REG - Polar Capital Hldgs - Polar Capital Holdings Unaudited interim results
20/11/2023 07:00
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RNS Number : 8992T Polar Capital Holdings PLC 20 November 2023
Polar Capital Holdings plc ("Polar Capital" or "the Group")
Unaudited interim results for six months ended 30 September 2023
"Strong pipeline of interest in our diversified thematic strategies, improving
fund performance and balance sheet strength support a maintained first interim
dividend" Gavin Rochussen, CEO
Highlights
· Assets under Management ("AuM") at 30 September 2023 £19.1bn (31
March 2023: £19.2bn) and at 10 November 2023 £18.9bn.
· Net outflows of £581m, a material decrease of £264m vs the prior
comparable period, aided by inflows into a number of funds.
· Core operating profit(†) £22.5m (30 September 2022: £25.8m)
· Profit before tax £21.1m (30 September 2022: £23.0m)
· Basic earnings per share 16.2p (30 September 2022: 17.7p) and
adjusted diluted total earnings per share(†) 17.2p (30 September 2022:
19.0p)
· Interim dividend per ordinary share of 14.0p (January 2023: 14.0p)
declared to be paid in January 2024. The dividend payment date is 12 January
2024, with an ex-dividend date of 14 December 2023 and a record date of 15
December 2023.
† The non-GAAP alternative performance measures shown here are described and
reconciled to IFRS measures on the Alternative Performance Measures (APM) page
This RNS does not constitute an offer or recommendation to invest in any
of the funds referenced within.
Gavin Rochussen, Chief Executive Officer, commented:
"The past six months have been a challenging period for equity markets driven
by a volatile macro environment. Like many of our peers, Polar Capital has not
been immune from these challenges, but net outflows as a percentage of opening
AuM have been relatively modest, and in fact, have materially slowed vs the
prior comparable period. This was helped by net inflows into a number of
funds, namely our Polar Capital Emerging Market Stars Fund, Polar Capital
European ex-UK income Fund, Polar Capital Japan Value Fund and Polar Capital
Smart Energy Fund.
"Long-term performance remains positive across the UCITs fund range with all
funds bar one in the 1(st) or 2(nd) quartile of their Lipper peer group since
inception. More recently, 77% of Polar Capital's total AuM is in the top two
quartiles of the Lipper peer group calendar year-to-date.
"As a result, and helped by a strong year for technology stocks, assets under
management ended the reporting period at £19.1bn, representing a modest
decrease from the year end.
"As an investment led, specialist boutique, the quality of our product range
remains central to our efforts to grow the business and a number of our funds
have seen renewed interest of late. For example, the well documented
breakthrough in artificial intelligence has seen an increased interest in the
Polar Capital Artificial Intelligence Fund. It had its six-year anniversary in
October 2023 and is 3(rd) percentile against Lipper peers over one year, 5(th)
percentile over five years and 4(th) percentile since inception.
"Similarly, the Polar Capital Global Insurance Fund has seen renewed interest
given its defensive characteristics. It recently passed its 25-year
anniversary and since launch it has delivered strong and consistent annualised
returns to investors of circa 10% pa (Source: Polar Capital, 30 September
2023. R GBP Acc share class with reinvestment of dividends and capital gain
distributions, in Pounds Sterling).
"In the six months, the largest beneficiary of net inflows was our Emerging
Market Stars fund range, which garnered a combined total of £244m of net
inflows, despite the tough backdrop and muted investor demand for the asset
class.
The Emerging Markets and Asia Stars team now collectively manage £1.5bn and
there has been continued progress in the US with US domiciled fund vehicles
surpassing £125m.
"The Smart funds managed by the Sustainable Thematic team have now reached AuM
of £280m.
"The Nordic region has continued to grow through additional flows into the
Polar Capital Emerging Market Stars Fund and there is emerging interest in the
Polar Capital Smart Energy and Smart Mobility funds.
"Pleasingly, Polar Capital won the 2023 European Asset Management Firm of the
Year (€20bn-€100bn) award at the Funds Europe 2023 awards, which is
testament to the quality of our offering.
"We continue to invest in our digital marketing reach and have intensified our
client contact interactions to utilise our significant remaining fund
capacity. This, given our differentiated range of sector, thematic and
regional fund strategies, gives us confidence that we will perform for our
clients and shareholders over the long term."
For further information please contact:
Polar Capital
+44 (0)20 7227 2700
Gavin Rochussen (Chief Executive)
Samir Ayub (Finance Director)
Numis Securities- Nomad and Joint Broker
+44 (0)20 7260 1000
Giles Rolls
Charles Farquhar
Stephen Westgate
Peel Hunt - Joint
Broker
+44 (0)20 3597 8680
Andrew Buchanan
John Welch
Sam Milford
Camarco
+44 (0)20 3757 4995
Ed Gascoigne-Pees
Jennifer Renwick
Phoebe Pugh
Assets Under Management
AuM split by type
30 September 2023 31 March 2023
£bn % £bn %
Open ended funds 14.1 74% Open ended funds 14.3 75%
Investment trusts 4.1 21% Investment trusts 3.9 20%
Segregated mandates 0.9 5% Segregated mandates 1.0 5%
Total 19.1 Total 19.2
AuM split by strategy
Ordered according to launch date
30 September 2023 31 March 2023
£bn % £bn %
Technology 7.5 39% Technology 7.2 38%
European Long/Short 0.1 0.5% European Long/Short 0.1 0.5%
Healthcare 3.6 19% Healthcare 3.8 20%
Global Insurance 2.0 10% Global Insurance 2.1 11%
Financials 0.6 3% Financials 0.5 2%
Convertibles 0.5 2.5% Convertibles 0.7 4%
North America 0.6 3% North America 0.6 3%
Japan Value 0.2 1% Japan Value 0.2 1%
European Income 0.3 2% European Income 0.2 1%
UK Value 1.1 6% UK Value 1.2 6%
Emerging Markets and Asia 1.5 8% Emerging Markets and Asia 1.3 7%
European Opportunities 0.8 4% European Opportunities 1.0 5%
European Absolute Return* - - European Absolute Return* 0.1 0.5%
Sustainable Thematic Equities 0.3 2% Sustainable Thematic Equities 0.2 1%
Total 19.1 100% Total 19.2 100%
* The Melchior European Absolute Return Fund was closed down in May 2023.
