REG - Polar Capital Hldgs - Unaudited interim results
22/11/2021 07:05
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RNS Number : 0417T Polar Capital Holdings PLC 22 November 2021
Polar Capital Holdings plc ("Polar Capital" or “the Group”)
Unaudited interim results for six months ended 30 September 2021
65% increase in core profits
Highlights
· Assets under Management ("AuM") at 30 September 2021 £23.4bn (31
March 2021: £20.9bn)
· Core operating profit(†) £36.3m (30 September 2020: £22.0m)
· Pre-tax profit £31.7m (30 September 2020: £27.0m)
· Basic earnings per share 26.5p (30 September 2020: 23.4p) and
adjusted diluted total earnings per share(†) 28.1p (30 September 2020:
22.1p)
· Interim dividend per ordinary share of 14.0p (January 2021: 9.0p)
declared to be paid in January 2022(*)
· Shareholders' funds £146.8m (30 September 2020: £114.4m) including
cash and investments of £140.5m (30 September 2020: £111.3m)
† The non-GAAP alternative performance measures shown here are described and
reconciled to IFRS measures on the Alternative Performance Measures (APM) page
* Further details on the timetable for the interim dividend are described on
the shareholder information page
Gavin Rochussen, Chief Executive Officer, commented:
"In the six months to 30 September 2021, AuM increased by £2.5bn from
£20.9bn to £23.4bn, an increase of 12% over the period and since then has
increased to £25.0bn as at 12 November 2021.
"Core operating profit (excluding performance fees, other income and
exceptional items) was up 65% to £36.3m compared to the comparable prior half
year period and up 23% from £29.5m in the immediately preceding six-month
period to 31 March 2021.
"This time last year, Polar Capital established a new Head of Sustainability
role and put in place separate Sustainability and Diversity committees to
increase focus on these areas, in investment and for the Group. Six of Polar
Capital's funds have been classified as Article 8 under the European Union's
SFDR regulations and there is a pipeline of funds aiming to reclassify as
Article 8. The recently launched Smart Energy and Smart Mobility funds are
classified as Article 9 funds.
"There is much greater concern about the impact of climate change, and this
will result in growing demand for greener technologies and the investment
landscape will be shaped by the conversations and outcomes from COP26 held in
Glasgow.
"The launch of the Polar Capital Smart Energy and Smart Mobility Funds in
September 2021 were well received with early flows and demonstrable appetite
from potential investors in these funds.
"Our diverse and differentiated range of sector, thematic and regional fund
strategies and our performance led culture where 74%, 93% and 99% of our AuM
is in the top two quartiles against peers over three years, five years and
since inception respectively together with significant remaining capacity
provides confidence that momentum will continue."
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
Charles Farquhar
Stephen Westgate
Giles Rolls (QE)
Peel Hunt - Joint
Broker
+44 (0)20 3597 8680
Andrew Buchanan
Rishi Shah
Camarco
+44 (0)20 3757 4995
Ed Gascoigne-Pees
Jennifer Renwick
Monique Perks
Phoebe Pugh
Assets Under Management
AuM split by type
30 September 2021 31 March 2021
£bn % £bn %
Open-ended funds 17.8 76% Open-ended funds 16.6 79%
Investment trusts 4.5 19% Investment trusts 3.9 19%
Segregated mandates 1.1 5% Segregated mandates 0.4 2%
Total 23.4 Total 20.9
AuM split by strategy
(Ordered according to launch date)
30 September 2021 31 March 2021
£bn % £bn %
Technology 10.7 46% Technology 10.2 49%
Japan 0.2 0.8% Japan 0.1 0.5%
European Long/Short 0.1 0.4% European Long/Short 0.2 1%
Healthcare 3.8 16% Healthcare 2.9 14%
Financials 0.5 2% Financials 0.3 1%
Insurance 1.7 7% Insurance 1.7 8%
Emerging Markets Income - - Emerging Markets Income 0.1 0.5%
Convertibles 0.8 3% Convertibles 0.8 4%
North America 0.9 4% North America 0.8 4%
European Income 0.1 0.4% European Income 0.2 1%
UK Value 1.7 7% UK Value 1.4 7%
Emerging Markets and Asia 0.9 4% Emerging Markets and Asia 0.4 2%
Phaeacian 0.6 3% Phaeacian 0.5 2%
European Opportunities 1.3 6% European Opportunities 1.1 5%
European Absolute Return 0.1 0.4% European Absolute Return 0.1 0.5%
Melchior Global Equity * - Melchior Global Equity 0.1 0.5%
Sustainable Thematic Equity ** - Sustainable Thematic Equity - -
Total 23.4 Total 20.9
* AuM as at 30 September 2021 was £5m.
