REG - Record PLC - Final Results <Origin Href="QuoteRef">RECL.L</Origin> - Part 2
16/06/2017 07:05
- Part 2: For the preceding part double click ID:nRSP2591Ia
numbers, which rose from an average
of 69 last year to 73 this year. An increase in non-personnel costs of 7% was
driven predominantly by the increase in occupancy costs associated with a new
lease on larger offices for Record's headquarters in Windsor UK, plus moving
the US office from Atlanta to New York, both at higher market rentals than was
previously the case (see note 23 of the financial statements for further
detail).
Group Profit Share Scheme
The Group operates a Group Profit Share Scheme such that a long-term average
of 30% of underlying operating profit before Group Profit Share ("GPS") is
made available to be awarded to staff. The Remuneration Committee has agreed
that for the year ended 31 March 2017, the Group Profit Share Scheme is 30% of
pre-GPS operating profit. This represents £3.3 million, an increase of 10%
over the previous financial year and in line with Group financial performance.
Directors and senior management in Record are required to take a proportion of
this remuneration in the form of shares which are subject to lock-up
arrangements under the scheme rules.
Under the scheme rules, the intention is to purchase shares required, in the
market following the announcement of interim and full year financial results.
Operating profit and margins
On a fully consolidated basis, the operating profit for the year increased by
26% to £8.6 million and the Group operating margin increased to 36% (2016:
32%).
Management also considers operating profit and profit before tax on an
"underlying" basis, which excludes the impact of the income and expenditure
attributable to non-controlling interests (i.e. gains and losses attributable
to other investors in the seed funds which are consolidated into the Group's
financial statements on a line-by-line basis, as required under IFRS). This
reflects the approach used for internal management reporting and is considered
to represent more accurately the core revenues and costs driving current and
future cash flows of the business. Underlying operating profit for the year
was £7.7 million (2016: £6.9 million) with underlying profit before tax for
the year of £7.9 million (2016: £7.0 million).
Cash flow
The Group's year end cash and cash equivalents stood at £19.1 million (2016:
£21.7 million). The cash generated from operating activities before tax was
£8.7 million (2016: £7.1 million), with £1.6 million paid in taxation (2016:
£1.6 million) and £3.6 million paid in dividends (2016: £3.7 million). At the
year end, the Group held money market instruments with maturities between
three and twelve months, worth £18.1 million (2016: £13.0 million). These
instruments are managed as cash by the Group but are not classified as cash
under IFRS rules (see note 16 of the financial statements for more details).
Dividends
Shareholders received an interim ordinary dividend of 0.825p per share paid on
23 December 2016, equivalent to £1.8 million. As disclosed in the Chairman's
statement, the Board is recommending an increased ordinary dividend in line
with the improved profitability of the Group and in addition a special
dividend returning the excess of this year's earnings over the total ordinary
dividend to shareholders. Consequently, the Board recommends paying a final
ordinary dividend of 1.175 pence per share, equivalent to £2.6 million, taking
the overall ordinary dividend to 2.00 pence per share, and simultaneously
paying a special dividend of 0.91 pence per share (equivalent to £2.0
million), making the total dividends paid for the year of £6.3 million equal
to earnings of 2.91 pence per share, (total ordinary dividend paid in respect
of the prior year ended 31 March 2016 was 1.65 pence per share, and there was
no special dividend paid).
Subject to shareholder approval, the final ordinary dividend will be paid
simultaneously with the special dividend on 2 August 2017 to shareholders on
the register on 30 June 2017, the ex-dividend date being 29 June 2017. All
ordinary and special dividends for the financial year will be fully covered by
earnings.
For the current and future financial years, the Board intends to pursue a
progressive dividend policy and to consider the return of excess earnings over
ordinary dividends to shareholders, potentially in the form of special
dividends. On this basis, such distributions to shareholders will be
considered on a 'total distribution' basis, such that the total distribution
for any one financial year will at least be covered by earnings, whilst always
being subject to market conditions at the time, and to any further excess
capital assessed as required by the Board.
Financial stability and capital management
The Group's balance sheet is strong and liquid with total net assets of £41.6
million at the end of the year, including current assets managed as cash
totalling £37.2 million. The business remains cash generative, with net cash
inflows from operating activities of £7.2 million for the year.
