measured at the acquisition date fair value, as are the
identifiable net assets acquired and liabilities incurred including any asset
or liability resulting from a contingent or deferred consideration arrangement
and equity instruments issued by the Group. The acquisition date is the date
on which the Group effectively obtains control of the acquiree.
Acquisition-related costs are expensed as incurred and included within
administrative costs in the consolidated statement of profit or loss.
The Group applies the optional concentration test to assess whether an
acquired set of activities is not a business. If the concentration test is not
met, the Group then determines that it has acquired a business when the
acquired set of activities and assets include an input and a substantive
process that together significantly contribute to the ability to create
outputs.
Goodwill and intangible assets
Goodwill arising on the acquisition of a business is the excess of the
consideration paid over the net identifiable assets acquired and liabilities
assumed. Goodwill is measured at cost less any accumulated impairment losses.
Impairment testing is based on the expected future benefits of the relevant
cash-generating unit (CGU) as a whole.
Intangible assets such as investment management contracts acquired separately
are measured on initial recognition at cost which is their fair value as at
acquisition date. Following initial recognition, intangible assets are carried
at cost less any accumulated amortisation and accumulated impairment losses,
with the related expenditure or charge recognised in the consolidated
statement of profit or loss. Intangible assets are amortised on a
straight-line basis over their useful economic lives. Intangible assets are
derecognised upon disposal or when no future economic benefits are expected
from their use or disposal. Any gain or loss on derecognition is included in
the consolidated statement of profit or loss.
Financial assets
The Group's financial assets include seed capital investments, investment
securities, trade and other receivables, cash and equivalents and derivative
financial instruments. The classification adopted by the Group depends on the
purpose for which the financial assets were acquired and is determined at
initial recognition.
Financial assets are initially recognised at fair value, being the
consideration given, plus, any directly attributable transaction costs, except
in the case of financial assets recorded at fair value through profit or loss
where transaction costs are immediately recognised in the consolidated
statement of profit or loss.
Purchases and sales of financial assets are recognised at trade date, being
the date when the Group commits to purchase or sell the asset.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets at FVTPL include the Group's investments in the funds that it
manages, but does not control, including those which are held by the Group
against bonus awards deferred into fund units. Such assets are subsequently
carried at fair value, with any gains or losses arising from changes in fair
value being recognised in the consolidated statement of profit or loss.
Investment securities
Investment securities represent securities both long and short positions,
other than derivatives, held by consolidated funds. These securities are
classified as FVTPL and are measured at fair value with gains and losses
recognised through the consolidated statement of profit or loss.
Financial liabilities
The Group's financial liabilities include trade and other payables, derivative
financial instruments, deferred consideration payable and third-party
interests in funds that have been consolidated as subsidiaries.
Financial liabilities at fair value through profit or loss
Financial liabilities at FVTPL are carried at fair value, with gains and
losses recognised in the consolidated statement of profit or loss within other
income in the period in which they arise. Financial liabilities at FVTPL
include third-party interests in consolidated funds which are classified as at
FVTPL.
Contingent liabilities
Contingent liabilities are potential obligations that may arise due to
uncertain future events that are not wholly within the control of the Group.
Such liabilities are disclosed when the chance of such events occurring is no
longer remote.
Revenue from contracts with customers
Revenue from contracts with customers represents fees receivable, excluding
value added tax, for discretionary investment management services and research
fees during the year.
Management fees are based on a percentage of assets under management either
per calendar month or quarter as set out in the relevant investment management
agreements (IMA). Management fees relate specifically to the Group's provision
of investment management services for each relevant time period and therefore
such services are satisfied over time because either the customer
simultaneously receives and consumes the benefits provided by the fund manager
as the service is provided or, the fund manager's performance enhances the
assets that the fund controls. Management fees are recognised as the service
is provided and it is probable that the fee will be collected.
Research fee income relates to research provided in respect of funds managed
in accordance with the relevant IMA and is recognised as the service is
provided and it is probable that the fee will be collected.