Chief Executive's Report
Market Overview
The first half of Polar Capital's financial year ended on a weak note in
global bond and equity markets, with a sell-off during the month of September
2023. Up to that point, bonds and equities had been moving in opposite
directions, with bonds weakening while equity markets, and the US market in
particular, made progress.
Bond markets are experiencing another difficult year. Central banks remain in
inflation-fighting mode, which has meant that official rates have remained
higher. Longer term US bond yields have also moved up, driven by an increase
in real interest rates, and by a deterioration in the supply-demand balance as
issuance continues while the pace of central bank bond buying declines.
The positive tone in equity markets has surprised many investors this year.
Higher interest rates have not yet led to the widely predicted recession, so
corporate earnings have in aggregate remained reasonably strong. At the same
time, innovation has led to positive outcomes in the technology and healthcare
sectors. In technology, the rapid development and commercialisation of machine
learning algorithms and large language models has led to strong profit growth
and, in turn, high expectations. In healthcare, the positive clinical results
and wide-ranging potential of the GLP-1, class of diabetes drugs, have been
similarly well received by investors.
In both areas, the gains have accrued to a small number of companies. The side
effect of success in these particular areas is that the big have become
bigger, and equity market indices have become more top heavy. Over the long
term, the market will naturally challenge established oligopolies, and any
valuation excesses will be unwound if underlying cash flow growth does not
match expectations.
These areas of success also led to outperformance in the first half of 2023 in
growth styles versus value, which is atypical in periods of rising interest
rates. More recently, this pattern has started to reverse.
Fund Performance
In equity markets, the US market and the tech sector in particular, have been
the standout positive performers. At the other end of the spectrum, Emerging
Markets currently sit close to a 20-year performance low point relative to the
US. Slowing growth in China, and the de-rating of the Chinese equity market,
plays a role here.
A further side effect of the success of tech companies which are Artificial
Intelligence beneficiaries, and of healthcare stocks which stand to gain from
GLP-1 medications, is that larger companies have tended to outperform smaller
ones. This has been a headwind for Polar Capital. Many of our investment teams
have derived long term success from investing outside the larger, better-known
areas of their respective markets, and many clients have supported this
approach, as they often own the larger companies directly.
So far this year, the dominance of the largest companies accounts for the
underperformance of the Polar Capital Global Technology Fund and the Polar
Capital Technology Trust, the Polar Capital Healthcare Opportunities Fund, as
well as the underperformance of the Melchior European Opportunities Fund.
These strategies have good long term track records, but the recent past has
been more challenging.
As the dominance of growth styles has started to wane, we have seen a recovery
in the relative performance of the Group's more value-driven strategies such
as the Polar Capital European ex-UK Income Fund, which is 277 bps ahead of
benchmark in the six months to end September 2023, the Polar Capital Japan
Value Fund, which is 171 bps ahead, and the Polar Capital North American Fund,
which is 107 bps ahead. The Polar Capital Global Insurance Fund is also ahead
of its benchmark over this period.
The Polar Capital Global Insurance Fund has celebrated its 25-year
anniversary. Since launch it has delivered strong and consistent annualised
returns to investors of circa 10% pa, by investing for the long-term in a
concentrated portfolio of best-in-class non-life insurers. Insurance sector
performance is typically counter cyclical, offering investors genuine
diversification with unique drivers. This Fund is ranked in the 2(nd) quartile
in the Lipper peer group over three years, 1(st) quartile over five years and
is ranked at the 4(th) percentile since inception.
The last three months have seen falling share prices across the alternative
energy sector as political commitments to decarbonization have wavered, and as
high interest rates have undermined valuation. Polar Capital's Smart Energy
strategies have held their own versus benchmark so far, this financial year.
The rotation away from anything connected to the renewable energy or electric
vehicle supply chain has, however, been a short-term headwind for Polar
Capital's Emerging Market strategies, leading to underperformance in the first
six months of the financial year. With the long-term need for alternative
sources of energy as pressing as ever, we believe that this will be an
important investment theme in the years to come.
Across the Polar Capital UCITS fund range, performance against the Lipper peer
group funds remains strong over all time periods, albeit less strong over
three years. The Polar Capital Global Technology Fund had a challenging year
in 2021 but has improved relative to peers subsequently. Calendar
year-to-date, against the Lipper peer group, the Polar Capital Technology Fund
is 14(th) percentile and at the 22(nd) percentile since inception.