** AuM as at 30 September 2021 comprised of seed capital of £7m.
Chief Executive's Report
Market Overview
The six-month period to the end of September 2021 saw a change in investment
environment and market leadership. Growth once again outperformed value, and
the technology sector was one of the best performers, with the materials and
industrials sectors at the bottom of the pack.
( )
US 10-year bond yields and the US 2-10 year yield curve hit a post COVID-19
high on 31 March 2021 and, until recently, had been moving persistently lower
as excitement about economic re-opening began to wane in the face of
continuing COVID-19 outbreaks across the world. This was the opposite of the
prior six-month period; equity markets had rallied strongly from the point in
early November 2020 when the first announcements on effective COVID-19
vaccines were made, and the victorious US Democrats proposed a stimulatory set
of policy initiatives.
News media are giving extensive coverage to supply chain problems and
intermediate goods shortages across the world. At the margin, these trends are
likely to lead companies to carry more inventory, and to shorten supply lines
in the search for resilience.
Talk of higher inflation is widespread, particularly in the UK, where apparent
labour shortages in particular industries are exacerbating goods shortages.
Oil and gas prices have risen rapidly. As ever, the solution has a political
dimension. Europe does not want to concede too much to Russia, which plays a
big role in gas supply.
Despite the possibility that these changes in investment backdrop bring
greater risk, financial markets have so far been reasonably well behaved.
The reason for such a moderate response may be that growth remains strong in
much of the world; output has probably peaked at high levels but should remain
above trend through 2022. Similarly, while central banks are starting to
remove policy support, it is likely to be some time before policy becomes
restrictive.
Equally, governments have little incentive to endanger the nascent recovery by
tightening fiscal policy too rapidly. Paying down large amounts of COVID-19
related debt would be much harder in a lower growth phase.
Data indicates that US consumers have not spent all of the stimulus cheques
which they received. This means that there is still pent-up consumer demand,
but it may be the case that households want to retain a higher level of
savings in these uncertain times.
There is much greater concern about the impact of climate change, and this
will result in growing demand for greener technologies and the investment
landscape will be shaped by the conversations and outcomes from COP26 held in
Glasgow.
Fund Performance
The past 18 months have seen significant variability in equity market
leadership, visible in the performance of value versus growth and quality, of
small companies versus large and, more broadly, of disruptors versus more
established businesses.
The six months to end September 2021 saw the style pendulum swing back from
value to growth, consistent with lower market interest rates. Those Polar
strategies with greater value orientation, such as North America and European
ex UK Income underperformed over the period, although strategies which combine
value and quality, such as UK Value and Phaeacian International Value,
outperformed their benchmarks.
In the growth group, Emerging Market Stars and Asian Stars, both of which
incorporate sustainability as an important part of their process, delivered
outperformance, building on their strong foundations since inception at Polar
in 2018.
Polar Capital's Technology and Healthcare teams have had a tougher time in the
first six months of the financial year. The Global Technology Fund and the
Healthcare Opportunities fund underperformed, in part due to the
outperformance of the very large companies in their respective areas; both
strategies have an all-cap orientation. The Technology team came into 2021
with a cautious view of their sector, due to high valuations; their defensive
tactics, expressed via cash and index puts, have not yet borne fruit as
valuations across the sector have continued to go up.
The small and mid-cap Healthcare Discovery fund, the Healthcare Blue Chip
fund, and the Automation and Artificial Intelligence fund have outperformed
their benchmarks nevertheless.
This time last year, Polar Capital established a new Head of Sustainability
role and put in place separate Sustainability and Diversity committees to
increase focus on these areas, in investment and for the Group. Six of Polar
Capital's funds have been classified as Article 8 under the European Union's
SFDR regulations and there is a pipeline of funds aiming to reclassify as
Article 8. The recently launched Smart Energy and Smart Mobility funds are
classified as Article 9 funds.