Performance fees are variable consideration based on a percentage of
investment performance achieved relative to predefined benchmarks as set out
in the relevant IMA. Performance fees by their nature are highly susceptible
to volatility until they are crystallised and are no longer subject to claw
back. This is usually at the end of the performance period of a fund when the
performance fee calculation can be confirmed with certainty. Therefore,
performance fees are recognised at the point when they are crystallised.
Commissions and fees payable
Commissions and fees payable to third parties are in respect of rebates on
investment management fees, distribution and research fees payable to third
parties are recognised over the period for which the service is provided.
Standards and amendments not yet effective
There are no new or amended standards and interpretations that are issued, but
not yet effective, up to the date of issuance of the Group's consolidated
financial statements that would be expected to have a material impact on the
Group when they become effective.
Changes in accounting policies and disclosures
No standards or amendments have been issued during the year that have had or
are expected to have an impact on the Group's consolidated financial
statements.
2. Revenue
31 March 2022 31 March 2021
£'000 £'000
Investment management and research fees 209,988 157,326
Investment performance fees 14,119 43,584
Gain on forward currency contracts - 598
224,107 201,508
The Group used forward currency contracts to hedge management fees derived
from non-Sterling based funds in previous years. Effective 1 April 2021, the
Group has discontinued its revenue hedging programme.
Geographical analysis of revenue (based on the residency of source) is as
follows:
31 March 2022 31 March 2021
£'000 £'000
United Kingdom 35,138 28,431
Ireland 166,752 166,588
Cayman Islands 4,232 1,910
United States of America 5,698 2,002
Rest of Europe 11,675 1,979
Rest of the world 612 -
Gain on forward currency contracts - 598
224,107 201,508
3. Operating costs
a) Operating costs include the following expenses:
31 March 2022 31 March 2021
£'000 £'000
Staff costs including partnership profit allocations 107,989 94,925
Depreciation 1,404 1,399
Amortisation and impairment of intangible assets 7,860 419
Auditors' remuneration 383 418
Included within operating costs is a net amount of £3.5m in relation to
termination and reorganisation costs treated as exceptional items.
b) Auditors' remuneration:
31 March 2022 31 March 2021
£'000
£'000
Audit of Group and Company financial statements 125 135
Local statutory audits of subsidiaries 151 128
Audit-related assurance services 6 10
Other assurance services - internal controls report 101 77
Other advisory services - regulatory review - 28
Tax advisory services - 40
383 418
4. Dividends paid and proposed
Dividends on ordinary shares declared and paid during the year:
31 March 2022 31 March 2021
£'000 £'000
First interim dividend for 2022: 14.0p per share (2021: 9.0p per share) 13,564 8,413
Second interim dividend for 2021: 31.0p per share (2020: 25.0p per share) 29,836 23,494
Total dividend paid and charged to equity 43,400 31,907
The Board has declared a second interim dividend of 32.0p (2021: 31.0p) to be
paid in July 2022.
Together with the first interim dividend of 14.0p paid in January 2022 the
total dividend for the year amounts to 46.0p (2021: 40.0p).
5. Share-based payments
A summary of the charge to the consolidated statement of profit or loss for
each share-based payment arrangement is as follows:
31 March 2022 31 March 2021
£'000 £'000
Preference shares 1,095 (333)
LTIP and initial share awards 3,808 3,312
Equity incentive plan 740 794
Deferred remuneration plan 1,708 1,852
7,351 5,625
Certain employees of the Group and partners of Polar Capital LLP hold Manager
Preference Shares or Manager Team Member Preference Shares (together
'Preference Shares') in Polar Capital Partners Limited, a group company.