The Polar Capital Artificial Intelligence Fund which had its six-year
anniversary in October 2023 is 3(rd) percentile against Lipper peers over one
year, 5(th) percentile over five years and 4(th) percentile since inception.
Calendar year-to-date, 77% of Polar Capital's total AuM is in the top two
quartiles of the Lipper peer group, 73% over one year, 48% over three years,
84% over five years and 93% since inception of respective funds.
Relative to respective benchmarks, 41% of AuM is on or ahead of benchmark
calendar year-to-date and 64% of AuM is on or ahead of benchmark since
inception.
AuM and Fund Flows
The latest Broadridge Fund Data indicate that in the period April to August
2023 across Europe and the UK, equity funds have been in outflow and in August
bonds were also in outflow. This has been a challenging environment for the
industry.
In the six months to 30 September 2023, AuM declined from £19.2bn to
£19.1bn, a decrease of less than 1.0% over the period. The £85m decline in
AuM comprised net redemptions of £581m, plus outflows from fund closures of
£50m, which were offset by an increase of £546m related to market movement
and fund performance.
In the six months, the largest beneficiary of net inflows was our Emerging
Market Stars fund range, which garnered a combined total of £244m of net
inflows, despite the tough backdrop and muted investor demand for the asset
class.
On the back of continued strong fund performance, the Polar Capital European
ex-UK Income Fund had net inflows of £95m.
The Polar Capital Smart Energy and Smart Mobility Funds had combined net
inflows of £60m. They marked their second anniversary on 30 September 2023
and investor interest in the strategies continues to build.
Within the healthcare suite of funds, the large cap focused, Polar Capital
Healthcare Blue Chip Fund benefited from net inflows of £50m.
The Polar Capital Japan Value Fund saw a return to net inflows, reflecting
strong market returns and improving investor sentiment, as did the Artificial
Intelligence Fund, as investor interest in this rapidly evolving space
ignited.
More broadly during the period, we saw the return of inflation and rapid
interest rate rises around the world result in general investor risk aversion,
characterised by a flight to fixed income and cash. Consequently, numerous of
our funds experienced net outflows during the period under review.
Marked negative investor sentiment towards UK and European equities led to
redemptions from the Melchior European Opportunities Fund of £181m and from
the Polar Capital UK Value Opportunities Funds of £46m.
While the overall rate of outflows from our technology strategies declined
quarter on quarter, net outflows from the open-ended Polar Capital Technology
Fund were £181m and share buy backs by the Polar Capital Technology
Investment Trust amounted to £65m over the period.
The Polar Capital Global Convertible Bond Fund experienced outflows of £149m,
as some income investors sought yield from alternative, lower risk asset
classes. The Polar Capital Global Insurance Fund suffered net outflows of
£152m, as two long-standing shareholders decided to take profits following
the strong performance of the Fund in calendar year 2022.
Other funds experiencing outflows in the period included the Polar Capital
North American Fund, the Polar Capital Healthcare Opportunities Fund, and to a
lesser extent Polar Capital Global Absolute Return, Biotechnology and
Healthcare Discovery Funds.
Notwithstanding net outflows in October amounting to £390m, which can mainly
be attributed to redemptions by two clients from Biotechnology and UK Value
Opportunities funds, AuM at 10 November was £18.9bn.
Financial Results
Average AuM over the six months to 30 September 2023 increased by 2% from
£19.1bn to £19.4bn. However, relative to the comparable six-month period to
30 September 2022 average AuM declined by 3% from £20.0bn to £19.4bn. The
decrease in average AuM resulted in net management fees(†) decreasing by 4%
to £76.5m from £80.0m in the comparable prior six-month period. Management
fee yield margin(†) declined, as anticipated, by 1bp to 79bps over the
period compared to the comparable prior half year period.
Total operating costs were 1% lower at £55.0m compared to the comparable
prior half year.
Core operating profit(†) was down 13% to £22.5m compared to the comparable
prior half year and up 2% from £22.1m in the immediately preceding six-month
period to 31 March 2023.
Profit before tax decreased by 8% to £21.1m compared to the comparable prior
half year. Basic EPS decreased by 8% compared to the half year period to 30
September 2022. Adjusted diluted core EPS(†) of 17.3p is a 14% decrease
over the comparable prior half year period to 30 September 2022.
Six months to Six months to Six months to
30 September 2023 31 March 30 September 2022
£'m 2023 £'m
£'m
Average AuM (£'bn) 19.4 19.1 20.0
Net management fees(†) 76.5 74.8 80.0
Core operating profit(†) 22.5 22.1 25.8
Performance fee profit(†) - 1.7 -
Other income* (0.5) 3.6 (1.5)
Share-based payments on preference shares (0.3) (0.2) (0.1)
Exceptional items (0.6) (5.0) (1.2)
Profit before tax 21.1 22.2 23.0
Basic EPS 16.2p 19.1p 17.7p
Adjusted diluted total earnings per share(†) 17.2p 25.3p 19.0p
Adjusted diluted core EPS(†) 17.3p 19.6p 20.1p
† The non-GAAP alternative
performance measures shown here are described and reconciled in the APM
section below.
* A reconciliation to reported results
is given in the APM section below.
The Board has declared an interim dividend of 14.0p to be paid in January 2024
(January 2023: 14.0p). Maintaining last year's first interim dividend of
14.0p represents a covered dividend that is 81% of first half adjusted diluted
core EPS and reflects our confidence in the business and the strength of our
balance sheet.