As at 29 October 2021, 74% of Polar Capital's UCITS fund AuM is ranked in the
top two quartiles versus peers over three years with 21% ranked in the top
quartile over the same period. Over five years, 74% of AuM is ranked top
quartile and 93% ranked in the top two quartiles versus the Lipper peer group.
Since inception, 84% of AuM is ranked in the top quartile and 99% is ranked in
the top two quartiles.
AuM and Fund Flows
In the six months to 30 September 2021, AuM increased by £2.5bn from £20.9bn
to £23.4bn, an increase of 12% over the period and since then has increased
to £25.0bn as at 12 November 2021. The £2.5bn increase in AuM comprised net
subscriptions of £690m and £1,807m relating to market movement and fund
performance. There were net inflows of £596m into segregated mandates, net
inflows from share issuance of £136m by the investment trusts and net
outflows of £42m from the open-ended funds.
In the six months, the largest beneficiaries of net inflows were the
sustainability oriented Emerging Market Stars Fund with £366m of net inflows
and the Asian Stars Fund which had net inflows of £70m. Within the healthcare
suite of funds, the Biotechnology Fund benefited from net inflows of £199m
and three segregated healthcare mandates were funded with £427m. The Polar
Capital Global Financials Trust had share issuances amounting to £154m while
the Polar Capital Technology Trust had net share buy-backs amounting to £18m.
The Convertibles team attracted £85m of net inflows into their Global
Convertible Fund and Global Absolute Return Fund. The Phaeacian International
Mutual Fund had net inflows of £27m and the Japan Value Fund benefited from
net inflows of £20m reversing a multi-year period of sustained net outflows.
The Technology Fund, which had benefited from inflows in 2020, suffered from
client allocation decreasing away from the technology sector as well as profit
taking by investors following excellent absolute performance over the past
years. Net outflows from the fund, which was soft closed in 2020, were £413m
and the A&AI Fund had outflows, for similar reasons, of £49m. While the
UK Value Opportunities Fund, also soft-closed in 2020, suffered modest net
outflows of £18m in the period, the team benefited from the funding of a
segregated mandate amounting to £169m. Our North American Fund which has
suffered sustained prior periods of net outflows saw this trend reduce and net
outflows in the six-month period were £33m with net inflows in the more
recent months.
Following the retirement of the lead fund manager, the GEM Income Fund was
closed and merged with the Emerging Market Stars Fund resulting in £34m of
net outflows in the period leading up to the merger of the two funds. Other
funds experiencing outflows in the period were the European ex-UK Income Fund,
Global Insurance Fund and Healthcare Opportunities Fund, although outflows
from the latter were more than offset by the funding of segregated healthcare
mandates.
The launch of the Polar Capital Smart Energy and Smart Mobility Funds in
September 2021 were well received with early flows and demonstrable appetite
from potential investors in these funds.
Results
Average AuM over the six months to 30 September 2021 increased by 53% to
£22.5bn from £14.7bn in the comparable prior half year period, while there
has been a 20% rise in average AuM compared to average AuM of £18.7bn for the
immediately preceding six months to 31 March 2021. The increase in average AuM
resulted in net management fees, after commission and rebates payable,
increasing by 50% to £92.9m compared to the comparable six-month period and
rose 15% compared to the immediately preceding six-month period. Management
fee yield margin(†) declined, as anticipated, by 1bp to 83bp compared to
the comparable prior six-month period.
Core operating profit(†) (excluding performance fees, other income and
exceptional items) was up 65% to £36.3m compared to the comparable prior half
year period and up 23% from £29.5m in the immediately preceding six-month
period to 31 March 2021.
Profit before tax increased by 17% to £31.7m compared to the comparable prior
half year period, although it declined compared to the immediately preceding
six-month period which included performance fee profits which crystalise in
the second half of our financial year. Basic EPS has increased by 13% compared
to the half year period to September 2020. Adjusted diluted core
EPS(†) of 28.2p is a 25% increase on the immediately preceding six months
to 31 March 2021 and a 56% increase over the comparable half year period to
September 2020. Adjusted diluted total EPS(†) of 28.1p is a 27% increase
compared to the comparable six-month period to 30 September 2020.