The preference shares are designed to incentivise and retain the Group's fund
management teams. These shares provide each manager with an economic interest
in the funds that they run and ultimately enable the manager, at their option
and at a future date, to convert their interest in the revenues generated from
their funds to a value that may (at the discretion of the parent undertaking,
Polar Capital Holdings plc) be satisfied by the issue of ordinary shares in
Polar Capital Holdings plc. Such conversion takes place according to a
pre-defined conversion formula that considers the relative contribution of the
manager to the Group as a whole. The equity is awarded in return for the
forfeiture of a manager's current core economic interest and is issued over
three years from the date of conversion.
The issue of the Preference Shares constitutes a share-based payment under
IFRS 2 and the cost is the estimated fair value, at the date of issue of the
preference shares, of the effective entitlement to the ordinary shares. At
each reporting date the estimated number of ordinary shares to be ultimately
issued upon conversion will vary and the holder, initially, and the Group,
ultimately, determines the start of the three year period ('Crystallisation')
over which the ordinary shares are awarded following conversion. The start of
this period will always be at least three years after the end of the financial
accounting period in which the preference shares are issued.
In the year to 31 March 2022, the Biotechnology team called for a full
conversion and the Convertible team called for a partial conversion of
preference shares into Polar Capital Holdings plc equity (2021: none).
At 31 March 2022 five sets of preference shares (2021: four sets) have the
right to call for conversion.
The following table illustrates the number of, and movements in, the estimated
number of ordinary shares to be issued.
Estimated number of ordinary shares to be issued against preference shares
with a right to call for conversion:
31 March 2022 Number of shares 31 March 2021 Number of shares
At 1 April 4,426,528 4,676,882
Conversion/crystallisation (1,350,514) -
Movement in the year (335,410) (250,354)
At 31 March 2,740,604 4,426,528
Number of ordinary shares to be issued against converted preference shares:
31 March 2022 Number of shares 31 March 2021 Number of shares
Outstanding at 1 April 1,766,541 3,733,904
Conversion/crystallisation 1,350,514 -
Adjustment on re-calculation (295,954) (344,982)
Issued in the year (1,468,973) (1,622,381)
Outstanding at 31 March 1,352,128 1,766,541
6. Earnings per Share
A reconciliation of the figures used in calculating the basic, diluted and
adjusted earnings per share (EPS) figures is as follows:
31 March 2022 31 March 2021
£'000 £'000
Earnings
Profit after tax for purpose of basic and diluted EPS 48,924 62,718
Adjustments (post tax):
Add exceptional items - acquisition related costs 2,896 1,908
Add exceptional items - amortisation of intangible assets 1,865 419
Add exceptional items - impairment of intangible assets 5,995 -
Less exceptional items - net gain on derecognition of deferred consideration (3,749) -
liabilities
Add/ (less) back cost of share-based payments on preference shares 1,095 (333)
Less net amount of deferred staff remuneration (793) (3,728)
Profit after tax for purpose of adjusted basic and adjusted diluted EPS 56,233 60,984
The adjusted EPS figure includes an adjustment for deferred remuneration
costs. The Group believes that aligning staff remuneration and profits
generated in the same period will allow users of the financial statements to
gain a supplemental understanding of the Group's results and their
comparability year on year.
Exceptional items were excluded from the adjusted EPS calculations as they
included costs such as non-recurring acquisition related transition and
termination costs as well as net gains arising on the derecognition of
deferred consideration liabilities and the amortisation and impairment of
certain acquired intangible assets.