The Board's new capital policy is to retain minimum capital (being equivalent
to shareholders' funds) within the business broadly equivalent to twelve
months' worth of future estimated operating expenses (excluding variable
remuneration), plus capital assessed as sufficient to meet regulatory capital
requirements and working capital purposes, and for investing in new
opportunities for the business. To this end, the Group maintains a financial
model to assist it in forecasting future capital requirements over a three
year cycle under various scenarios and monitors the capital and liquidity
positions of the Group on an ongoing and frequent basis. The Group has no
debt.
Record Currency Management Limited ("RCML") is a BIPRU limited licence firm
authorised and regulated in the UK by the Financial Conduct Authority ("FCA"),
and is a wholly owned subsidiary of Record plc. RCML is required to submit
semi-annual capital adequacy returns, and it held significant surplus capital
resources relative to its regulatory financial resource requirement throughout
the year. Similarly the Group also submits semi-annual capital adequacy
returns but on a consolidated basis, taking account of the risks across the
business assessed by the Board as requiring further capital. In assessing
these risks, the Group uses an active risk-based approach to monitoring and
managing risks, which includes its Internal Capital Adequacy Assessment
Process ("ICAAP").
The Board has concluded that the Group is adequately capitalised both to
continue its operations effectively and to meet regulatory requirements, due
to the size and liquidity of balance sheet resources maintained by the Group.
The Group held regulatory capital resources based on the audited financial
statements as at 31 March, as follows:
Regulatory capital resources (£m) 2017 2016
Core Tier 1 capital 36.8 33.7
Deductions: intangible assets (0.2) (0.3)
Regulatory capital resources 36.6 33.4
Further information regarding the Group's capital adequacy information can be
found in the Group's Pillar 3 disclosure, which is available on the Group's
website at www.recordcm.com.
Viability statement
In accordance with the UK Corporate Governance Code, the Directors have
performed a robust assessment of the viability of the Group considering the
business model, the Group's expected financial position, Board strategy and
risk appetite, the Group's solvency and liquidity and its principal risks.
The Directors review the financial forecasts and position of the Group on a
regular basis, mindful of the need to maintain a strong balance sheet whilst
allowing the Group the flexibility to adapt its products and services to
challenging market conditions, or to take advantage of emerging business
opportunities. The Group's strategy and principal risks are assessed and
reviewed regularly by the Board as well as by the Executive Committee and
operational sub-committees within the Group.
The market and regulatory environment in which the Group operates is
constantly evolving and the Directors consider it prudent to consider a three
year horizon over which to assess the viability of the Group. This is
consistent with the approach in its ICAAP, which uses scenario analysis to
evaluate potential impacts of severe but plausible occurrences on the
business, and to quantify the level of capital required to mitigate the
financial impact to the Group. Such scenarios consider material events that
may occur as a result of the principal risks faced by the business, for
example, direct AUME outflows or severe reputational damage to the business.
Having reviewed and considered the results of the above, the Directors have a
current, reasonable expectation that the Group will continue to operate and
meet its liabilities as they fall due over the three year period of their
assessment, to 31 March 2020.
Consolidated statement of comprehensive income
Year ended 31 March
2017 2016
Note £'000 £'000
Revenue 3 23,928 21,134
Cost of sales (298) (221)
Gross profit 23,630 20,913
Administrative expenses (15,067) (14,123)
Operating profit 4 8,563 6,790
Finance income 112 143
Profit before tax 8,675 6,933
Taxation 6 (1,540) (1,523)
Profit after tax and total comprehensive income for the year 7,135 5,410
Profit and total comprehensive income for the year attributable to:
Non-controlling interests 819 (131)
Owners of the parent 6,316 5,541
Earnings per share for profit attributable to the equity holders of the Group during the year
Basic earnings per share 7 2.91p 2.55p
Diluted earnings per share 7 2.90p 2.54p
