REG - Record PLC - Final Results <Origin Href="QuoteRef">RECL.L</Origin> - Part 3
16/07/2015 11:05
- Part 3: For the preceding part double click ID:nRSP2338Qb
Inc. - -
Record Fund Management Limited - -
N P Record Trustees Limited - -
Total investment in subsidiaries (at cost) 30 30
Capitalised investment in respect of share-based payments
Record Currency Management (US) Inc. 76 66
Record Group Services Limited 341 184
Total capitalised investment in respect of share-based payments 417 250
Total investment in subsidiaries 447 280
Particulars of subsidiary undertakings
Name Nature of Business
Record Currency Management Limited Currency management services (FCA registered)
Record Group Services Limited Management services to other Group undertakings
Record Portfolio Management Limited Dormant
Record Currency Management (US) Inc. US advisory and service company (SEC and CFTC registered)
Record Fund Management Limited Dormant
N P Record Trustees Limited Dormant trust company
The Group's interest in the equity capital of subsidiary undertakings is 100%
of the ordinary share capital in all cases. Record Currency Management (US)
Inc. is incorporated in Delaware, and all other subsidiaries are registered in
England and Wales.
Investment in funds
In December 2010, the Company invested in the Record Currency - FTSE FRB10
Index Fund and the Record Currency - Emerging Market Currency Fund. Initially,
these were both accounted for as a disposal group held for sale. In both
cases, the Group still retained control over each of the funds twelve months
after making the original investment. Consequently both funds ceased to be
classified as held for sale and were consolidated in full, on a line by line
basis.
The Group has retained control of the Record Currency - Emerging Market
Currency Fund through the period, and it remains consolidated in full, on a
line by line basis in the Group's financial statements. The Group ceased to
control the Record Currency - FTSE FRB10 Index Fund from 1 March 2014 and no
longer consolidates this fund on a line by line basis.
The Company made a further investment in the Record Currency - Global Alpha
Fund in May 2013. This fund is consolidated in full, on a line by line
basis.
All three fund investments are presented in investments in the Company
statement of financial position.
Investment in funds 2015 2014
£'000 £'000
Record Currency - FTSE FRB10 Index Fund 1,105 1,120
Record Currency - Emerging Market Currency Fund 1,028 1,017
Record Currency - Global Alpha Fund 959 961
3,092 3,098
13. Deferred taxation - Group
Deferred tax is the future tax consequences of temporary differences between
the carrying amounts and tax bases of assets and liabilities shown on the
statement of financial position. The amount of deferred tax provided is based
on the expected manner of recovery or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at
the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. The carrying amount of the deferred tax assets are reviewed at each
statement of financial position date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all
or part of the asset to be recovered.
A deferred tax liability is generally recognised for all taxable temporary
differences.
Deferred tax assets or liabilities arising on goodwill are not recognised but
are however recognised on separately identifiable intangible assets. Deferred
tax arising on the initial recognition of an asset or liability, other than a
business combination, that at the time of the transaction affects neither the
accounting nor taxable profit or loss, is not recognised.
2015 2014
£'000 £'000
Profit and loss account movement arising during the year (85) 153
Asset brought forward 158 5
Asset carried forward 73 158
The provision for deferred taxation consists of the tax effect of temporary
differences in respect of:
2015 2014
£'000 £'000
Deferred tax allowance on unvested share options 66 159
Shortfall / (excess) of taxation allowances over depreciation on fixed assets 7 (1)
73 158
At the year end the Group had deferred tax assets of £72,518 (2014: £157,908).
At the year end there were share options not exercised with an intrinsic
value for tax purposes of £327,987 (2014: £755,687). On exercise the Group
will be entitled to a corporation tax deduction in respect of the difference
between the exercise price and the strike price. There is no unprovided
deferred taxation.
14. Trade and other receivables
Trade and other receivables are stated at their original invoice value, as the
interest that would be recognised from discounting future cash receipts over
the short credit period is not considered to be material. Individual
receivables are considered for impairment when they are past due or when other
objective evidence is received that a specific counterparty will default.
Impairment of trade receivables is presented within administrative expenses.