31 March 2022 31 March 2021
Number of shares Number of shares
'000 '000
Weighted average number of shares
Weighted average number of ordinary shares, excluding own shares, for the 96,300 93,396
purpose of basic and adjusted basic EPS
Effect of dilutive potential shares - LTIPs, share options and preference 4,190 4,552
shares crystallised but not yet issued
Weighted average number of ordinary shares, for purpose of diluted and 100,490 97,948
adjusted diluted EPS
31 March 2022 31 March 2021
Pence Pence
Earnings per share
Basic 50.8 67.2
Diluted 48.7 64.0
Adjusted basic 58.4 65.2
Adjusted diluted 56.0 62.2
7. Goodwill and intangible assets
Investment management
contracts
Goodwill £'000 Total
£'000 £'000
Cost
As at 1 April 2021 6,770 18,647 25,417
Re-measurement of goodwill(1) (38) - (38)
As at 31 March 2022 6,732 18,647 25,379
Accumulated amortisation and impairment
As at 1 April 2021 - 419 419
Amortisation for the year - 1,865 1,865
Impairment for the year - 5,995 5,995
As at 31 March 2022 - 8,279 8,279
Net book value as at 31 March 2022 6,732 10,368 17,100
Cost
As at 1 April 2020 - - -
Acquisition during the year 6,770 18,647 25,417
As at 31 March 2021 6,770 18,647 25,417
Accumulated amortisation and impairment
As at 1 April 2020 - - -
Amortisation for the year - 419 419
Impairment for the year - - -
As at 31 March 2021 - 419 419
Net book value as at 31 March 2021 6,770 18,228 24,998
1. The re-measurement of goodwill relates to the purchase price adjustment
recognised in the current year.
The amortisation and impairment of intangible assets have been treated as
exceptional items.
(a) Goodwill
Goodwill relates to the acquisition of Dalton Capital (Holdings) Limited, the
parent company of Dalton Strategic Partnership LLP, a UK based boutique asset
manager. The goodwill is attributable to a single CGU.
(b) Intangible assets
The table below shows the carrying amount assigned to each component of the
intangible asset and the remaining amortisation period.
31 March 2022 31 March 2021
Carrying Remaining Carrying Remaining
value amortisation value amortisation
£'000 period £'000 period
Investment management contracts acquired from Dalton Capital (Holdings) 10,368 8.9 years 11,531 9.9 years
Limited
Investment management contracts acquired from First Pacific Advisors LP - - 6,697 9.5 years
10,368 18,228
The Group has fully impaired the carrying value of the intangible asset at the
reporting date relating to the investment management contracts of the
International Value and World Value equity funds acquired from First Pacific
Advisors LP in 2021. This was due to the closure of the funds managed by the
team in May 2022. As a result, an impairment loss of £6.0m was recognised
within operating costs in the consolidated statement of profit or loss, an
unrealised gain was recorded on the derecognition of the corresponding
liability of £4.8m and £0.4m of further reorganisation costs in relation to
the closure of the mutual funds have been recorded with a net impact to profit
before tax of £1.6m.
8. Subsidiary undertakings
The consolidated financial statements of the Group include the operating
subsidiaries listed below. At 31 March 2022 and 2021 all operating
subsidiaries, other than Polar Capital Partners Limited and Polar Capital US
Holdings Limited, were indirectly held. All operating subsidiaries are wholly
owned, except for: Polar Capital LLP in which Polar Capital Partners Limited
has contributed 23% (2021: 25%) of the capital. The Company is deemed to be
the controlling party of Polar Capital LLP.