Consolidated statement of financial position
As at 31 March
2017 2016
Note £'000 £'000
Non-current assets
Property, plant and equipment 10 881 81
Intangible assets 11 245 299
Investments 12 - -
Deferred tax assets 13 102 43
Total non-current assets 1,228 423
Current assets
Trade and other receivables 14 6,972 5,695
Derivative financial assets 15 53 106
Money market instruments with maturities > 3 months 16 18,102 13,020
Cash and cash equivalents 16 19,120 21,720
Total current assets 44,247 40,541
Total assets 45,475 40,964
Current liabilities
Trade and other payables 17 (3,013) (2,372)
Corporation tax liabilities 17 (804) (776)
Derivative financial liabilities 15 (48) (108)
Total current liabilities (3,865) (3,256)
Total net assets 41,610 37,708
Equity
Issued share capital 18 55 55
Share premium account 1,971 1,899
Capital redemption reserve 20 20
Retained earnings 34,785 31,715
Equity attributable to owners of the parent 36,831 33,689
Non-controlling interest 20 4,779 4,019
Total equity 41,610 37,708
Consolidated statement of changes in equity
Year ended 31 March 2017
Called up share capital Share premium account Capital redemption reserve Retained earnings Total Attributable to equity holders of the parent Non-controlling interest Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2016 55 1,899 20 31,715 33,689 4,019 37,708
Profit and total comprehensive income for the year - - - 6,316 6,316 819 7,135
Dividends paid - - - (3,592) (3,592) - (3,592)
Own shares acquired by EBT - - - (775) (775) - (775)
Release of shares held by EBT - 72 - 992 1,064 - 1,064
Issue of units in funds to non-controlling interests - - - - - (59) (59)
Share-based payment reserve movement - - - 129 129 - 129
Transactions with shareholders - 72 - (3,246) (3,174) (59) (3,233)
As at 31 March 2017 55 1,971 20 34,785 36,831 4,779 41,610
Year ended 31 March 2016
Called up share capital Share premium account Capital redemption reserve Retained earnings Total Attributable to equity holders of the parent Non-controlling interest Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2015 55 1,847 20 30,006 31,928 3,876 35,804
Profit and total comprehensive income for the year - - - 5,541 5,541 (131) 5,410
Dividends paid - - - (3,750) (3,750) - (3,750)
Own shares acquired by EBT - - - (1,006) (1,006) - (1,006)
Release of shares held by EBT - 52 - 536 588 - 588
Change in non-controlling interest on initial consolidation of seed fund - - - - - 417 417
Issue of units in funds to non-controlling interests - - - - - (143) (143)
Share-based payment reserve movement - - - 388 388 - 388
Transactions with shareholders - 52 - (3,832) (3,780) 274 (3,506)
As at 31 March 2016 55 1,899 20 31,715 33,689 4,019 37,708
Consolidated statement of cash flows
Year ended 31 March
2017 2016
Note £'000 £'000
Net cash inflow from operating activities 24 7,166 5,509
Cash flow from investing activities
Purchase of intangible software (189) (39)
Purchase of property, plant and equipment (899) (29)
Sale of securities - 1,462
(Purchase)/sale of money market instruments with maturity > 3 months (5,082) 5,079
Increase in cash as a result of consolidating FTSE FRB10 Index Fund - 1,968
Interest received 112 165
Net cash (outflow)/inflow from investing activities (6,058) 8,606
Cash flow from financing activities
Cash flow from redemption of units in funds (59) (143)
Exercise of share options 28 -
Purchase of own shares (221) (794)
Dividends paid to equity shareholders 8 (3,592) (3,750)
Cash outflow from financing activities (3,844) (4,687)
Net (decrease)/ increase in cash and cash equivalents in the year (2,736) 9,428
Effect of exchange rate changes 136 282
Cash and cash equivalents at the beginning of the year 21,720 12,010
Cash and cash equivalents at the end of the year 19,120 21,720
Closing cash and cash equivalents consist of:
Cash 7,457 5,439
Cash equivalents 11,663 16,281
Cash and cash equivalents 16 19,120 21,720
Company statement of financial position
As at 31 March
2017 2016
Note £'000 £'000
Non-current assets
Investments 12 4,197 3,666
Total non-current assets 4,197 3,666
Current assets
Cash and cash equivalents 16 2 2
Total current assets 2 2
Total assets 4,199 3,668
Current liabilities
Trade and other payables 17 (11) (11)
Corporation tax liabilities 17 (67) -
Total current liabilities (78) (11)
Total net assets 4,121 3,657
Equity
Issued share capital 18 55 55
Share premium account 1,809 1,809
Capital redemption reserve 20 20
Retained earnings 2,237 1,773
Total equity 4,121 3,657
During the year the Company made a total comprehensive gain of £3,855,425
(2016: £4,091,492).
