REG - Polar Capital Hldgs - Unaudited Interim Results
18/11/2024 07:00
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RNS Number : 5103M Polar Capital Holdings PLC 18 November 2024
POLAR CAPITAL HOLDINGS plc ("Polar Capital" or "the Group")
Unaudited Interim Results for the six months ended 30 September 2024
"Continued fund performance and our diversification meant that
Polar Capital's Assets under Management grew by 4% over the period,
from £21.9bn to £22.7bn and given the positive outlook for the business,
the first interim dividend per share was maintained at 14.0p."
Gavin Rochussen, CEO
Highlights
• Assets under Management (AuM) at 30 September 2024 up 4% to £22.7bn
(31 March 2024: £21.9bn) and at 8 November 2024 £23.9bn
• Net inflows of £472m during the period (six months to 30 September
2023: outflows of £581m)
• Core operating profit(†) up 21% to £27.3m (30 September 2023:
£22.5m)
• Profit before tax up 9% to £23.1m (30 September 2023: £21.1m)
• Basic earnings per share up 7% to 17.3p (30 September 2023: 16.2p) and
adjusted diluted total earnings per share(†) up 42% to 24.5p (30 September
2023: 17.2p)
• Interim dividend per ordinary share of 14.0p (January 2024: 14.0p)
declared to be paid in January 2025. The dividend payment date is 10 January
2025, with an ex-dividend date of 12 December 2024 and a record date of 13
December 2024.
† The non-GAAP alternative performance measures shown here are described and
reconciled to IFRS measures in the Alternative Performance Measures (APM)
section.
This RNS does not constitute an offer or recommendation to invest in any of
the funds referenced within.
Gavin Rochussen, Chief Executive Officer, commented:
"It has been a positive start to the new financial year with net inflows over
six months reaching £472m and market movement and fund performance
contributing a further £323m to asset growth. This has seen our AuM rise 4%
to £22.7bn at the end of the reporting period, and more recently, AuM has
increased further to £23.9bn as at 8 November 2024. Notable successes have
been the Emerging Markets & Asia strategies which saw net inflows of
£929m over the period following strong investor demand.
"Performance has also been pleasing. Across the Polar Capital UCITS fund
range, which represents 75% of the Group's total AuM, 90% of AuM is in the top
two quartiles of the appropriate Lipper peer group over one year to 30
September 2024. 77% of AuM is in the top two quartiles over three years, 97%
over five years and 99% since inception. Since inception to 30 September 2024,
91% of AuM is in the first quartile against the Lipper peer group.
"The Healthcare suite of funds has performed well against benchmark and
against the Lipper peer group and has attracted net inflows into the
Healthcare Opportunities and Biotech Funds of £144m and £77m respectively.
"The Polar Capital Global Insurance and Japan Value Funds delivered strong
returns, with respective net inflows of £29m and £22m over the past six
months.
"Relative to the comparable six-month period to 30 September 2023, average AuM
increased by 15% from £19.4bn to £22.4bn. The increase in average AuM
resulted in net management fees increasing by 15% to £87.6m from £76.5m in
the comparable prior six-month period.
"Core operating profit(†) increased by 21% to £27.3m compared to the
comparable prior half year.
"The Board has declared an interim dividend of 14.0p to be paid in January
2025 (January 2024: 14.0p).
"There has been further recognition of our specialist funds with Polar Capital
winning the Emerging Markets Manager of the Year Award in the European
Pensions Awards 2024. Given the strategic focus on growing the client base in
the US, it is pleasing that Morningstar have upgraded the Emerging Markets
Stars US 40 Act mutual fund from a Bronze to a Silver rating, driven by
increased conviction in our investment team.
"In September 2024, we were pleased to announce the launch of the US domiciled
Polar Capital International Small Company Fund with Dan Boston as Lead
Manager. International expansion remains a key part of our 'Growth with
Diversification' strategy and this launch represents an important strategic
milestone.