Name Country of incorporation Registered Principal
office activities
Polar Capital Partners Limited UK 16 Palace Street, London, UK Services company
Polar Capital US Holdings Limited UK 16 Palace Street, London, UK Investment holding company
Polar Capital LLP UK 16 Palace Street, London, UK Investment management
Polar Capital Secretarial Services Limited UK 16 Palace Street, London, UK Corporate secretary
Polar Capital Partners (Jersey) Limited Jersey 12 Castle Street, St Helier, Jersey Investment management
Polar Capital (America) Corporation USA 2711 Centreville Road, Wilmington, USA Investment advisory
Polar Capital (Europe) SAS France 18 Rue de Londres, 75009 Paris, France Investment management
Polar Capital (Shanghai) Consulting Co Limited China Bund Finance Centre S2, No.600 Zhongshan East 2 Road, Shanghai, 200010 Services company
Polar Capital Holdings LLC USA 1209 Orange Street, Wilmington, USA Investment holding company
Dalton Capital (Holdings) Limited UK 16 Palace Street, London, UK Investment holding company
Dalton Strategic Partnership LLP UK 16 Palace Street, London, UK Investment management
Polar Funds Marketing (Switzerland) AG Switzerland Klausstrasse 4, 8008 Zurich, Switzerland Investment management
Polar Capital (Singapore) Private Limited Singapore 77 Robinson Road, #13-00, Robinson 77, Singapore (068896) Services company
The consolidated financial statements of the Group also include the following
seed capital investments and indirectly held entities which were judged to
require consolidation into the Group as at 31 March 2022:
Name Country of Registered office Principal activities Percentage
incorporation of ordinary
shares held
Polar Capital China Stars Fund Ireland 4 Georges Court, UCITS sub-fund 67%
54-62 Townsend Street,
Dublin, Ireland
Polar Capital China Mercury Fund Cayman Islands PO Box 309 Ugland House Alternative Fund 65%
Grand Cayman KY1-1104
Cayman Islands
Polar Capital Emerging Market Stars Fund USA 50 S.LaSallee Street, Mutual Fund 98%
Chicago, USA
Polar Capital Smart Mobility Fund Ireland 4 Georges Court, UCITS sub-fund 50%
54-62 Townsend Street,
Dublin, Ireland
Phaeacian Partners Holdings LP USA 1209 Orange Street, Investment 55%
Wilmington, USA management
Phaeacian Partners LLC USA 1209 Orange Street, Investment 55%
Wilmington, USA management
9. Financial Instruments
The fair value of financial instruments that are traded in active markets at
each reporting date is determined by reference to quoted market prices or
dealer price quotation (bid price for long positions and ask price for short
positions), without any deduction for transaction costs. For financial
instruments not traded in an active market, such as forward exchange
contracts, the fair value is determined using appropriate valuation techniques
that take into account the terms and conditions of the contracts and utilise
observable market data, such as spot and forward rates, as inputs.
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities.
Level 2: other techniques for which all inputs which have a significant effect
on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the
recorded fair value that are not based on observable market data.
At the end of both the current year as well as the comparative period, all
financial instruments at fair value through profit or loss held by the Group
were Level 1 except for:
• forward foreign exchange contracts classified as Level 2. These
were fair valued using valuation techniques that incorporate foreign exchange
spot and forward rates.
• deferred consideration payable and other financial liability are
classified as Level 3. These were fair valued using discounted cash flow
models that incorporate unobservable inputs.
The fair value hierarchy of financial assets and liabilities which are carried
at fair value at the year-end is as follows:
2022 2021
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Financial assets
Assets at FVTPL 77,783 - - 77,783 57,151 - - 57,151
Other financial assets 2,695 - - 2,695 - 84 - 84
80,478 - - 80,478 57,151 84 - 57,235
Financial liabilities
Liabilities at FVTPL 9,805 - 855 10,660 6,328 - 14,054 20,382
Other financial liabilities - 20 - 20 4,069 - - 4,069
9,805 20 855 10,680 10,397 - 14,054 24,451
Movement in liabilities at FVTPL categorised as Level 3 during the year were:
31 March 2022 31 March 2021
£'000 £'000
At 1 April 14,054 -
Additions - 15,014
Repayment (9,416) (517)
Net gain recognised in the statement of profit or loss (3,783) (443)
At 31 March 855 14,054
The fair value of financial instruments not held at fair value approximates to
their carrying value as at reporting date. During the reporting year there
were no transfers between levels in fair value measurements.
10. Financial liabilities at fair value through profit or loss
31 March 2022 31 March 2021
£'000 £'000
Current:
Securities - short positions 407 571
Third-party interests in consolidated funds 9,398 5,727
Deferred consideration 125 8,910
Other financial liability 93 886
10,023 16,124
Non-current
Other financial liability 637 -
Deferred consideration - 4,258
Liabilities at fair value through profit or loss 10,660 20,382
Deferred consideration payable with respect to the acquisition of Dalton
Capital (Holdings) Limited is nil at 31 March 2022 (2021: £7.1m). The
deferred consideration was settled on 28 February 2022 for an amount of £8.1m
resulting in an additional charge of £1.0m recognised in the statement of
profit or loss.