Six months to Six months to Six months to
30 September 2021 31 March 30 September 2020
£ 2021 £
£
Average AuM 22.5bn 18.7bn 14.7bn
Net management fees 92.9m 80.7m 61.8m
Core operating profit(†) 36.3m 29.5m 22.0m
Performance fee profit(†) - 19.5m 0.5m
Other income* (0.3)m 2.5m 4.9m
Share-based payments on preference shares (0.4)m 0.7m (0.4)m
Exceptional items (3.9)m (2.8)m -
Profit before tax 31.7m 48.9m 27.0m
Basic EPS 26.5p 43.8p 23.4p
Adjusted diluted earnings per share(†) 28.1p 22.1p
(non-GAAP measure) 40.1p
Adjusted diluted core EPS(†) 28.2p 22.6p 18.0p
† The non-GAAP alternative
performance measures shown here are described on the APM page.
* A reconciliation to reported results
is given on the APM page.
In accordance with the stated dividend policy, the Board has declared an
interim dividend of 14p to be paid in January 2022 (January 2021: 9p). This
represents a 56% increase in the first interim dividend which aligns with the
increase in adjusted diluted core EPS.
Net inflows have continued in October 2021 and early November 2021 and the
pipeline for the remainder of the financial year is encouraging.
Strategic progress and thanks
The sustainable thematic team joined Polar Capital in September 2021 and the
Polar Capital Smart Energy and Smart Mobility Funds were launched. This
provides additional capacity in appealing equity strategies and will, over
time, further diversify the concentration of our assets under management
across a broader array of teams. There has been considerable progress in the
growth and diversification of our distribution activities and further
investment in our digital marketing efforts. Following the funding of further
segregated institutional mandates in the period, we had in excess of £1bn in
segregated mandates at the period end including a mandate with an Australian
institution marking success in our expansion into the Asia Pacific region.
Continued progress has been made in the area of sustainability both at Polar
Capital corporate level and within our funds. In terms of SFDR, we have two
Article 9 funds, six Article 8 Funds with a pipeline of funds aiming to
reclassify as Article 8.
With the attainment of a highly credible three-year track record since joining
Polar Capital, the AuM in the sustainable Emerging Market Stars suite of fund
strategies now exceeds £1bn and has been instrumental in establishing a
meaningful and valued client base in the Nordic region.
During the period, Polar Capital was recognised as Boutique of the Year in the
Financial News Fund Manager awards.
We are extremely grateful for the support of our clients and the hard work and
commitment of our partners and staff during the period as we continue to
emerge from lockdown into a more normalised working environment.
Outlook
Our diverse and differentiated range of sector, thematic and regional fund
strategies and our performance led culture where 74%, 93% and 99% of our AuM
is in the top two quartiles against peers over three years, five years and
since inception respectively together with significant remaining capacity
provides confidence that momentum will continue.
Gavin Rochussen
Chief Executive
19 November 2021
Alternate Performance Measures (APMs)
APM Definition Reconciliation Reason for use
Core operating profit Profit before performance fee profits, other income, exceptional items and APM reconciliation To present a measure of the Group's profitability excluding performance fee
tax. 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 better understanding of the financial performance of the Group, (b)
of adjusted diluted earnings per share, divided by the weighted average number comparing staff remuneration and profits generated in the same time period
of ordinary shares. (rather than deferring remuneration over a longer vesting period) allows users
of the accounts to gain a better 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 better understanding
of the Group's results and allows users of the accounts to better compare
results across companies to the extent the identification, or not, of
intangible assets affects the relative amortisation costs.
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 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. the core profitability of the Group before performance fee profits, and other
components, which can be volatile and non-recurring.
Net Management fee yield Net management fees 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.