Strategic progress and thanks
We have continued to make steady progress in diversifying the fund range and
diversifying distribution both regionally and by channel.
The Smart funds managed by the Sustainable Thematic team have now reached AuM
of £280m. The Emerging Markets and Asia Stars team now collectively manage
£1.5bn and there has been continued progress in the US with US domiciled fund
vehicles surpassing £125m.
Further progress has been made in developing distribution channels in Asia and
the Nordic regions and following the opening of offices in Singapore last
year, an office was opened in Stockholm during the period. The Nordic region
has continued to grow through additional flows into the Polar Capital Emerging
Market Stars funds and there is emerging interest in the Polar Capital Smart
Energy and Smart Mobility funds.
Polar Capital and its funds continued to be nominated for a number of awards.
The Convertible Bond Absolute Return Fund was 'highly commended' in the
Absolute Return Category of the Investment Week Awards. Polar Capital
Technology Trust won the Best Report & Accounts at the AIC Awards. Polar
Capital Technology Trust won the 'Best Technology/Biotech - Active' category
in the A J Bell Awards.
Polar Capital won the 2023 European Asset Management Firm of the Year
(€20bn-€100bn) award at the Funds Europe 2023 awards and is currently
shortlisted for the following awards: ESG Investment Leaders Awards 2023, Most
Effective Brand Strategy - Small Company at the Financial Services Forum
Awards, Emerging Markets Manager of the Year at the FN Fund Management Awards,
ESG Investing Awards 2023 in both the Emerging Markets and Energy Transition
categories. The Emerging Markets Stars team is shortlisted for EM Manager of
the Year at the Wealth & Asset Management Awards. All three Investment
Trusts, Polar Capital Technology Trust, Polar Capital Global Healthcare Trust
and Polar Capital Financials Trust, have been shortlisted at the Investment
Week Investment Company of the Year Awards.
We are immensely grateful for hard work and commitment from our staff and
partners over what has been a challenging period for equity asset managers. We
are also grateful for and appreciate the ongoing support from our loyal and
supportive clients and shareholders.
Outlook
The last six months has continued to be challenging as the rate of inflation,
while peaking in some regions, remains stubbornly high in others. A higher
interest rate environment and increased geopolitical tension not only in
Ukraine, but also more recently in the Middle East, has meant investors have
taken a cautious 'risk off' stance resulting in outflows across all asset
classes.
Notwithstanding a challenging investment backdrop, our capacity constrained
funds have performed well over the long term. The total capacity across all 13
of our teams is currently £63bn which allows significant headroom for net
inflows when market sentiment improves.
We continue to invest in our digital marketing reach and have intensified our
client contact interactions to utilise our significant remaining fund
capacity. This, given our differentiated range of sector, thematic and
regional fund strategies, gives us confidence that we will perform for our
clients and shareholders over the long term.
Gavin Rochussen
Chief Executive
17 November 2023
Alternate Performance Measures (APMs)
The Group uses the non-GAAP APMs listed below to provide users of the Interim
Report 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 revenue 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 APM reconciliation 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 APM reconciliation 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 profit margin Core operating profit divided by Chief Executive's report 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 revenue less commissions and fees payable. Chief Executive's report 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 revenue divided by average AuM. Chief Executive's report 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
interim reported results
The summary below reconciles key APMs the Group measures to its interim
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.
2023 Interim Reported Reclassification 2023 2022
Results on consolidation Interim Interim Non-GAAP results
£'m of seed Reclassification Non-GAAP £'m
investments of costs results APMs
£'m £'m £'m
Investment management and research fees 86.9 - - 86.9 90.9
Commissions and fees payable (10.4) - - (10.4) (10.9)
76.5 - - 76.5 80.0 Net management fees
Operating costs (55.0) 0.2 21.8 (33.0) (31.3)
Finance costs (0.1) - - (0.1) -
- - (20.9) (20.9) (22.9) Core distributions
21.4 0.2 0.9 22.5 25.8 Core operating profits
Investment performance fees - - - - -
- - - - - Performance fee interests
- - - - - Performance fee profits
Other income (0.3) (0.2) - (0.5) (1.5)
Share-based payments on preference shares - - (0.3) (0.3) (0.1)
Exceptional items - - (0.6) (0.6) (1.2)
Profit before tax for the period 21.1 - - 21.1 23.0
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:
Earnings per share (Unaudited) (Unaudited)
30 September 2023 30 September 2022
Pence Pence
Diluted earnings per share 16.0 17.4
Impact of share-based payments - preference shares only 0.3 0.1
Impact of exceptional items 0.6 1.2
Impact of deferment, where IFRS defers cost into future periods 0.3 0.3
Adjusted diluted total EPS 17.2 19.0
Add back other income (post-tax) 0.1 1.1
Adjusted diluted core EPS 17.3 20.1
Exceptional items
Exceptional items for the period to 30 September 2023 include amortisation of
the acquired intangible asset as part of Dalton acquisition (2022: Exceptional
items include non-recurring termination and reorganisation costs related to
the closure of Phaeacian mutual funds which were closed down in May 2022).