Company statement of changes in equity
Year ended 31 March 2017
Called up share capital Share premium account Capital redemption reserve Retained earnings Total shareholders' equity
£'000 £'000 £'000 £'000 £'000
As at 1 April 2016 55 1,809 20 1,773 3,657
Profit and total comprehensive income for the year - - - 3,855 3,855
Dividends paid - - - (3,592) (3,592)
Share option reserve movement - - - 201 201
Transactions with shareholders - - - (3,391) (3,391)
As at 31 March 2017 55 1,809 20 2,237 4,121
Year ended 31 March 2016
Called up share capital Share premium account Capital redemption reserve Retained earnings Total shareholders' equity
£'000 £'000 £'000 £'000 £'000
As at 1 April 2015 55 1,809 20 1,191 3,075
Profit and total comprehensive income for the year - - - 4,092 4,092
Dividends paid - - - (3,750) (3,750)
Share option reserve movement - - - 240 240
Transactions with shareholders - - - (3,510) (3,510)
As at 31 March 2016 55 1,809 20 1,773 3,657
Company statement of cash flows
Year ended 31 March
2017 2016
Note £'000 £'000
Net cash outflow from operating activities 24 - (471)
Cash flow from investing activities
Dividends received 3,592 4,205
Interest received - 1
Net cash inflow from investing activities 3,592 4,206
Cash flow from financing activities
Dividends paid to equity shareholders 8 (3,592) (3,750)
Cash outflow from financing activities (3,592) (3,750)
Net decrease in cash and cash equivalents in the year - (15)
Cash and cash equivalents at the beginning of the year 2 17
Cash and cash equivalents at the end of the year 2 2
Closing cash and cash equivalents consist of:
Cash 2 2
Cash equivalents - -
Cash and cash equivalents 2 2
Notes to the financial statements
For the year ended 31 March 2017
These financial statements exclude disclosures that are both immaterial and
judged to be unnecessary to understand our results and financial position.
1. Accounting policies
In order to increase the clarity of the notes to the financial statements,
accounting policy descriptions appear at the beginning of the note to which
they relate, and are shown in italic text.
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out in the notes below. These
policies have been consistently applied to all periods presented unless
otherwise stated.
a. Accounting convention
Basis of preparation
The Group and Company have prepared their financial statements under
International Financial Reporting Standards ("IFRSs") as adopted by the
European Union. IFRSs comprise standards and interpretations approved by the
International Accounting Standards Board ("IASB") and the International
Financial Reporting Interpretations Committee ("IFRIC") as adopted in the
European Union as at 31 March 2017. The financial statements have been
prepared on a historical cost basis, modified to include fair valuation of
derivative financial instruments.
The Directors are satisfied that the Company and the Group have adequate
resources with which to continue to operate for the foreseeable future. For
this reason the financial statements have been prepared on a going concern
basis.
The preparation of financial statements in accordance with the recognition and
measurement principles set out in IFRSs requires management to make
judgements, estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and expenses. The bases
for management judgements, estimates and assumptions are discussed further in
note 2.
Impact of new accounting standards
A number of amendments to existing standards and interpretations have been
issued, some of which were mandatory for periods beginning 1 April 2016, with
the remaining becoming effective in future periods. The new standards and
amendments to existing standards effective for the year to 31 March 2017 have
not had a material impact on the financial statements of Record plc.
Standard Description Effective date
Amendments to IAS 1 (December 2014) Part of the disclosure initiative aimed at improving financial statement presentation and disclosures 1 January 2016
Standards and interpretations issued but not yet adopted
Standard Description Effective date (periods commencing on or after 1 January 2017)
IFRS 9 (July 2014) Financial instruments 1 January 2018
IFRS 15 (May 2014) Revenue from contracts with customers 1 January 2018
IFRS 16 (January 2016) Leases 1 January 2019
IFRS 9 has been endorsed by the EU and replaces the classification and
measurement models for financial instruments in IAS 39 with three
classification categories: amortised cost, fair value through profit or loss
and fair value through other comprehensive income. The Group's business model
and the contractual cash flows arising from its investments in financial
instruments determine the classification. The impact of the standard will
depend on the types of financial instruments held by the Group on adoption.
The detailed assessment of the exact impact IFRS 9 will have on the Group's
financial statements is ongoing.