"Looking ahead, visibility on actively managed equity flows for the industry
remains unclear. However, given our compelling long-term investment
performance and remaining capacity in a broad range of active, specialist and
differentiated thematic, sector and regionally focused fund strategies, we are
confident that we can continue to 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 Officer)
Samir Ayub (Chief Financial Officer)
Deutsche Numis - Nomad and Joint Broker +44 (0)20 7260 1000
Giles Rolls
Charles Farquhar
Peel Hunt LLP- Joint Broker +44 (0)20 3597 8680
Andrew Buchanan
Oliver Jackson
Camarco +44 (0)20 3757 4995
Ed Gascoigne-Pees
Jennifer Renwick
Phoebe Pugh
Assets under Management (AuM)
AuM split by type
30 September 2024 31 March 2024
£bn £bn
Open ended funds 16.9 75% Open ended funds 16.0 73%
Investment trusts 5.1 22% Investment trusts 5.1 23%
Segregated mandates 0.7 3% Segregated mandates 0.8 4%
Total 22.7 Total 21.9
AuM split by strategy
Ordered according to launch date
30 September 2024 31 March 2024
£bn £bn
Technology 9.7 42% Technology 9.9 45%
European Long/Short 0.1 0.4% European Long/Short 0.1 0.5%
Healthcare 3.9 17% Healthcare 3.9 18%
Global Insurance 2.5 11% Global Insurance 2.3 10%
Financials 0.6 3% Financials 0.6 3%
Convertibles 0.4 1.8% Convertibles 0.4 2%
North America 0.6 3% North America 0.7 3%
Japan Value 0.2 1% Japan Value 0.2 1%
European Income 0.2 1% European Income 0.2 1%
UK Value 1.0 4% UK Value 0.9 4%
Emerging Markets and Asia 2.9 13% Emerging Markets and Asia 1.8 8%
European Opportunities 0.4 1.8% European Opportunities 0.6 3%
Sustainable Thematic Equities 0.2 1% Sustainable Thematic Equities 0.3 1.5%
International Small Company* - - International Small Company* - -
Total 22.7 Total 21.9
* The International Small Company Fund was launched on 30 September 2024 and
its closing AuM was £7m.
Chief Executive's Report
Market Overview
The first half of Polar Capital's financial year ended on a strong note in
both equity and bond markets. The 10-year US government bond yield ended
September 2024 at 3.8%, having been very close to 5.0% almost a year earlier.
Equity markets also moved higher, consistently in the case of the US, where
growth is moderating, and explosively in the case of China, where a package of
economic stimulus measures was announced right at the end of September 2024.
The Chinese equity market has moved from being one of the most disliked
investment destinations for international investors to one of the most
discussed, as investors have closed short positions. The Chinese market is
undeniably cheap, even versus the rest of Asia, but the economy still has
structural problems. The cheap manufacturing model has been gradually
undermined by higher wages and by overcapacity, consumers have not been
spending as freely as before, despite their high savings ratio, and the
private sector arguably still needs greater freedom. These problems may be too
complex to be solved simply with an interest rate cut, but the apparent
willingness of the Chinese authorities to support assets such as real estate
and equities could restore consumer confidence.
There have been eye-catching moves in other assets too. The oil price has
often been a hedge in times of geopolitical stress. It fulfilled this role
after the Russian invasion of Ukraine in 2022 but has performed less well
during the current Middle East conflict. Perhaps the expansion of alternative
energy sources, and most recently the re-emergence of nuclear power, have
played a part. Also, the US is now a net exporter of oil, making Middle
Eastern oil supply somewhat less critical.
The gold price is benefiting not just from concern about worldwide war and
conflict, but also from demand for jewellery in India and China and their
central banks buying gold. Indian gold imports have just hit record levels as
the government has cut import duties. Gold has traditionally been a good
insulator against the extremes of inflation and recession, but it is unusual
for the gold price to outperform a rising US equity market.
Fund Performance
Equity markets have continued to make progress over the six-month period. The
technology sector has performed well, and China's strong rally in September
2024 left the previously underperforming Emerging Markets on a par with other
regions year-to-date. Some European markets, and the UK in particular,
continue to suffer from lower economic growth, and from a less vibrant
corporate sector.
Two structural factors, namely benchmark index concentration, and the
underperformance of smaller companies versus broad markets, remain
influential. There is a well-documented inverse relationship between index
concentration and the relative performance of active managers; when individual
companies become very large index constituents, fund concentration rules make
it more difficult for managers to capitalise. This has made it particularly
hard for Polar's technology funds to deliver returns in excess of their
benchmarks.
The underperformance of smaller companies versus large peers has also made
life more difficult for some of Polar Capital's strategies in the period,
specifically Polar Capital's North American and European Opportunities
strategies. Smaller companies have tended to perform less well in periods of
high or rising interest rates, as they tend to have more floating rate debt.
Nevertheless, small and mid-cap companies have been a rich source of
investment ideas in the past, and history suggests that index concentration,
currently at a high level, does mean revert. These factors will not remain
headwinds forever.
Other teams at Polar Capital have delivered good results in the period. Polar
Capital's Healthcare Opportunities Fund, and its Financials Funds, both
long-standing areas of strength in thematic investing at Polar Capital, have
delivered good results. Healthcare Opportunities was an early investor in some
of the smaller beneficiaries of the GLP-1 category of obesity medication,
which has been beneficial, and the financials team has been successful
recently both in banks and non-bank financials.
Polar Capital's UK Value strategy has capitalised on the recent outperformance
of the FTSE 250 versus the FTSE 100, finding enduring success stories in
mid-sized UK companies, while the Polar Capital China Stars Fund, the Japan
Value strategy, and the Polar Capital Europe ex-UK Income Fund also
outperformed their respective benchmarks in the six-month period under review.