Group Company
2015 2014 2015 2014
£'000 £'000 £'000 £'000
Trade receivables 4,648 4,431 - -
Amounts due from Group undertaking - - - 146
Accrued income 1,078 518 - -
Other receivables 74 51 - -
Prepayments 524 646 - -
6,324 5,646 - 146
All amounts are short term. The Directors consider that the carrying amount
of trade and other receivables approximates to their fair value. All of the
Group's trade and other receivables have been reviewed for indicators of
impairment; no such indicators were noted. The Group has not renegotiated the
terms of any receivables in the year ended 31 March 2015. The carrying amount
of receivables whose terms have been renegotiated, that would otherwise be
past due or impaired is £nil (2014: £nil).
15. Derivative financial assets and liabilities
Derivative financial instruments are initially recognised at cost on the date
on which the contract is first entered into unless the fair value at
acquisition is different to cost, in which case fair value is recognised.
Subsequently they are measured at fair value with gains and losses recognised
in profit or loss. Transaction costs are immediately recognised in profit or
loss. The fair values of derivative financial instruments are determined by
reference to active market transactions.
The Group holds derivative financial instruments for two purposes. The Group
uses forward foreign exchange contracts to reduce the risk associated with
sales denominated in foreign currencies, and additionally uses both foreign
exchange options and forward foreign exchange contracts in order to achieve a
return within the seed funds. The instruments are recognised at fair value.
The fair value of the contracts is calculated using the market rates
prevailing at the period end date. The net gain or loss on instruments is
included within revenue.
Derivative financial assets 2015 2014
£'000 £'000
Forward foreign exchange contracts held to hedge cash flow 8 7
Forward foreign exchange contracts held for trading 35 153
Foreign exchange options held for trading 576 38
Total derivative financial assets 619 198
Derivative financial liabilities 2015 2014
£'000 £'000
Forward foreign exchange contracts held to hedge cash flow - (3)
Forward foreign exchange contracts held for trading - (33)
Short foreign exchange option positions held for trading (680) (86)
Total derivative financial liabilities (680) (122)
Derivative financial instruments held to hedge cash flow
At 31 March 2015 there were outstanding contracts with a principal value of
£4,260,992 (31 March 2014: £3,198,193) for the sale of foreign currencies in
the normal course of business. The fair value of the contracts is calculated
using the market forward contract rates prevailing at 31 March 2015. The Group
does not apply hedge accounting.
The net gain or loss on forward foreign exchange contracts held to hedge cash
flow is as follows:
Derivative financial instruments held to hedge cash flow 2015 2014
£'000 £'000
Net (loss) / gain on forward foreign exchange contracts at fair value through profit or loss (92) 173
Derivative financial instruments held for trading
The Record Currency - FTSE FRB10 Index Fund and the Record Currency - Emerging
Market Currency Fund, use forward foreign exchange contracts in order to
achieve a return. The Record Currency - Global Alpha Fund uses a variety of
instruments including forward foreign exchange contracts, options and futures
in order to achieve a return.
All derivative financial instruments held by the Record Currency - Global
Alpha Fund and the Record Currency - Emerging Market Currency Fund were
classified as held for trading throughout the period. The derivative
financial instruments held by the Record Currency - FTSE FRB10 Index Fund were
classified as held for trading until the fund was deconsolidated from the
Group on 1 March 2014.
At 31 March 2015 there were outstanding contracts with a principal value of
£36,120,350 (31 March 2014: £26,387,218).
The net gain or loss on derivative financial instruments held for trading for
the year was as follows:
Derivative financial instruments held for trading 2015 2014
£'000 £'000
Net loss on forward foreign exchange contracts and foreign exchange options at fair value through profit or loss (232) (283)
16. Cash management
The Group's cash management strategy employs a variety of treasury management
instruments including cash, money market deposits and treasury bills. Whilst
the Group manages and considers all of these instruments as cash, which are
subject to its own internal cash management process, not all of these
instruments are classified as cash or cash equivalents under IFRS.
IFRS defines cash and cash equivalents as cash in hand, on demand and
collateral deposits held with banks and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value. Moreover, instruments
can only generally be classified as cash and cash equivalents where they are
held for the purpose of meeting short-term cash commitments rather than for
investment or other purposes.
In the Group's judgement, bank deposit and treasury bills with maturities in
excess of 3 months do not meet the definition of short-term or highly liquid
and are held for purposes other than meeting short-term commitments. In
accordance with IFRS, these instruments are not categorised as cash or cash
equivalents and are disclosed as money market instruments with maturities >3
months.