IFRS 15 has been endorsed by the EU and deals with revenue recognition;
establishing principles for reporting useful information to users of financial
statements about the nature, amount, timing and uncertainty of revenue and
cash flows arising from an entity's contracts with customers. Revenue is
recognised in a manner that depicts the pattern of transfer of services to the
customer, according to a five-step model stipulated by the standard. The
standard replaces IAS 18 "Revenue" and IAS 11 "Construction contracts" and
related interpretations. The standard is effective for annual periods
beginning on or after 1 January 2018 and earlier application is permitted
subject to EU endorsement. The Group does not anticipate that IFRS 15 will
have a material impact on results. However, additional disclosures may be
required.
IFRS 16 "Leases" will replace IAS 17 "Leases". IFRS 16 requires that all
operating leases in excess of one year, where the Group is the lessee, are
included on the Group's statement of financial position. The Group will be
required to recognise a right-of-use (ROU) asset and a lease liability
(representing the obligation to make lease payments). The ROU asset will be
amortised on a straight-line basis with the interest expense on the lease
liability being measured using the effective interest method. IFRS 16 contains
optional exemptions for both short-term leases (less than 12 months) and for
small-value leases. The standard is effective for annual periods beginning on
or after 1 January 2019 and earlier application is permitted subject to EU
endorsement and the entity adopting IFRS 15 at the same time. The Group is
currently assessing the impact of IFRS 16 on its financial statements.
No other standards or interpretations issued but not yet effective are
expected to have a material impact on the Group's financial statements.
b. Basis of consolidation
The consolidated financial information contained within the financial
statements incorporates financial statements of the Company and its
subsidiaries drawn up to 31 March 2017. Subsidiaries are entities controlled
by the Company and are included from the date that control commences until the
date that control ceases. Control is achieved where the Company is exposed to
or has rights over variable returns from its involvement with the entity and
it has the power to affect returns. Where the Group controls an entity, but
does not own all the share capital of that entity, the interest of the other
shareholders' non-controlling interests is stated within equity at the
non-controlling interests' proportion of the fair value of the recognised
assets and liabilities.
An Employee Benefit Trust has been established for the purposes of satisfying
certain share-based awards. As the Group has "de facto" control over this
special purpose entity, the trust is fully consolidated within the financial
statements.
The Group has investments in three funds. These funds are held by Record plc
and represent seed capital investments by the Group. If the Group is in a
position to be able to control a fund by virtue of holding a majority of units
in the fund, then the fund is consolidated within the Group accounts. We
consider that the Group exerts such control in cases where it (either in
isolation or together with its related parties) holds a majority of units in
the fund. Such funds are consolidated either on a line-by-line basis, or if it
meets the definition of a disposal group held for sale it is classified and
accounted for on that basis. In the case that the Group does not control a
fund for the complete reporting period, then the fund is consolidated only for
the part of the reporting period for which the Group has control over the
entity.
The accounts of subsidiary undertakings, which are prepared using uniform
accounting policies, are coterminous with those of the Company apart from
those of the seeded funds which have accounting reference dates of 30
September. The consolidated financial statements incorporate the financial
performance of the seeded funds in the year ended 31 March 2017 and the
financial position of the seeded funds as at 31 March 2017.
The Company is taking advantage of the exemption under the Companies Act 2006
s408(1) not to present its individual statement of comprehensive income and
related notes that form part of the financial statements. The Group's total
comprehensive income for the year includes a profit of £3,855,425 attributable
to the Company (2016: £4,091,492).
All intra-Group transactions, balances, income, expenses and dividends are
eliminated on consolidation.
c. Foreign currencies
The financial statements are presented in sterling (£), which is the
functional currency of the parent company. Foreign currency transactions are
translated into the functional currency of the parent company using prevailing
exchange rates which are updated on a monthly basis. Foreign exchange gains
and losses resulting from the settlement of such transactions and from the
re-measurement of monetary items at year end exchange rates are recognised in
profit or loss.
d. Financial instruments
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash
flows from the financial assets expire, or when the financial asset and all
substantial risks and rewards are transferred. A financial liability is
derecognised when it is extinguished, discharged, cancelled or expires.
e. Impairment of assets
The Group assesses whether there is any indication that any of its assets have
been impaired at least annually. If such an indication exists, the asset's
recoverable amount is estimated and compared to its carrying value.