Across the Polar Capital UCITS fund range, which represents 75% of the Group's
total AuM, 90% of AuM is in the top two quartiles of the appropriate Lipper
peer group over one year to 30 September 2024. 77% of AuM is in the top two
quartiles over three years, 97% over five years and 99% since inception. Since
inception to 30 September 2024, 91% of AuM is in the top quartile against the
Lipper peer group.
Against the backdrop of highly concentrated indices, as at the end of
September 2024, 44% of UCITS AuM has outperformed the benchmark over one year,
39% exceeded the benchmark over three years, 39% was ahead over five years and
88% outperformed the benchmark since inception.
AuM and Fund Flows
Broadridge Fund Data indicate that in the period May 2024 to August 2024
across Europe and the UK, active equity funds have been in outflow with net
inflows into passive equity funds. Flows into fixed income instruments have
dominated net inflows for the period November 2023 to August 2024. The past
six months have been challenging for active equity managers.
In the six months to 30 September 2024, AuM increased from £21.9bn to
£22.7bn, an increase of 4% over the period. The £795m increase in AuM
comprised net inflows of £472m and an increase of £323m related to market
movement and fund performance.
In the six months, our Emerging Market and Asia Stars fund range received net
inflows of £929m despite muted investor interest in emerging markets
equities. The significant net inflows were almost entirely a consequence of
gaining market share from peer emerging market equity managers.
The Healthcare suite of funds has performed well against benchmark and against
the Lipper peer group and has attracted net inflows into the Healthcare
Opportunities and Biotech Funds of £144m and £77m respectively. However,
this was partially offset by separate account mandate trimming of £96m and
£40m relating to the redemption of the fixed life preference shares linked to
Polar Capital Global Healthcare Trust.
The Polar Capital Global Insurance Fund continued its excellent performance
and is up 22% year to date in absolute terms and ahead of benchmark by 3% over
the same period while 18% up in absolute terms annualised over three years and
ahead of benchmark by 3% annualised over three years. Since the Fund's
inception in 1998 it is ranked at the 4(th) percentile against the Lipper peer
group as at 30 September 2024. The Fund had net inflows of £29m in the six
months to 30 September 2024.
The Polar Capital Japan Value Fund is 15(th) percentile since inception
against the Lipper peer group and has returned 16% annualised over three years
beating the benchmark by 4% on an annualised basis over three years. The Fund
had net inflows of £22m in the six-month period.
While interest in the Polar Capital Artificial Intelligence Fund continued
with net inflows of £82m in the period, net outflows from the open-ended
Polar Capital Technology Fund were £243m and share buy backs by the Polar
Capital Technology Investment Trust amounted to £59m in the period.
The Polar Capital Smart Energy Fund and a related separate account mandate
suffered net outflows of £50m in the six months as a result of muted investor
appetite for sustainable funds.
Continued negative investor sentiment towards UK and European equities led to
redemptions from the Melchior European Opportunities Fund of £64m and the
trimming of a separate account mandate of £38m. The Polar Capital European
ex-UK Income Fund had net outflows of £21m and the Polar Capital UK Value
Opportunities strategy had net outflows of £11m in the six months. While the
Polar Capital European Forager Fund had net redemptions of £4m during the
period, a significant long-term investor in the fund redeemed £84m in October
2024 as a consequence of asset allocation and reorganisation of the client's
fund structure. This led to the decision by the Board of the Forager fund to
liquidate the Fund and return capital to all clients at the same time.
The Polar Capital North American Fund continued to suffer net outflows as
performance was challenging given the high stock concentration in the indices
and continuing competition from passive US equity funds. Net outflows from the
fund in the six months were £104m.
The Polar Capital Global Convertible Bond funds experienced outflows of £60m,
given the higher interest environment with investors seeking yield from lower
risk asset classes such as money market funds.
Financial Results
Average AuM over the six months to 30 September 2024 increased by 13% from the
preceding six months, rising from £19.9bn to £22.4bn. However, relative to
the comparable six-month period to 30 September 2023, average AuM increased by
15% from £19.4bn to £22.4bn. The increase in average AuM resulted in net
management fees(†) increasing by 15% to £87.6m from £76.5m in the
comparable prior six-month period. Management fee yield margin(†) declined,
as anticipated, by 1bp to 78bps over the period compared to the comparable
prior half-year period.
Total operating costs increased by 22% to £67.3m compared to the comparable
prior half-year period, primarily due to higher variable compensation costs
and impairment of goodwill.
Core operating profit(†) increased by 21% to £27.3m compared to the
comparable prior half-year period and is up by 22% from £22.3m in the
preceding six-month period to 31 March 2024.