A breakdown of exceptional items is as follows:
Exceptional items (Unaudited) (Unaudited)
30 September 30 September
2023 2022
£'m £'m
Recorded in operating costs
Termination and reorganisation costs - 0.6
Amortisation of intangible asset 0.6 0.6
Net exceptional items recorded in the consolidated statement of profit or loss 0.6 1.2
Interim Consolidated Statement of Profit or Loss
For the six months to 30 September 2023
(Unaudited) (Unaudited)
Six months to 30 September 2023 Six months to 30 September 2022
£'000 £'000
Revenue 86,891 90,936
Other income (271) (1,221)
Gross income 86,620 89,715
Commissions and fees payable (10,435) (10,955)
Net income 76,185 78,760
Operating costs (55,020) (55,758)
Finance costs (108) -
Profit for the period before tax 21,057 23,002
Taxation (5,423) (5,914)
Profit for the period attributable to ordinary shareholders 15,634 17,088
Earnings per share
Basic 16.2p 17.7p
Diluted 16.0p 17.4p
Adjusted basic (Non-GAAP measure) 17.4p 19.3p
Adjusted diluted (Non-GAAP measure) 17.2p 19.0p
Interim Consolidated Statement of Other Comprehensive Income
For the six months to 30 September 2023
(Unaudited) (Unaudited)
Six months to 30 September 2023 Six months to 30 September 2022
£'000 £'000
Profit for the period attributable to ordinary shareholders 15,634 17,088
Other comprehensive income - items that will be reclassified to profit or loss
in subsequent periods:
Exchange differences on translation of foreign operations (163) 2,267
Other comprehensive (loss)/income for the period (163) 2,267
Total comprehensive income for the period, net of tax, attributable to 15,471 19,355
ordinary shareholders
All of the items in the above statements are derived from continuing
operations.
Interim Consolidated Balance Sheet
As at 30 September 2023
(Unaudited) (Audited)
30 September 2023 31 March
£'000 2023
£'000
Non-current assets
Goodwill and intangible 15,356 15,937
assets
Property and equipment 9,451 10,534
Deferred tax assets 1,009 106
25,816 26,577
Current assets
Assets at fair value through profit or loss 70,471 83,048
Trade and other receivables 22,700 19,523
Other financial assets 4,667 5,237
Cash and cash equivalents 72,785 106,976
Current tax assets 610 319
171,233 215,103
Total assets 197,049 241,680
Non-current liabilities
Provisions and other liabilities 7,921 8,900
Liabilities at fair value through profit or loss 286 462
Deferred tax liabilities - 518
8,207 9,880
Current liabilities
Liabilities at fair value through profit or loss 8,163 16,369
Trade and other payables 55,266 68,651
Provisions 332 3,203
Other financial liabilities - 10
Current tax liabilities 2,004 712
65,765 88,945
Total liabilities 73,972 98,825
Net assets 123,077 142,855
Capital and reserves
Issued share capital 2,530 2,520
Share premium 19,364 19,364
Investment in own shares (33,286) (31,623)
Capital and other reserves 12,188 12,299
Retained earnings 122,281 140,295
Total equity attributable to ordinary shareholders 123,077 142,855
Interim Consolidated Statement of Changes in Equity
For the six months to 30 September 2023
Share premium £'000 Investment Capital reserves £'000 Other reserves £'000 Retained earnings £'000 Total equity £'000
Issued in own shares
share capital £'000 £'000
As at 1 April 2023 (audited) 2,520 19,364 (31,623) 695 11,604 140,295 142,855
Profit for the period - - - - - 15,634 15,634
Other comprehensive income - - - - (163) - (163)
Total comprehensive income - - - - (163) 15,634 15,471
Dividends paid to shareholders - - - - - (30,865) (30,865)
Issue of shares 10 - - - - (10) -
Own shares acquired - - (7,588) - - - (7,588)
Release of own shares - - 5,925 - - (5,190) 735
Share-based payment - - - - - 2,417 2,417
Current tax in respect of employee share options 18 18
- - - - -
Deferred tax in respect of employee share options 34 34
- - - - -
As at 30 September 2023 (unaudited) 2,530 19,364 (33,286) 695 11,493 122,281 123,077
As at 1 April 2022 (audited) 2,506 19,364 (24,915) 695 11,722 146,875 156,247
Profit for the period - - - - - 17,088 17,088
Other comprehensive income - - - - 2,267 - 2,267
Total comprehensive income - - - - 2,267 17,088 19,355
Dividends paid to shareholders - - - - - (30,911) (30,911)
Issue of shares 14 - - - - (14) -
Own shares acquired - - (6,734) - - - (6,734)
Release of own shares - - 2,991 - - (1,736) 1,255
Share-based payment - - - - - 2,717 2,717
Current tax in respect of employee share options (3) (3)
- - - - -
Deferred tax in respect of employee share options (606) (606)
- - - - -
As at 30 September 2022 (unaudited) 2,520 19,364 (28,658) 695 13,380 134,019 141,320
Interim Consolidated Cash Flow Statement
For the six months to 30 September 2023
(Unaudited) (Unaudited)
Six months to 30 September Six months to 30 September
2023 2022
£'000 £'000
Operating activities
Cash flow generated from operations 7,449 10,405
Tax paid (5,853) (1,081)
Interest received 1,104 214
Interest on lease - (37)
Net cash inflow from operating activities 2,700 9,501
Investing activities
Investment income 350 502
Sale of assets at fair value through profit or loss 28,971 17,850
Purchase of assets at fair value through profit or loss (20,341) (33,733)
Net cashflow from deconsolidation of seed investment - (6,080)
Purchase of property and equipment (149) (143)
Net cash inflow/(outflow) from investing activities 8,831 (21,604)
Financing activities
Dividends paid to shareholders (30,865) (30,911)
Lease payments (697) (653)
Interest on lease (108) -
Purchase of own shares (7,588) (6,734)
Third-party subscriptions into consolidated funds 3,725 12,055
Third-party redemptions from consolidated funds (10,163) (1,223)
Net cash outflow from financing activities (45,696) (27,466)
Net decrease in cash and cash equivalents (34,165) (39,569)
Cash and cash equivalents at start of period 106,976 121,128
Effect of exchange rate changes on cash and cash equivalents (26) 905
Cash and cash equivalents at end of period 72,785 82,464
Notes to the Unaudited Interim Consolidated Financial Statements
For the six months to 30 September 2023
1. General Information, Basis of Preparation and Accounting Policies
1.1 Corporate information
Polar Capital Holdings plc (the 'Company') is a public limited company
incorporated and domiciled in England and Wales whose shares are traded on the
Alternative Investment Market ('AIM') of the London Stock Exchange.