Reclassification
Interim reported on consolidation Interim
Results of seed Reclassification Non-GAAP
£'m investments of costs results
£'m £'m £'m APMs
Investment management and research fees 103.6 - - 103.6
Commissions and fees payable (10.7) - - (10.7)
92.9 - - 92.9
Operating costs (60.5) 0.3 29.0 (31.2)
- - (25.4) (25.4) Core distributions
32.4 0.3 3.6 36.3 Core operating profits
Investment performance fees - - - -
- - - - Performance fee interests
- - - - Performance fee profits
Other income (0.7) (0.3) 0.7 (0.3)
Share-based payments on preference shares - - (0.4) (0.4)
Exceptional items - - (3.9) (3.9)
Profit for the year 31.7 - - 31.7
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
30 September 2021
Pence
Diluted earnings per share 25.3
Impact of share-based payments - preference shares only 0.4
Impact of exceptional items 3.9
Impact of deferment, where IFRS defers cost into future periods (1.5)
Adjusted diluted total EPS 28.1
Performance fee profit and other income 0.1
Adjusted diluted core EPS 28.2
Interim Consolidated Statement of Profit or Loss
For the six months to 30 September 2021
(Unaudited) (Unaudited)
Six months to 30 September 2021 Six months to 30 September 2020
£'000 £'000
Revenue 103,647 68,826
Other income (722) 5,290
Gross income 102,925 74,116
Commissions and fees payable (10,735) (6,055)
Net income 92,190 68,061
Operating costs (60,468) (41,020)
Profit for the period before tax 31,722 27,041
Taxation (6,366) (5,216)
Profit for the period attributable to ordinary shareholders 25,356 21,825
Earnings per share 26.5p 23.4p
Basic
Diluted 25.3p 22.5p
Adjusted basic (Non-GAAP measure) 29.4p 23.0p
Adjusted diluted (Non-GAAP measure) 28.1p 22.1p
Interim Consolidated Statement of Other Comprehensive Income
For the six months to 30 September 2021
(Unaudited) (Unaudited)
Six months to 30 September 2021 Six months to 30 September 2020
£'000 £'000
Profit for the period attributable to ordinary shareholders 25,356 21,825
Other comprehensive income - items that will be reclassified to income
statement in subsequent periods:
Net movement on the fair valuation of cash flow hedges - 1,167
Deferred tax effect - (222)
- 945
Exchange differences on translation of foreign operations 327 (668)
Other comprehensive income for the period 327 277
Total comprehensive income for the period, net of tax, attributable to 25,683 22,102
ordinary shareholders
All of the items in the above statements are derived from continuing
operations.
Interim Consolidated Balance Sheet
As at 30 September 2021
(Unaudited) (Audited)
30 September 2021 31 March
£'000 2021
£'000
Non-current assets
Goodwill and intangible 26,743 24,998
assets
Property and equipment 4,458 5,104
Deferred tax assets 4,598 5,783
35,799 35,885
Current assets
Assets at fair value through profit or loss 71,451 57,151
Trade and other receivables 27,621 23,924
Other financial assets 164 84
Current tax assets 3,136 1,966
Cash and cash equivalents 103,382 136,718
205,754 219,843
Total assets 241,553 255,728
Non-current liabilities
Liabilities at fair value through profit or loss 7,692 4,258
Provisions and other liabilities 3,505 4,123
Deferred tax liabilities 3,896 4,116
15,093 12,497
Current liabilities
Liabilities at fair value through profit or loss 15,076 16,124
Trade and other payables 64,182 71,598
Other financial liabilities 367 4,069
79,625 91,791
Total liabilities 94,718 104,288
Net assets 146,835 151,440
Capital and reserves
Issued share capital 2,502 2,468
Share premium 19,364 19,364
Investment in own shares (21,683) (26,579)
Capital and other reserves 12,451 11,030
Retained earnings 134,201 145,157
Total equity attributable to ordinary shareholders 146,835 151,440
Interim Consolidated Statement of Changes in Equity
For the six months to 30 September 2021
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 2021 (audited) 2,468 19,364 (26,579) 695 10,335 145,157 151,440
Profit for the period - - - - - 25,356 25,356
Other comprehensive income - - - - 327 - 327
Total comprehensive income - - - - 327 25,356 25,683
Dividends paid to shareholders - - - - - (29,836) (29,836)
Issue of shares 34 - - - - (34) -
Own shares acquired - - (7,629) - - - (7,629)
Release of own shares - - 12,525 - - (10,489) 2,036