Profit before tax increased by 9% to £23.1m compared to the comparable prior
half-year. Basic EPS increased by 7% compared to the half year period to 30
September 2023. Exceptional items of £6.0m included an impairment of the
goodwill from the acquisition of Dalton Strategic Partnership LLP.
Adjusted diluted core EPS(†) of 20.5p for the current period ending 30
September 2024 represents an 18% increase over the comparable prior half-year
period ending 30 September 2023.
Six months to Six months to Six months to
30 September 2024 30 September 2023 31 March
£'m £'m 2024
£'m
Average AuM (£'bn) 22.4 19.4 19.9
Net management fees(†) 87.6 76.5 77.2
Core operating profit(†) 27.3 22.5 22.3
Performance fee profit(†) - - 9.6
Other income* 2.8 (0.5) 2.7
Share-based payments on preference shares (1.0) (0.3) (0.4)
Exceptional items (6.0) (0.6) (0.6)
Profit before tax 23.1 21.1 33.6
Core operating margin(†) 31% 29% 29%
Management fee yield(†) 78 bps 79 bps 78 bps
Basic EPS 17.3p 16.2p 26.1p
Adjusted diluted total earnings per share(†) 24.5p 17.2p 26.8p
Adjusted diluted core EPS(†) 20.5p 17.3p 17.7p
† 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 2025
(January 2024: 14.0p). Maintaining last year's first interim dividend of
14.0p represents a covered dividend that is 68% of first half adjusted diluted
core EPS compared to the prior comparable period when the dividend represented
81% of adjusted diluted core EPS. This reflects the improving results and our
confidence in the business and the strength of our balance sheet.
Strategic progress
In September 2024, we were pleased to announce the launch of the US domiciled
Polar Capital International Small Company Fund with Dan Boston as Lead
Manager. Dan brings 19 years' experience to his role and now heads our
US-based and newly established Global Small Company team. The team takes a
'research first' approach to seeking out wealth creating smaller companies
with the ability to compound over the long-term and become industry leaders.
International expansion remains a key part of our 'Growth with
Diversification' strategy and this launch represents an important strategic
milestone.
There has been further recognition of our specialist funds with Polar Capital
winning the Emerging Markets Manager of the Year Award in the European
Pensions Awards 2024. Given the strategic focus on growing the client base in
the US, it is pleasing that Morningstar have upgraded the Emerging Markets
Stars US 40 Act mutual fund from a Bronze to a Silver rating, driven by
increased conviction in our investment team. The Polar Capital Global
Insurance Fund won the Specialist Equities category at the Investment Week
Fund Manager of the Year Awards 2024. Polar Capital Emerging Markets Stars
Fund has been shortlisted for Best Sustainable Emerging Markets Fund at the
Investment Week Sustainable Investment Awards 2024 and Polar Capital Smart
Energy Fund has been shortlisted for Best ESG Investment Fund at the ESG
Investing Awards 2024. Both Polar Capital Global Healthcare Trust and Polar
Capital Technology Trust have been shortlisted in the specialist sector at the
Investment Week Investment Company of the Year Awards 2024. Polar Capital
Global Healthcare Trust has been shortlisted for 'Sector Performance Award' at
Citywire Investment Trust Awards 2024.
As always, we are grateful for the commitment and dedication from our staff
over the period as we have seen a recovery in net inflows, improved fund
performance and increased profitability. We are also appreciative of the
ongoing support from our loyal and supportive clients and shareholders.
Outlook
While the conflict in Ukraine and the Middle East still brings uncertainty,
inflation across the world has been falling and many Central Banks have now
started to cut interest rates. This may create a better backdrop for risk
assets. Investors remain cautious and many opt to retain high cash balances as
current uncertain conditions play out. UK based investors have been
particularly cautious leading up to and following the Autumn Budget.
Given our compelling long-term investment performance and remaining capacity
in a broad range of active, specialist and differentiated thematic, sector and
regionally focused fund strategies, we are confident that we can continue to
perform for our clients and shareholders over the long term.
Gavin Rochussen
Chief Executive
15 November 2024
Alternative 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 fee revenue. APM reconciliation To present additional information thereby assisting users of the accounts in
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 adjusting for this non-cash item provides a useful
items which may either be non-recurring or non-cash in nature, and in the case supplemental 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 useful supplemental understanding of the Group's
results and their comparability period on period and (c) removing 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 fees Gross management fees less commissions and fees payable. APM reconciliation To present a clear view of the net amount of management fees earned by the
Group after accounting for commissions and fees payable.
Net management fee yield Net management fees divided by average AuM. 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
reported results
The summary below reconciles key APMs the Group measures to its reported
results for the current year and also reclassifies the line-by-line impact on
consolidation of seed investments to provide a clearer understanding of the
Group's core business operation of fund management.