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. Impairment losses are recognised in
profit or loss.
f. Provisions and contingent liabilities
Provisions are recognised when present obligations as a result of a past event
will probably lead to an outflow of economic resources from the Group and
amounts can be estimated reliably. Timing or amount of the outflow may still
be uncertain. A present obligation arises from the presence of a legal or
constructive commitment that has resulted from past events.
Provisions are measured at the estimated expenditure required to settle the
present obligation, based on the most reliable evidence available at the
reporting date, including the risks and uncertainties associated with the
present obligation. Provisions are discounted to their present values, where
the time value of money is material. Any reimbursement that the Group can be
virtually certain to collect from a third party with respect to the obligation
is recognised as a separate asset. However, this asset may not exceed the
amount of the related provision.
All provisions are reviewed at each reporting date and adjusted to reflect the
current best estimate. In those cases where the possible outflow of economic
resources as a result of present obligations is considered improbable or
remote, no liability is recognised.
g. Equity
Share capital represents the nominal (par) value of shares that have been
issued. Share premium includes any premium received on issue of share capital.
Retained earnings includes all current and prior period retained profits and
share-based employee remuneration. All transactions with owners of the parent
are recorded separately within equity.
2. Critical accounting estimates and judgements
The estimates and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates. The
estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Note 1.b. describes the basis which the Group uses to determine whether it
controls seed funds. Note 19 covers the assumptions made in calculating the
fair value of share options offered by the Group to its employees. The
Directors have judged that the Group does not bear substantially all the risks
and rewards of ownership of its leasehold premises and therefore accounts for
the leases as operating leases as described in note 23.
3. Revenue
Revenue recognition
Revenue is recognised in profit or loss when the amount of revenue can be
measured reliably, it is probable that economic benefits will flow to the
entity, the stage of completion can be measured reliably, and the costs
incurred and costs to complete the transaction can be measured reliably also.
Management fees are accrued on a daily basis, typically based upon an agreed
percentage of the assets under management equivalents ("AUME") denominated in
the client's chosen base currency. The Group is entitled to earn performance
fees from some clients where the performance of the clients' mandates exceeds
defined benchmarks by an agreed level of outperformance over a set time
period. Performance fees are recognised at the end of each contractual
performance period as this is the first point at which the fee amount can be
estimated reliably and it is probable that the fee will be received.
Segmental analysis
The Directors, who together are the entity's Chief Operating Decision Maker,
consider that its services comprise one operating segment (being the provision
of currency management services) and that it operates in a market that is not
bound by geographical constraints. The Group provides Directors with revenue
information disaggregated by product, whilst operating costs, assets and
liabilities are presented on an aggregated basis. This reflects the unified
basis on which the products are marketed, delivered and supported.
a. Product revenues
The Group has split its currency management revenues by product. Other income
includes gains or losses from foreign exchange conversion, gains or losses on
derivative financial instruments (see note 15), gains or losses on seed
investments that have not been consolidated on a line-by-line basis and fees
from other related services.
2017 2016 13
Revenue by product type £'000 £'000
Management fees
Dynamic Hedging 5,542 5,513
Passive Hedging 12,130 9,438
Currency for Return 1,025 791
Multi-Product 4,021 5,199
Total management fee income 22,718 20,941
Performance fee income - Dynamic Hedging - 315
Other income 1,210 (122)
Total revenue 23,928 21,134
Other income includes gains attributable to the non-controlling interest's
holding in the funds of £821,769 (2016: losses of £112,274).
b. Geographical analysis
The geographical analysis of revenue is based on the destination i.e. the
location of the client to whom the services are provided. All turnover
originated in the UK.
2017 2016
Revenue by geographical region £'000 £'000
Management and performance fee income
UK 3,863 4,501
US 4,979 3,746
Switzerland 11,576 11,939
Other 2,300 1,070
Total management and performance fee income 22,718 21,256
Other income 1,210 (122)
Total revenue 23,928 21,134
Other income is not analysed by geographical region.
All of the Group's tangible non-current assets are located in the UK.
c. Major clients
During the year ended 31 March 2017, four clients individually accounted for
more than 10% of the Group's revenue. The four largest clients generated
revenues of £3.7 million, £3.4 million, £2.9 million and £2.5 million in the
year (2016: five largest clients generated revenues of £2.8 million, £2.8
million, £2.4 million, £2.4 million and £2.3 million).