Share-based payment - - - - - 4,047 4,047
Current tax in respect of employee share options - - - - 2,477 - 2,477
Deferred tax in respect of employee share options - - - - (1,383) - (1,383)
As at 30 September 2021 (unaudited) 2,502 19,364 (21,683) 695 11,756 134,201 146,835
As at 1 April 2020 (audited) 2,417 19,101 (24,139) 695 7,646 110,358 116,078
Profit for the period - - - - - 21,825 21,825
Other comprehensive income - - - - 277 - 277
Total comprehensive income - - - - 277 21,825 22,102
Dividends paid to shareholders - - - - - (23,494) (23,494)
Issue of shares 45 38 - - - (44) 39
Own shares acquired - - (4,277) - - - (4,277)
Release of own shares - - 2,287 - - (1,150) 1,137
Share-based payment - - - - - 2,282 2,282
Current tax in respect of employee share options - - - - 145 - 145
Deferred tax in respect of employee share options - - - - 414 - 414
As at 30 September 2020 (unaudited) 2,462 19,139 (26,129) 695 8,482 109,777 114,426
Interim Consolidated Cash Flow Statement
For the six months to 30 September 2021
(Unaudited) (Unaudited)
Six months to 30 September Six months to 30 September
2021 2020
£'000 £'000
Operating activities
Cash generated from operations 27,015 5,718
Tax paid (5,404) (5,069)
Interest on lease (51) (65)
Net cash flow from operating activities 21,560 584
Investing activities
Interest received and similar income 13 37
Investment income 176 137
Sale of assets at fair value through profit or loss 14,698 18,166
Purchase of assets at fair value through profit or loss (30,666) (18,357)
Re-measurement of purchase consideration in respect of business acquisition 38 -
Payments in respect of asset acquisition (363) -
Purchase of property and equipment (30) (50)
Net cash outflow from investing activities (16,134) (67)
Financing activities
Dividends paid to shareholders (29,836) (23,494)
Issue of shares - 9
Purchase of own shares (7,585) (3,900)
Lease payments (653) (648)
Third-party subscriptions into consolidated funds 3,194 2,501
Third-party redemptions from consolidated funds (3,811) (94)
Net cash outflow from financing activities (38,691) (25,626)
Net decrease in cash and cash equivalents (33,265) (25,109)
Cash and cash equivalents at start of period 136,718 107,753
Effect of exchange rate changes on cash and cash equivalents (71) (170)
Cash and cash equivalents at end of period 103,382 82,474
Notes to the Unaudited Interim Consolidated Financial Statements
For the six months to 30 September 2021
1. General Information, Basis of Preparation and Accounting Policies
1.1 General information
Polar Capital Holdings plc ("the Company") is a public limited Company
registered in England and Wales.
1.2 Basis of Preparation
The unaudited interim condensed consolidated financial statements to 30
September 2021 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 2021, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union and the Companies Act 2006 applicable to companies reporting under IFRS.
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 2021.
1.3 Group information
The Group is required to consolidate seed capital investments where it is
deemed to control them. In addition to the operating subsidiaries and seed
capital investments consolidated at 31 March 2021, the Group has consolidated
the following two funds as at 30 September 2021:
· Polar Capital Smart Energy Fund
· Polar Capital Smart Mobility Fund
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 Group's outlook. As part of
this assessment the Directors have used information available to the date of
issue of these interim financial statements and considered the following key
areas:
· Analysis of the Group's budget for the year ending March 2022,
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
balance sheet date. Therefore, the Directors continue to adopt the going
concern basis of accounting in preparing the consolidated financial
statements.
2. Revenue
(Unaudited) (Unaudited)
Six months to 30 September 2021 Six months to 30 September 2020
£'000 £'000
Investment management and research fees 103,647 67,909
Investment performance fee - 1,050
Loss on forward currency contracts - (133)
103,647 68,826
Effective 1 April 2021, the Group has discontinued its revenue hedging
programme.