Any seed investments in newly launched or nascent funds, where the Group is
determined to have control, are consolidated. As a consequence, the statement
of profit or loss of the fund is consolidated into that of the Group on a
line-by-line basis. Any seed investments that are not consolidated are fair
valued through a single line item (other income) on the Group consolidated
statement of profit or loss.
2024 Reclassification 2024 2023
Interim Reported on consolidation Interim Non-GAAP Interim Non-GAAP
Results of seed Reclassification results results
£'m investments of costs £'m £'m APMs
£'m £'m
Investment management and research fees 100.6 - - 100.6 86.9
Commissions and fees payable (13.0) - - (13.0) (10.4)
87.6 - - 87.6 76.5 Net management fees
Operating costs (67.3) 0.1 31.4 (35.8) (33.0)
Finance costs (0.1) - - (0.1) (0.1)
- - (24.4) (24.4) (20.9) Core distributions
20.2 0.1 7.0 27.3 22.5 Core operating profit
Performance fees - - - - -
- - - - - Performance fee interests
- - - - - Performance fee profit
Other income 2.9 (0.1) - 2.8 (0.5)
Exceptional items - - (6.0) (6.0) (0.6)
Share-based payments - - (1.0) (1.0) (0.3)
on preference shares
Profit before tax for the period
23.1 - - 23.1 21.1
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 2024 30 September 2023
Pence Pence
Diluted earnings per share 17.1 16.0
Impact of share-based payments - preference shares only 1.0 0.3
Impact of exceptional items 6.0 0.6
Impact of deferment, where IFRS defers cost into future periods 0.4 0.3
Adjusted diluted total EPS 24.5 17.2
Of which: Other income (4.0) 0.1
Adjusted diluted core EPS 20.5 17.3
Exceptional items
Exceptional items for the period to 30 September 2024 include amortisation of
the acquired intangible asset as part of Dalton acquisition and related
impairment charge on the goodwill (2023: Exceptional items relate to
amortisation of the intangible assets).
A breakdown of exceptional items is as follows:
Exceptional items (Unaudited) (Unaudited)
30 September 30 September
2024 2023
£'m £'m
Recorded in operating costs
Amortisation of intangible asset 0.6 0.6
Impairment of goodwill (See Note 8) 5.4 -
Net exceptional items recorded in the consolidated statement of profit or loss 6.0 0.6
Interim Consolidated Statement of Profit or Loss
For the six months to 30 September 2024
(Unaudited) (Unaudited)
Six months to 30 September 2024 Six months to 30 September 2023
£'000 £'000
Revenue 100,616 86,891
Other income 2,884 (271)
Gross income 103,500 86,620
Commissions and fees payable (12,960) (10,435)
Net income 90,540 76,185
Operating costs (67,309) (55,020)
Finance costs (100) (108)
Profit before tax 23,131 21,057
Taxation (6,484) (5,423)
Profit for the year attributable to ordinary shareholders 16,647 15,634
Earnings per share
Basic 17.3p 16.2p
Diluted 17.1p 16.0p
Adjusted basic (Non-GAAP measure) 24.8p 17.4p
Adjusted diluted (Non-GAAP measure) 24.5p 17.2p
Interim Consolidated Statement of Other Comprehensive Income
For the six months to 30 September 2024
(Unaudited) (Unaudited)
Six months to 30 September 2024 Six months to 30 September 2023
£'000 £'000
Profit for the period attributable to ordinary shareholders 16,647 15,634
Other comprehensive (expense)/income - items that will be reclassified to
profit or loss statement in subsequent periods:
Exchange differences on translation of foreign operations (853) (163)
Other comprehensive expense for the period (853) (163)
Total comprehensive income for the period, net of tax, attributable to 15,471
ordinary shareholders
15,794
All of the items in the above statements are derived from continuing
operations.