1.2 Basis of Preparation
The unaudited interim condensed consolidated financial statements to 30
September 2023 have been prepared in accordance with IAS 34: Interim Financial
Reporting.
The unaudited interim condensed consolidated financial statements do not
include all the information and disclosures required in annual financial
statements and should be read in conjunction with the Group's annual financial
statements as at 31 March 2023, which have been prepared in accordance with
UK-adopted international accounting standards and in conformity with the
requirements of the Companies Act 2006.
The accounting policies adopted and the estimates and judgements used in the
preparation of the unaudited interim condensed consolidated financial
statements are consistent with the Group's annual financial statements for the
year ended 31 March 2023.
1.3 Group information
The Group is required to consolidate seed capital investments where it is
deemed to control them. The operating subsidiaries and seed capital
investments consolidated at 30 September 2023 are consistent with the annual
report at 31 March 2023 except for the Polar Capital Emerging Market ex-China
Stars Fund (a sub fund of Polar Capital Fund plc) and Polar Capital Emerging
Market ex-China Stars Fund (a US 40-Act mutual fund), which have both been
consolidated effective 30 June 2023.
1.4 Going concern
The Directors have made an assessment of going concern taking into account
both the Group's current results as well as the impact on the Group's outlook.
As part of this assessment the Directors have used a range of information
available to the date of issue of these interim financial statements and
considered the Group budget, longer term financial projections including
stress testing scenarios applied as part of the Group's ICARA, cash flow
forecasts and an analysis of the Group's forecasted liquid assets and its
regulatory capital position.
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 approval of the interim consolidated financial statements. Therefore,
the Directors continue to adopt the going concern basis of accounting in
preparing the interim consolidated financial statements.
2. Revenue
(Unaudited) (Unaudited)
Six months to 30 September 2023 Six months to 30 September 2022
£'000 £'000
Investment management and research fees 86,891 90,936
3. Components of other income and other comprehensive income
(a) Components of other income
(Unaudited) (Unaudited)
Six months to 30 September 2023 Six months to 30 September 2022
£'000 £'000
Interest income on cash and cash equivalents 1,104 214
Net gain on other financial assets/ liabilities - short positions 1,234 7,640
Net loss on other financial assets/ liabilities - forward currency contracts (265) (5,607)
Net loss on financial assets and liabilities at FVTPL (4,603) (6,460)
Investment income 350 502
Other loss - attributed to third party holdings 1,909 2,490
(271) (1,221)
(b) Components of other comprehensive income
(Unaudited) (Unaudited)
Six months to 30 September 2023 Six months to 30 September 2022
£'000 £'000
Exchange differences on translation of foreign operations:
(Losses)/gains arising during the period (163) 2,391
Reclassification adjustments for losses included in the consolidated statement - (124)
of profit or loss
(163) 2,267
4. Operating costs
a) Operating costs include the following items:
(Unaudited) (Unaudited)
Six months to 30 September 2023 Six months to 30 September 2022
£'000 £'000
Staff costs including partnership profit allocations 39,765 42,544
Depreciation 1,232 751
Amortisation of intangible assets 581 581
Auditors' remuneration 228 193
b) Auditors' remuneration:
Audit of Group financial statements 56 63
Local statutory audits of subsidiaries 105 76
Audit-related assurance services 4 3
Other assurance services - internal controls review 63 51
228 193
5. Dividends
(Unaudited) (Unaudited)
Six months to 30 September 2023 Six months to 30 September 2022
£'000 £'000
Dividend paid 30,865 30,911
On 28 July 2023, the Group paid a second interim dividend for 2023 of 32p
(2022: 32p) per ordinary share.
6. 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:
(Unaudited) (Unaudited)
Six months to 30 September 2023 Six months to 30 September 2022
£'000 £'000
Preference shares 370 138
LTIP share awards 860 1,514
Equity incentive shares 304 315
Deferred remuneration plan shares 883 750
2,417 2,717
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.
No conversion of preference shares into Polar Capital Holdings plc equity has
taken place during the period to 30 September 2023 (2022: No conversion).