3. Operating costs
a) Operating costs include the following items:
(Unaudited) (Unaudited)
Six months to 30 September 2021 Six months to 30 September 2020
£'000 £'000
Staff costs including partnership profit allocations 46,576 30,437
Depreciation 678 670
Amortisation of intangible assets 932 -
Auditors remuneration 175 133
b) Auditors' remuneration:
Audit of Group financial statements 68 43
Local statutory audits of subsidiaries 63 51
Audit-related assurance services 5 -
Other assurance services - internal controls review 39 39
175 133
4. Other income
(Unaudited) (Unaudited)
Six months to 30 September 2021 Six months to 30 September 2020
£'000 £'000
Interest income and cash and cash equivalents 13 41
Net gain/ (loss) on other financial liabilities - short positions and futures 1,704 (4,600)
Net (loss)/gain on forward contracts (440) 718
Net gain on financial assets at FVTPL 360 4,308
Net (loss)/ gain on financial liabilities at FVTPL (3,048) 5,347
Investment income 190 155
Other gain/ (loss) - attributed to third party holdings 499 (679)
(722) 5,290
Net loss on financial liabilities at fair value through profit or loss
includes a mark to market charge of £0.7m relating to the deferred
consideration payable on the Dalton acquisition.
5. Dividends
(Unaudited) (Unaudited)
Six months to 30 September 2021 Six months to 30 September 2020
£'000 £'000
Dividend paid 29,836 23,494
On 31 July 2021, the Group paid a second interim dividend for 2021 of 31p
(2020: 25p) 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 2021 Six months to 30 September 2020
£'000 £'000
Preference shares 444 429
LTIP and initial share awards 2,303 810
Equity incentive plan 739 380
Deferred remuneration plan 561 663
4,047 2,282
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 intended to be earnings enhancing for the Group
and 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.
In November 2021, the Biotechnology team called for a full conversion and the
Convertible team called for a partial conversion of preference shares into
Polar Capital Holdings equity (2020: none). At 30 September 2021, three sets
of preference shares (2020: 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:
(Unaudited) (Unaudited)
30 September 2021 30 September 2020
Number of shares Number of shares
At 1 April 4,426,258 4,676,882
Conversion/crystallisation (1,350,514) -
Movement during the period (718,593) 147,276
At 30 September 2,357,421 4,824,158
Number of ordinary shares to be issued against converted preference shares:
(Unaudited) (Unaudited)
30 September 2021 30 September 2020
Number of shares Number of shares
Outstanding at 1 April 1,766,541 3,733,904
Conversion/crystallisation 1,350,514 -
Adjustment on re-calculation - (28,261)
Issued during the period (1,333,921) (1,622,380)
Outstanding at 30 September 1,783,134 2,083,263
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 2021 30 September 2020
£'000 £'000
Earnings
Profit after tax for purpose of basic and diluted EPS 25,356 21,825
Adjustments (post tax):
Add back cost of share-based payments on preference shares 444 429
Add back exceptional items - acquisition related costs 2,262 -
Add back exceptional items - amortisation of intangible assets 932 -
Add back exceptional items - fair value charge on deferred consideration 686 -
relating to business acquisition
Less net amount of deferred staff remuneration (1,500) (832)
Profit after tax for purpose of adjusted basic and adjusted diluted EPS 28,180 21,422
(Unaudited) (Unaudited)
Six months to Six months to
30 September 2021 30 September 2020
Number of shares Number of shares
Weighted average number of shares
Weighted average number of ordinary shares, excluding own shares, for purposes 95,743,599 93,307,573
of basic and adjusted basic EPS
Effect of dilutive potential shares - share options 2,711,240 1,699,471
Effect of preference shares crystallised but not yet issued 1,783,134 2,083,263
Weighted average number of ordinary shares, for purpose of diluted and 100,237,973 97,090,307
adjusted diluted EPS
(Unaudited)
Six months to (Unaudited)
30 September 2021 Six months to
Pence 30 September 2020
Pence
Earnings per share
Basic 26.5 23.4
Diluted 25.3 22.5
Adjusted basic 29.4 23.0
Adjusted diluted 28.1 22.1
8. Goodwill and intangible assets
Goodwill relates to the acquisition of Dalton Capital (Holdings) Limited, the
parent company of Dalton Strategic Partnership LLP (Dalton), a UK based
boutique asset manager, which completed on 28 February 2021.
Intangible assets relate to investment management contracts acquired as part
of the business combination with Dalton and the asset acquisition related to
the International Value and World Value equity team from the Los Angeles based
asset manager First Pacific Advisors LP (FPA). The net book value of these
intangible assets as at 30 September 2021 were £10.9m and £9.1m
respectively.