Interim Consolidated Balance Sheet
As at 30 September 2024
(Unaudited) (Audited)
30 September 2024 31 March
£'000 2024
£'000
Non-current assets
Goodwill and intangible assets 8,810 14,774
Property and equipment 7,356 8,307
Deferred tax assets 3,384 1,938
19,550 25,019
Current assets
Assets at fair value through profit or loss 81,827 62,433
Trade and other receivables 25,838 21,070
Other financial assets 1,067 3,393
Assets at amortised cost 3,349 6,698
Cash and cash equivalents 68,277 98,880
Current tax assets 287 127
180,645 192,601
Total assets 200,195 217,620
Non-current liabilities
Provisions and other liabilities 6,316 7,537
Liabilities at fair value through profit or loss 146 249
6,462 7,786
Current liabilities
Liabilities at fair value through profit or loss 7,699 5,425
Trade and other payables 57,845 64,128
Provisions 64 247
Other financial liabilities - 9
Current tax liabilities 3,590 4,127
69,198 73,936
Total liabilities 75,660 81,722
Net assets 124,535 135,898
Capital and reserves
Issued share capital 2,539 2,530
Share premium 19,364 19,364
Investment in own shares (30,625) (34,652)
Capital and other reserves 11,767 12,019
Retained earnings 121,490 136,637
Total equity - attributable to ordinary shareholders 124,535 135,898
Interim Consolidated Statement of Changes in Equity
For the six months to 30 September 2024
Issued share capital £'000 Investment in own shares
Share premium £'000 Capital reserves Other reserves Retained earnings
£'000 £'000 £'000 £'000 Total equity
£'000
As at 1 April 2024 (audited) 2,530 19,364 (34,652) 695 11,324 136,637 135,898
Profit for the year - - - - - 16,647 16,647
Other comprehensive expense - - - - (853) - (853) - -
Total comprehensive income - - - - (853) 16,647 15,794
Dividends paid to shareholders - - - - - (30,869) (30,869)
Issue of shares 9 - - - - (9) -
Own shares acquired - - (1,369) - - - (1,369)
Release of own shares - - 5,396 - - (4,489) 907
Share-based payment - - - - - 3,573 3,573
Current tax in respect of employee share options - - - - 103 - 103
Deferred tax in respect of employee share options - - - - 498 - 498
As at 30 September 2024 2,539 19,364 (30,625) 695 11,072 121,490 124,535
(unaudited)
2,520 19,364 (31,623) 695 11,604 140,295 142,855
As at 1 April 2023 (audited)
Profit for the year - - - - - 15,634 15,634
Other comprehensive expense - - - - (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 2,530 19,364 (33,286) 695 11,493 122,281 123,077
(unaudited)
Interim Consolidated Cash Flow Statement
For the six months to 30 September 2024
(Unaudited) (Unaudited)
Six months to Six months to
30 September 30 September
2024 2023
£'000 £'000
Cash flows generated from operating activities
Cash flows generated from operations 21,879 7,449
Tax paid (8,028) (5,853)
Interest received 1,198 1,104
Net cash inflow generated from operating activities 15,049 2,700
Cash flows generated from investing activities
Investment income 239 350
Sale of assets/liabilities at fair value through profit or loss 12,841 28,971
Purchase of assets at fair value through profit or loss (31,388) (20,341)
Sale of assets at amortised cost 3,349 -
Purchase of property and equipment (296) (149)
Payments in respect of asset acquisition (23) -
Net cash (outflow)/inflow from investing activities (15,278) 8,831
Cash flows generated from financing activities
Dividends paid to shareholders (30,869) (30,865)
Lease payments (983) (697)
Interest on lease (100) (108)
Purchase of own shares (462) (7,588)
Third-party subscriptions into consolidated funds 2,520 3,725
Third-party redemptions from consolidated funds (300) (10,163)
Net cash outflow from financing activities (30,194) (45,696)
Net decrease in cash and cash equivalents (30,423) (34,165)
Cash and cash equivalents at start of the period 98,880 106,976
Effect of exchange rate changes on cash and cash equivalents (180) (26)
Cash and cash equivalents at end of the period 68,277 72,785
Selected notes to the Unaudited Interim Consolidated Financial Statements
For the six months to 30 September 2024
1. General information, Basis of Preparation and Accounting policies
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.
Basis of preparation
The unaudited interim condensed consolidated financial statements to 30
September 2024 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 2024, 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 2024, except when otherwise stated.
The unaudited interim condensed consolidated financial statements are
presented in Sterling and all values are rounded to the nearest thousand
(£'000), except when otherwise stated.
Group information
The Group is required to consolidate seed capital investments where it is
deemed to control them. The operating subsidiaries consolidated at 30
September 2024 are consistent with those reported in the 31 March 2024 annual
report, with the following additions: the Polar Capital Emerging Markets
Healthcare Fund (a sub fund of Polar Capital Fund plc), consolidated as of 31
May 2024, and the Polar Capital International Small Company Fund (a US 40-Act
mutual fund), consolidated as of 30 September 2024.
Going concern
The Directors have made an assessment of going concern taking into account
both the Group's results as well as the impact of 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 consolidated 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 Six months to
30 September 2024 30 September 2023
£'000 £'000
Investment management and research fees 100,616 86,891
3. Components of other income
(Unaudited) (Unaudited)
Six months to Six months to
30 September 2024 30 September 2023
£'000 £'000
Interest income on cash and cash equivalents 1,198 1,104
Net (loss)/gain on other financial assets/ liabilities - short positions (1,992) 1,234
Net gain/(loss) on other financial assets/ liabilities - forward currency 1,127 (265)
contracts
Net gain/(loss) on financial assets and liabilities at FVTPL 2,800 (4,603)
Investment income 239 350
Other (gain)/loss - attributed to third party holdings (488) 1,909
2,884 (271)
4. Operating costs
a) Operating costs include the following expenses:
(Unaudited) (Unaudited)
Six months to Six months to
30 September 2024 30 September 2023
£'000 £'000
Staff costs including partnership profit allocations 46,976 39,765
Depreciation 1,246 1,232
Amortisation and impairment of intangible assets(1) 5,964 581
Auditors' remuneration 340 228
1. This balance includes impairment of goodwill amounting to
£5.4m recognised in the current period.