4. Operating profit
Operating profit for the year is stated after charging/(crediting):
2017 2016
£'000 £'000
Staff costs 10,434 9,693
Depreciation of property, plant and equipment 99 77
Amortisation of intangibles 243 244
Auditor fees
Fees payable to the Group's auditor for the audit of the Company's annual accounts 45 45
Fees payable to the Group's auditor for the audit of subsidiary undertakings 40 39
Fees payable to the Group's auditor and its associates for other services:
Corporation tax services - 10
Audit-related assurance services 68 68
Operating lease rentals: land and buildings 502 224
Loss on forward FX contracts held to hedge cash flow 506 315
(Gain)/loss on derivative financial instruments held by seed funds (612) 178
Exchange gain on revaluation of non-controlling interests' holding in seed funds (420) (17)
Other exchange gains (450) (281)
5. Staff costs
The average number of employees, including Directors, employed by the Group
during the year was:
2017 2016
Corporate 9 9
Client relationships 14 12
Investment research 12 10
Operations 22 23
Risk management 5 4
Support 11 11
Annual average 73 69
The aggregate costs of the above employees, including Directors, were as
follows:
2017 2016
£'000 £'000
Wages and salaries 7,499 6,922
Social security costs 1,059 1,005
Pension costs 376 479
Other employment benefit costs 1,500 1,287
Aggregate staff costs 10,434 9,693
Other employment benefit costs include share-based payments, share option
costs, and costs relating to the Record plc Share Incentive Plan.
6. Taxation - Group
Current tax is the tax currently payable based on taxable profit for the year.
Current income tax assets and/or liabilities comprise those obligations to, or
claims from, fiscal authorities relating to the current or prior reporting
periods, that are unpaid at the reporting date. Current tax is payable on
taxable profit, which differs from profit or loss in the financial statements.
Calculation of current tax is based on tax rates and tax laws that have been
enacted or substantively enacted by the end of the reporting period.
The total charge for the year can be reconciled to the accounting profit as
follows:
2017 2016
£'000 £'000
Profit before taxation 8,675 6,933
Taxation at the standard rate of tax in the UK of 20% (2016: 20%) 1,735 1,387
Tax effects of:
Other disallowable expenses and non-taxable income 18 15
Capital allowances for the period (higher)/lower than depreciation (14) 26
Higher tax rates on subsidiary undertakings 11 3
Adjustments recognised in current year in relation to the current tax of prior years - 4
(Profit)/loss attributable to non-controlling interest (164) 26
Other temporary differences (46) 62
Total tax expense 1,540 1,523
The tax expense comprises:
Current tax expense 1,599 1,493
Deferred tax expense (59) 30
Total tax expense 1,540 1,523
The standard rate of UK corporation tax for the year is 20% (2016: 20%). A
full corporation tax computation is prepared at the year end. The actual
charge as a percentage of the profit before tax may differ from the underlying
tax rate. Differences typically arise as a result of capital allowances
differing from depreciation charged, and certain types of expenditure not
being deductible for tax purposes. Other differences may also arise.
The tax charge for the year ended 31 March 2017 was £1,539,580 (2016:
£1,522,827) which was 17.7% of profit before tax (2016: 22.0%).
7. Earnings per share
Basic earnings per share is calculated by dividing the profit for the
financial year attributable to equity holders of the parent by the weighted
average number of ordinary shares in issue during the year.
Diluted earnings per share is calculated as for the basic earnings per share
with a further adjustment to the weighted average number of ordinary shares to
reflect the effects of all potential dilution.
There is no difference between the profit for the financial year attributable
to equity holders of the parent used in the basic and diluted earnings per
share calculations.
2017 2016
Weighted average number of shares used in calculation of basic earnings per share 217,401,660 217,176,877
Effect of potential dilutive ordinary shares - share options 591,036 711,980
Weighted average number of shares used in calculation of diluted earnings per share 217,992,696 217,888,857
pence pence
Basic earnings per share 2.91 2.55
Diluted earnings per share 2.90 2.54
The potential dilutive shares relate to the share options granted in respect
of the Group's Share Scheme (see note 19). There were share options in place
at the beginning of the period over 13,369,249 shares. During the year
1,589,458 share options were exercised, and a further 2,320,748 share options
lapsed or were forfeited. The Group granted 4,197,521 share options with a
potentially dilutive effect during the year. Of the 13,656,564 share options
in place at the end of the period, all have a dilutive impact at the year
end.