The deferred consideration amount relating to the asset acquisition from First
Pacific Advisors LP in 2021 was £0.1m at 31 March 2022 (2021: £6.1m). The
movement represents a payment of £1.2m to First Pacific Advisors LP and an
unrealised gain of £4.8m on derecognition of the remaining liability was
recognised in the statement of profit or loss.
11. Notes to the Cash Flow Statement
A reconciliation of profit before taxation to cash generated from operations
is as follows:
31 March 2022 31 March 2021
£'000 £'000
Profit on ordinary activities before taxation 62,090 75,915
Interest receivable and similar income (60) (53)
Investment income (247) (239)
Interest on lease 95 107
Depreciation of non-current property and equipment 1,404 1,399
Revaluation of liability at FVTPL - (443)
Amortisation and impairment of intangible assets 7,860 419
Decrease/(increase) in assets at FVTPL 7,710 (14,270)
(Decrease)/increase in other financial liabilities (10,402) 5,109
Increase in receivables (1,506) (9,109)
Increase in trade and other payables 8,421 26,491
Share-based payment 7,351 5,625
Increase in liabilities at FVTPL(1) (3,931) (6,134)
Release of fund units held against deferred remuneration 6,538 5,633
Other non-cash item - 404
Cash generated from operations 85,323 90,854
1. The movement includes those arising from acquiring and/or losing control of
consolidated seed funds.
12. Contingent liabilities
In the normal course of the Group's business, it may be subject to legal and
regulatory proceedings arising out of current and past operations, which in
some cases may result in contingent liabilities.
No such proceedings or related claims have been issued as at 31 March 2022.
As disclosed in these financial statements, the Phaeacian Accent
International Value and Phaeacian Global Value funds were closed by the Board
of the funds in May 2022. Post year end, the Group has initiated legal action
against counterparties involved in the Phaeacian transaction. This action
remains at a relatively early stage and while it is not possible to predict
the outcome, the Group believes that it has a valid basis, and it intends to
pursue such action robustly.
It is possible that one or more of these parties might issue counterclaims
against the Group but no such claims have been issued at the date of approving
these financial statements. As a result, it is not possible to estimate the
potential outcome of any such claims or to assess the quantum of any liability
with any certainty at this stage.
13. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties of the Company, have been eliminated on consolidation and are not
included in this Note.
14. Events after the reporting date
In April 2022, the Board of the Phaeacian mutual funds determined that it was
in the best interests of the investors for the Phaeacian Accent International
Value Fund and the Phaeacian Global Value Fund to be closed down.
Therefore, as an adjusting event after the reporting date, the related
intangible asset (see Note 7) and the corresponding deferred liability (See
Note 10) have been derecognised.
15. Status of results announcement
The Board of Directors approved this results announcement on 24 June 2022.
Whilst the financial information included in this announcement has been
prepared in accordance with UK-adopted international accounting standards,
this announcement does not itself contain sufficient information to comply
with all the disclosure requirements of UK-adopted international accounting
standards and does not constitute statutory accounts of the Group for the
years ended 31 March 2022 or 31 March 2021.
Neither the contents of the Company's website nor the contents of any website
accessible from the hyperlinks on the Company's website (or any other website)
is incorporated into or forms part of this announcement.
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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://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 (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EAFKKADPAEAARecent news on Polar Capital Holdings
See all newsREG - Polar Capital Hldgs - Transaction in Own Shares
AnnouncementREG - Polar Capital Hldgs - Transaction in Own Shares
AnnouncementREG - Polar Capital Hldgs - Director/PDMR Shareholding
AnnouncementREG - Polar Capital Hldgs - Total Voting Rights
AnnouncementREG - Polar Capital Hldgs - Transaction in Own Shares
Announcement