b) Auditors' remuneration:
(Unaudited) (Unaudited)
Six months to Six months to
30 September 2024 30 September 2023
£'000 £'000
Audit of Group and Company financial statements 97 56
Statutory audits of subsidiaries 153 105
Audit-related assurance services 19 4
Other assurance services - internal controls report 71 63
340 228
5. Dividends (Unaudited) (Unaudited)
Six months to Six months to
30 September 30 September
2024 2023
£'000 £'000
Dividend paid 30,869 30,865
On 2 August 2024, the Group paid a second interim dividend for 2024 of 32p
(2023: 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 2024 Six months to 30 September 2023
£'000 £'000
Preference shares 978 370
LTIP awards 1,539 860
Equity incentive plan 346 304
Deferred remuneration plan 710 883
3,573 2,417
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.
In November 2024, the Convertibles team called for a partial conversion of
preference shares into Polar Capital Holdings equity (30 September 2023: No
conversion).
At 30 September 2024 five sets of preference shares (30 September 2023: five
sets) have the ability 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 2024 30 September
Number of shares 2023
Number of shares
At 1 April 2,234,988 2,367,680
Conversion/crystallisation (114,716) -
Movement in the year 289,507 (109,970)
At 30 September 2,409,779 2,257,710
Number of ordinary shares to be issued against converted preference shares:
(Unaudited) (Unaudited)
30 September 30 September
2024 2023
Number of shares Number of shares
Outstanding at 1 April 353,055 810,310
Conversion/crystallisation 114,716 -
Issued in the year (353,055) (405,154)
Outstanding at 30 September 114,716 405,156
7. Earnings per Share
A reconciliation of the figures used in calculating the basic, diluted,
adjusted basic and adjusted diluted total earnings per share (EPS) is as
follows:
(Unaudited) (Unaudited)
Six months to Six months to
30 September 30 September 2023
2024 £'000
£'000
Earnings
Profit after tax for purpose of basic and diluted EPS 16,647 15,634
Adjustments (post tax):
Add exceptional items - impairment and amortisation of intangible assets 5,964 581
Add back cost of share-based payments on preference shares 978 370
Add net amount of deferred staff remuneration 357 225
Profit after tax for purpose of adjusted basic and adjusted diluted total EPS 23,946 16,810
(Unaudited) (Unaudited)
Six months to Six months to
30 September 30 September
2024 2023
Number of shares Number of shares
'000 '000
Weighted average number of shares
Weighted average number of ordinary shares, excluding own shares, for the 96,434 96,569
purpose of basic and adjusted basic EPS
Effect of dilutive potential shares - LTIPs, share options and preference 1,243 1,275
shares crystallised but not yet issued
Weighted average number of ordinary shares, for purpose of diluted and 97,677 97,844
adjusted diluted total EPS
(Unaudited) (Unaudited)
Six months to Six months to
30 September 2024 30 September 2023
Pence Pence
Earnings per share
Basic 17.3 16.2
Diluted 17.1 16.0
Adjusted basic 24.8 17.4
Adjusted diluted 24.5 17.2
8. Goodwill and intangible assets
Investment management
contracts
(Unaudited) Goodwill £'000 Total
£'000 £'000
Cost
As at 1 April 2024 6,732 18,647 25,379
As at 30 September 2024 6,732 18,647 25,379
Accumulated amortisation and impairment
As at 1 April 2024 - 10,605 10,605
Amortisation for the period - 581 581
Impairment for the period 5,383 - 5,383
As at 30 September 2024 5,383 11,186 16,569
Net book value as at 30 September 2024 1,349 7,461 8,810
Investment management
contracts
(Audited) Goodwill £'000 Total
£'000 £'000
Cost 6,732 18,647 25,379
As at 1 April 2023
As at 31 March 2024 6,732 18,647 25,379
Accumulated amortisation and impairment
As at 1 April 2023 - 9,442 9,442
Amortisation for the year - 1,163 1,163
As at 31 March 2024 - 10,605 10,605
Net book value as at 31 March 2024 6,732 8,042 14,774
Amortisation and impairment of intangible assets are treated as exceptional
items.
(a) Goodwill
Goodwill relates to the acquisition of Dalton Capital (Holdings) Limited, the
parent company of Dalton Strategic Partnership LLP, a UK based boutique asset
manager acquired on 26 February 2021. The goodwill is attributable to a single
CGU.