Investment management
Contracts
(Unaudited) Goodwill £'000 Total
£'000 £'000
Cost
As at 1 April 2021 6,770 18,647 25,417
Re-measurement of goodwill(1) (38) - (38)
Revaluation(2) - 2,715 2,715
As at 30 September 2021 6,732 21,362 28,094
Amortisation and impairment
As at 1 April 2021 - 419 419
Amortisation for the period - 932 932
Impairment for the period - - -
As at 30 September 2021 - 1,351 1,351
Net book value as at 30 September 2021 6,732 20,011 26,743
Investment management
Contracts
Goodwill £'000 Total
Audited £'000 £'000
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
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 period.
2. Revaluation of intangible asset relates to investment management
contracts acquired from FPA and is a result of the subsequent fair value
measurement of the deferred consideration amount payable to FPA.
Goodwill is tested for impairment at least on an annual basis or more
frequently when there are indications that goodwill may be impaired.
The Group has reviewed the investment management contracts related intangible
assets as at 30 September 2021 and has concluded that there are no indicators
of impairment.
9. Issued Share Capital
Allotted, called up and fully paid: (Unaudited) (Audited)
30 September 2021 31 March
£'000 2021
£'000
100,113,855 ordinary shares of 2.5p each 2,502 2,468
(31 March 2021: 98,745,668 ordinary shares of 2.5p each)
During the period, Polar Capital Holdings plc has issued 34,266 shares on
exercise of employee share options and 1,333,921 shares in connection with the
crystallisation of manager preference shares.
10. 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 and use 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)
30 September 2021
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets
Assets at FVTPL 71,451 - - 71,451
Other financial assets - 164 - 164
71,451 164 - 71,615
Financial Liabilities
Liabilities at FVTPL 5,543 - 17,225 22,768
Other financial liabilities 367 - - 367
5,910 - 17,225 23,135
(Audited)
31 March 2021
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets
Assets at FVTPL 57,151 - - 57,151
Other financial assets - 84 - 84
57,151 84 - 57,235
Financial Liabilities
Liabilities at FVTPL 6,328 - 14,054 20,382
Other financial liabilities 4,069 - - 4,069
10,397 - 14,054 24,451
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)
30 September (Audited)
2021 31 March
£'000 2021
£'000
At 1 April 14,054 -
Additions - 15,014
Repayment (363) (517)
Fair value movement 3,402 -
Foreign currency revaluation loss/ (gain) 132 (443)
At 30 September 17,225 14,054
11. Notes to the Cash Flow Statement
Reconciliation of profit before taxation to cash generated from operations
(Unaudited)
Six months to 30 September 2021 (Unaudited)
£'000 Six months to
30 September 2020
£'000
Cash flows from operating activities
Profit on ordinary activities before tax 31,722 27,041
Adjustments for:
Interest receivable and similar income (13) (41)
Investment income (190) (155)
Interest on lease 51 65
Amortisation of intangible assets 932 -
Depreciation of non-current property and equipment 678 670
Decrease/ (increase) in fair value of assets at fair value through profit or 2,001 (9,656)
loss
(Decrease)/ increase in other financial liabilities (3,050) 3,311
Increase in receivables (3,697) (15,302)
Decrease in trade and other payables (7,433) (2,059)
Share-based payments 4,047 2,282
(Decrease)/ increase in liabilities at fair value through profit or loss (1,004) 175
Release of fund units held against deferred remuneration 2,971 (613)
Cash generated from operations 27,015 5,718
12. 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 2021 and have taken place on an arm's length basis.
13. The Publication of Non-Statutory Accounts
The financial information contained in this unaudited interim report for the
period to 30 September 2021 does not constitute statutory accounts as defined
in s434 of the Companies Act 2006. The financial information for the six
months ended 30 September 2021 and 2020 has not been audited. The information
for the year ended 31 March 2021 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 30 June 2021. 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
John Mansell
Executive Director
Jamie Cayzer-Colvin Non-executive 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
Samir
Ayub
Executive Director (appointed 17 November 2021)
Laura
Ahto
Non-executive Director (appointed 17 November 2021)
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 2022. This will be paid on 14 January 2022 to shareholders on the
register on 24 December 2021. The shares will trade ex-dividend from 23
December 2021.
Remuneration Code
Disclosure of the Group's Remuneration Code will be made alongside its Pillar
3 disclosure which 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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