At 30 September 2023, five sets of preference shares (2022: five 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:
(Unaudited) (Unaudited)
30 September 2023 30 September 2022
Number of shares Number of shares
At 1 April 2,367,680 2,740,604
Conversion/crystallisation - -
Movement during the period (109,970) (404,308)
At 30 September 2,257,710 2,336,296
Number of ordinary shares to be issued against converted preference shares:
(Unaudited) (Unaudited)
30 September 2023 30 September 2022
Number of shares Number of shares
Outstanding at 1 April 810,310 1,352,128
Conversion/crystallisation - -
Issued during the period (405,154) (541,818)
Outstanding at 30 September 405,156 810,310
7. Earnings Per Share
A reconciliation of the figures used in calculating the basic, diluted and
adjusted earnings per share (EPS) figures is as follows:
(Unaudited) (Unaudited)
Six months to Six months to
30 September 2023 30 September 2022
£'000 £'000
Earnings
Profit after tax for purpose of basic and diluted EPS 15,634 17,088
Adjustments (post tax):
Add back cost of share-based payments on preference shares 370 138
Add back exceptional items - termination/ acquisition related costs - 615
Add back exceptional items - amortisation of intangible assets 581 581
Add net amount of deferred staff remuneration 225 250
Profit after tax for purpose of adjusted basic and adjusted diluted total EPS 16,810 18,672
(Unaudited) (Unaudited)
Six months to Six months to
30 September 2023 30 September 2022
Number of shares Number of shares
Weighted average number of shares
Weighted average number of ordinary shares, excluding own shares for purposes 96,569,042 96,661,663
of basic and adjusted basic EPS
Effect of dilutive potential shares - LTIPs, share options and preference 1,274,957 1,372,703
shares crystallised but not yet issued
Weighted average number of ordinary shares, for purpose of diluted and 97,843,999 98,034,366
adjusted diluted total EPS
(Unaudited)
Six months to (Unaudited)
30 September 2023 Six months to
Pence 30 September 2022
Pence
Earnings per share
Basic 16.2 17.7
Diluted 16.0 17.4
Adjusted basic 17.4 19.3
Adjusted diluted 17.2 19.0
8. Goodwill and intangible assets
Goodwill relates to the acquisition of Dalton Capital (Holdings) Limited, the
parent company of Dalton Strategic Partnership LLP, a UK based boutique asset
manager acquired on 26 February 2021. The goodwill is attributable to a single
CGU.
Intangible assets at 30 September 2023 relate to investment management
contracts acquired as part of the business combination with Dalton.
Investment management
contracts
(Unaudited) Goodwill £'000 Total
£'000 £'000
Cost
As at 1 April 2023 6,732 18,647 25,379
Revaluation/ Additions - - -
As at 30 September 2023 6,732 18,647 25,379
Accumulated amortisation and impairment
As at 1 April 2023 - 9,442 9,442
Amortisation for the period - 581 581
Impairment for the period - - -
As at 30 September 2023 - 10,023 10,023
Net book value as at 30 September 2023 6,732 8,624 15,356
Investment management
contracts
Goodwill £'000 Total
(Audited) £'000 £'000
Cost
As at 1 April 2022 6,732 18,647 25,379
As at 31 March 2023 6,732 18,647 25,379
Accumulated amortisation and impairment
As at 1 April 2022 - 8,279 8,279
Amortisation for the year - 1,163 1,163
Impairment for the year - - -
As at 31 March 2023 - 9,442 9,442
Net book value as at 31 March 2023 6,732 9,205 15,937
Amortisation and impairment of intangible assets are treated as exceptional
items.
Goodwill is tested for impairment at least on an annual basis or more
frequently when there are indications that goodwill may be impaired.
The table below shows the carrying amount assigned to each component of the
intangible asset and the remaining amortisation period.
(Unaudited) (Audited)
30 September 31 March
2023 2023
Remaining amortisation Remaining
Carrying value period Carrying value amortisation
£'000 £'000 period
Investment management contracts acquired from Dalton Capital (Holdings) 8,624 7.4 years 9,205 7.9 years
Limited
8,624 9,205
The Group has reviewed the investment management contracts related intangible
assets as at 30 September 2023 and has concluded that there are no indicators
of impairment.
9. Property and equipment
Right-of-use assets Leasehold Improvements £'000 Computer Equipment £'000 Office Furniture £'000
£'000 Total
(Unaudited) £'000
Cost
As at 1 April 2023 18,850 2,456 1,077 505 22,888
Additions - 68 52 29 149
As at 30 September 2023 18,850 2,524 1,129 534 23,037
Accumulated Depreciation
As at 1 April 2023 9,531 1,476 877 470 12,354
Charge for the year 1,009 146 65 12 1,232
As at 30 September 2023 10,540 1,622 942 482 13,586
Net book value as at 30 September 2023
8,310 902 187 52 9,451
Right-of-use assets Leasehold Improvements £'000 Computer Equipment £'000 Office Furniture £'000
£'000 Total
(Audited) £'000
Cost
As at 1 April 2022 10,749 2,086 969 497 14,301
Additions 4,126 370 108 8 4,612
Modification 3,975 - - - 3,975
As at 31 March 2023 18,850 2,456 1,077 505 22,888
Accumulated Depreciation
As at 1 April 2022 7,763 1,256 743 426 10,188
Charge for the year 1,768 220 134 44 2,166
As at 31 March 2023 9,531 1,476 877 470 12,354
Net book value as at 31 March 2023
9,319 980 200 35 10,534
10. Leases
A maturity analysis of the Group's lease liabilities is as follows:
Lease liabilities (Unaudited) (Audited)
30 September 31 March
2023 2023
£'000 £'000
Current 2,026 1,729
Non-current 6,544 7,526
8,570 9,255
The lease liabilities relate to the two leases in respect of the Group's
premises at 16 Palace Street in London, both expiring in January 2028, and the
Group's premises in Zurich, expiring in November 2026. The movement in lease
balances during the period was £0.7m, of which £0.8m were lease payments and
£0.1m was the interest expense (31 March 2023: The movement in lease was
£6.1m, of which £1.6m were lease payments, £0.2m was the interest expense,
£3.5m related to initial recognition of new leases and £4.0m related to
lease modification of the existing lease).