8. Dividends
Interim and special dividends are recognised when paid and final dividends
when approved by shareholders.
The dividends paid by the Group during the year ended 31 March 2017 totalled
£3,591,603 (1.65 pence per share) which comprised a final dividend in respect
of the year ended 31 March 2016 of £1,790,888 (0.825 pence per share) and an
interim dividend for the year ended 31 March 2017 of £1,800,715 (0.825 pence
per share).
The dividends paid by the Group during the year ended 31 March 2016 totalled
£3,749,849 (1.725 pence per share) which comprised a final dividend in respect
of the year ended 31 March 2015 of £1,962,261 (0.90 pence per share) and an
interim dividend for the year ended 31 March 2016 of £1,787,588 (0.825 pence
per share).
For the year ended 31 March 2017, a final ordinary dividend of 1.175 pence per
share has been proposed and a special dividend of 0.91 pence per share has
been declared.
9. Retirement benefit obligations
The Group operates defined contribution pension plans for the benefit of
employees. The Group makes contributions to independently administered plans,
such contributions being recognised as an expense when they fall due. The
assets of the schemes are held separately from those of the Group in
independently administered funds.
The Group is not exposed to the particular risks associated with the operation
of Defined Benefit plans and has no legal or constructive obligation to make
any further payments to the plans other than the contributions due.
The pension cost charge represents contributions payable by the Group to the
funds and amounted to £375,845 (2016: £479,206).
10. Property, plant and equipment - Group
All property, plant and equipment assets are stated at cost less accumulated
depreciation. Depreciation of property, plant and equipment is provided to
write off the cost, less residual value, on a straight-line basis over the
estimated useful life:
· Leasehold improvements - period from lease commencement to the earlier
of the lease termination date and the next rent review date
· Computer equipment - 2 to 5 years
· Fixtures and fittings - 4 to 6 years
Residual values, remaining useful economic lives and depreciation methods are
reviewed annually and adjusted if appropriate. Gains or losses on disposal are
included in profit or loss.
The Group's property, plant and equipment comprise leasehold improvements,
computer equipment and fixtures and fittings. The carrying amount can be
analysed as follows:
Leasehold Computer Fixtures
improvements equipment and fittings Total
2017 £'000 £'000 £'000 £'000
Cost
At 1 April 2016 534 542 244 1,320
Additions 635 106 158 899
Disposals (534) (106) (98) (738)
At 31 March 2017 635 542 304 1,481
Depreciation
At 1 April 2016 534 483 222 1,239
Charge for the year 36 46 17 99
Disposals (534) (106) (98) (738)
At 31 March 2017 36 423 141 600
Net book amounts
At 31 March 2017 599 119 163 881
At 1 April 2016 - 59 22 81
Leasehold Computer Fixtures
improvements equipment and fittings Total
2016 £'000 £'000 £'000 £'000
Cost
At 1 April 2015 534 624 304 1,462
Additions - 24 5 29
Disposals - (106) (65) (171)
At 31 March 2016 534 542 244 1,320
Depreciation
At 1 April 2015 534 522 277 1,333
Charge for the year - 67 10 77
Disposals - (106) (65) (171)
At 31 March 2016 534 483 222 1,239
Net book amounts
At 31 March 2016 - 59 22 81
At 1 April 2015 - 102 27 129
11. Intangible assets
Intangible assets are shown at historical cost less accumulated amortisation
and impairment losses. Amortisation is charged to profit or loss on a
straight-line basis over the estimated useful lives of the intangible assets
unless such lives are indefinite. Amortisation is included within operating
expenses in the statement of comprehensive income. Intangible assets are
amortised from the date they are available for use. Useful lives are as
follows:
· Software - 2 to 5 years
Amortisation periods and methods are reviewed annually and adjusted if
appropriate.
The Group's intangible assets comprises both purchased software and the
capitalised cost of software development. The carrying amounts can be analysed
as follows:
Software Total
2017 £'000 £'000
Cost
At 1 April 2016 1,189 1,189
Additions 189 189
Disposals - -
At 31 March 2017 1,378 1,378
Amortisation
At 1 April 2016 890 890
Charge for the year 243 243
Disposals - -
At 31 March 2017 1,133 1,133
Net book amounts
At 31 March 2017 245 245
At 1 April 2016 299 299
Software Total
2016 £'000 £'000
Cost
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