An impairment test was conducted at the period end to compare the carrying
amount of the CGU with its recoverable amount. The recoverable amount was
determined using a value-in-use calculation based on a discounted cash flow
model, incorporating the CGU's projected cash flows over a five-year period.
Key assumptions, including the discount rate and growth rate, remained
consistent with those used in the 31 March 2024 annual report. However, given
the increased outflows in the CGU during the current period and prevailing
investor sentiment and outlook, the five-year projected cash flows were
reviewed and adjusted as of the period end.
This analysis indicated that the recoverable amount of the CGU was lower than
its carrying value, resulting in an impairment charge of £5.4m against
goodwill.
The table below sets out the impacts of reasonably possible changes in key
estimates and judgements used in the discounted cash flow model:
Reasonably possible adverse movement Additional impact on impairment charge
£'m
Key estimates and judgements
Long term growth rate -1.0% (0.4)
Net flows -50% (1.0)
Discount rate +1.5% (0.9)
(b) Intangible assets
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
2024 2024
Remaining amortisation Remaining
Carrying value period Carrying value amortisation
£'000 £'000 period
Investment management contracts acquired from Dalton Capital (Holdings) 7,461 6.4 years 8,042 6.9 years
Limited
7,461 8,042
9. Financial Instruments
The fair value of financial instruments that are traded in active markets at
each reporting date is determined by reference to quoted market prices or
dealer price quotation (bid price for long positions and ask price for short
positions), without any deduction for transaction costs. For financial
instruments not traded in an active market, such as forward exchange
contracts, the fair value is determined using appropriate valuation techniques
that take into account the terms and conditions of the contracts and utilise
observable market data, such as spot and forward rates, as inputs.
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities.
Level 2: other techniques for which all inputs which have a significant effect
on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the
recorded fair value that are not based on observable market data.
At the end of both the current period as well as the comparative period, all
financial instruments at fair value through profit or loss held by the Group
were Level 1 except for:
• forward foreign exchange contracts classified as Level 2. These
were fair valued using valuation techniques that incorporate foreign exchange
spot and forward rates.
• other financial liability classified as Level 3. These were fair
valued using a discounted cash flow models that incorporate unobservable
inputs.
The fair value hierarchy of financial assets and liabilities which are carried
at fair value at the period end is as follows:
(Unaudited) (Audited)
30 September 2024 31 March 2024
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 81,827 - - 81,827 62,433 - - 62,433
Other financial assets 939 128 - 1,067 3,393 - - 3,393
82,766 128 - 82,894 65,826 - - 65,826
Financial liabilities
Liabilities at FVTPL 7,662 - 183 7,845 5,380 - 294 5,674
Other financial liabilities - - - - - 9 - 9
7,662 - 183 7,845 5,380 9 294 5,683
Movement in liabilities at FVTPL categorised as Level 3 during the year were: (Unaudited) (Audited)
30 September 31 March
2024 2024
£'000 £'000
At 1 April 294 546
Repayment (23) (70)
Net gain recognised in the statement of profit or loss (88) (182)
At 30 September 183 294
The fair value of financial instruments not held at fair value approximates to
their carrying value as at reporting date. During the reporting period there
were no transfers between levels in fair value measurements.
10. Cash flows generated from operations
A reconciliation of profit before tax to cash generated from operations is as
follows:
(Unaudited) (Unaudited)
Six months to 30 September 2024 Six months to 30 September 2023
£'000 £'000
Profit before tax 23,131 21,057
Interest receivable and similar income (1,198) (1,104)
Investment income (239) (350)
Interest on lease 100 108
Depreciation of non-current property and equipment 1,246 1,232
Amortisation and impairment of intangible assets 5,964 581
(Increase)/decrease in assets at FVTPL (2,793) 4,768
Increase/(decrease) in other financial assets and liabilities 1,327 (553)
Increase in receivables (4,768) (3,176)
Decrease in trade and other payables including other provisions (6,658) (16,551)
Share-based payment 3,573 2,416
Increase/(decrease) in liabilities at FVTPL(1) 481 (1,945)
Release of fund units held against deferred remuneration 1,713 966
Cash flows generated from operations 21,879 7,449
1. Movement includes those arising from acquiring and/or losing control of
consolidated seed funds.
11. Contingent liabilities
There are no contingent liabilities to disclose at 30 September 2024 (31 March
2024: nil).
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 2024 and have taken place on an arm's length basis.
13. The Publication of Non-Statutory Accounts
The financial information contained in these unaudited interim consolidated
financial statements for the period to 30 September 2024 does not constitute
statutory accounts as defined in s434 of the Companies Act 2006. The financial
information for the six months ended 30 September 2024 and 2023 has not been
audited. The information for the year ended 31 March 2024 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 26 June 2024. The
report of the independent auditor on those financial statements contained no
qualification or statement under s498 of the Companies Act 2006.
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.
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