The consolidated statement of profit or loss includes the following amounts
relating to leases recorded within operating costs:
(Unaudited) (Audited)
30 September 2023 31 March
£'000 2023
£'000
Interest expense on lease liabilities 108 175
Depreciation on ROU assets 1,009 1,768
1,117 1,943
There are no lease expenses incurred in relation to low-value assets or
short-term leases.
11. Issued Share Capital
Allotted, called up and fully paid: (Unaudited) (Audited)
30 September 2023 31 March
£'000 2023
£'000
101,195,879 ordinary shares of 2.5p each 2,530 2,520
(31 March 2023: 100,790,725 ordinary shares of 2.5p each)
During the period, Polar Capital Holdings plc has issued 405,154 shares in
connection with previously crystallised manager preference shares.
12. 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.
(Unaudited) (Audited)
30 September 2023 31 March 2023
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 70,471 - - 70,471 83,048 - - 83,048
Other financial assets 4,579 88 - 4,667 5,237 - - 5,237
75,050 88 - 75,138 88,285 - - 88,285
Financial liabilities
Liabilities at FVTPL 8,107 - 342 8,449 16,285 - 546 16,831
Other financial liabilities - - - - - 10 - 10
8,107 - 342 8,449 16,285 10 546 16,841
During the period there were no transfers between levels in fair value
measurements.
Movement in liabilities at FVTPL categorised as Level 3 during the year were:
(Unaudited) (Audited)
30 September 31 March
2023 2023
£'000 £'000
At 1 April 546 855
Repayment (38) (226)
Net gains recognised in the statement of profit or loss (166) (83)
At 30 September 342 546
13. Contingent liability
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.
There are no contingent liabilities to disclose at 30 September 2023 (31 March
2023: nil)
14. Notes to the Cash Flow Statement
Reconciliation of profit before taxation to cash generated from operations
(Unaudited) (Unaudited)
Six months to 30 September 2023 Six months to
£'000 30 September 2022
£'000
Cash flows from operating activities
Profit on ordinary activities before tax 21,057 23,002
Adjustments for:
Interest receivable and similar income (1,104) (214)
Investment income (350) (502)
Interest on lease 108 37
Amortisation of intangible assets 581 581
Depreciation of non-current property and equipment 1,232 751
Decrease in fair value of assets at fair value through profit or loss 4,768 6,552
Increase in other financial assets (553) (8,667)
(Increase)/decrease in receivables (3,176) 4,554
Decrease in trade and other payables including other provisions (16,551) (18,861)
Share-based payments 2,416 2,717
Decrease in liabilities at fair value through profit or loss(1) (1,945) (3,009)
Release of fund units held against deferred remuneration 966 3,464
Cash flow generated from operations 7,449 10,405
1. Movement includes those arising from acquiring and/or losing
control of consolidated seed funds.
2. 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. All related party transactions during the period are
consistent with those disclosed in the Group's annual financial statements for
the year ended 31 March 2023 and have taken place on an arm's length basis.
3. The Publication of Non-Statutory Accounts
The financial information contained in this unaudited interim report for the
period to 30 September 2023 does not constitute statutory accounts as defined
in s434 of the Companies Act 2006. The financial information for the six
months ended 30 September 2023 and 2022 has not been audited. The information
for the year ended 31 March 2023 has been extracted from the latest published
audited accounts, which have been filed with the Registrar of Companies. The
audited accounts filed with the Registrar of Companies contain a report of the
independent auditor dated 23 June 2023. The report of the independent auditor
on those financial statements contained no qualification or statement under
s498 of the Companies Act 2006.
Shareholder Information
Directors
David
Lamb
Non-executive Chairman
Gavin Rochussen Chief
Executive Officer
Samir
Ayub
Finance Director
Alexa Coates
Non-executive Director, Chair of Audit and Risk
Committee
Win Robbins
Non-executive Director, Chair of Remuneration
Committee
Andrew
Ross
Non-executive Director
Laura
Ahto
Non-executive Director
Anand
Aithal
Non-executive Director
Company No.
Registered in England and Wales
4235369
Registered Office
16 Palace Street
London, SW1E 5JD
Tel: 020 7227 2700
Group Company Secretary
Neil Taylor
Dividend
A first interim dividend of 14.0p per share has been declared for the year to
31 March 2024. This will be paid on 12 January 2024 to shareholders on the
register on 15 December 2023. The shares will trade ex-dividend from 14
December 2023.
Remuneration Code
Disclosure of the Group's Remuneration Code is made alongside its MIFIDPRU
public disclosure document and is available on the Company's website.
Half Year Report
Copies of this announcement and of the Half Year report will be available from
the Secretary at the Registered Office, 16 Palace Street, London SW1E 5JD and
from the Company's website at www.polarcapital.co.uk
(http://www.polarcapital.co.uk)
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.
ENDS
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