Group Company
2015 2014 2015 2014
£'000 £'000 £'000 £'000
Bank deposits with maturities > 3 months 17,500 14,989 - -
Treasury bills with maturity > 3 months 600 499 - -
Money market instruments with maturities > 3 months 18,100 15,488 - -
Cash 2,730 1,476 17 34
Bank deposits with maturities <= 3 months 9,280 10,027 - -
Cash and cash equivalents 12,010 11,503 17 34
Total assets managed as cash 30,110 26,991 17 34
Group Company
2015 2014 2015 2014
£'000 £'000 £'000 £'000
Cash and cash equivalents - Sterling 10,525 10,827 17 34
Cash and cash equivalents - USD 818 613 - -
Cash and cash equivalents - CHF 637 32 - -
Cash and cash equivalents - other currencies 30 31 - -
12,010 11,503 17 34
Since 31 December 2011, the Group cash and cash equivalents balance has
incorporated the cash held by the Record Currency - Emerging Market Currency
Fund (refer to note 12 for explanation of accounting treatment). In May 2013
Record plc seeded the Record Currency - Global Alpha Fund with an investment
of £1,000,000 and since this time the Group has had control over this fund.
Therefore the cash and cash equivalents held by the Record Currency - Global
Alpha Fund have also been incorporated above. As at 31 March 2015, the cash
and cash equivalents held by the seed funds over which the Group had control
totalled £3,920,614 (31 March 2014: £3,434,805) and the money market
instruments with maturities > 3 months held by these funds were £599,758 (31
March 2014: £499,179).
17. Current liabilities
Trade and other payables are stated at their original invoice value, as the
interest that would be recognised from discounting future cash payments over
the short payment period is not considered to be material.
Trade and other payables
Group Company
2015 2014 2015 2014
£'000 £'000 £'000 £'000
Trade payables 181 304 - -
Amounts owed to Group undertaking - - 480 447
Other payables 1 1 1 5
Other tax and social security 312 304 - -
Accruals 2,455 2,097 - -
2,949 2,706 481 452
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
Current tax liabilities
Group Company
2015 2014 2015 2014
£'000 £'000 £'000 £'000
Corporation tax 893 832 - -
18. Called up share capital
The share capital of Record plc consists only of fully paid ordinary shares
with a par value of 0.025p each. All shares are equally eligible to receive
dividends and the repayment of capital and represent one vote at the
shareholders' meeting.
2015 2014
£'000 Number £'000 Number
Authorised
Ordinary shares of 0.025p each 100 400,000,000 100 400,000,000
Called up, allotted and fully paid
Ordinary shares of 0.025p each 55 221,380,800 55 221,380,800
Movement in Record plc shares held by the Record plc Employee Benefit Trust
("EBT")
The EBT was formed to hold shares acquired under the Record plc share-based
compensation plans. Under IFRS the EBT is considered to be under de facto
control of the Group, and has therefore been consolidated into the Group
financial statements.
Neither the purchase nor sale of own shares leads to a gain or loss being
recognised in the Group statement of comprehensive income.
Number
Record plc shares held by EBT as at 31 March 2013 3,805,808
Adjustment for net purchases by EBT 68,175
Record plc shares held by EBT as at 31 March 2014 3,873,983
Adjustment for net sales by EBT (25,921)
Record plc shares held by EBT as at 31 March 2015 3,848,062
The holding of the EBT comprises own shares that have not vested
unconditionally to employees of the Group. Own shares are recorded at cost
and are deducted from retained earnings.
Further information regarding the Record plc share-based compensation plans
and relevant transactions made during the year is included in note 19.
19. Share-based payments
During the year ended 31 March 2015 the Group has managed the following
share-based compensation plans:
a) The Group Profit Share Scheme: share awards issued under the Group
Profit Share Scheme are classified as share-based payments with cash
alternatives under IFRS 2.
b) The Record plc Share Scheme: share options issued under the Record plc
Share Scheme are classified as equity-settled share-based payments under IFRS
2.
c) The Record plc Share Incentive Plan: the Group operates the Record plc
Share Incentive Plan ("SIP"), to encourage more widespread ownership of Record
plc shares by employees. The SIP is a tax-approved scheme offering attractive
tax savings for employees retaining their shares in the scheme over the medium
to long term.
All obligations arising from the three schemes are fulfilled through
purchasing shares in the market.
a) Group Profit Share Scheme
Share-based payments with cash alternatives
These transactions are compound financial instruments, which include a debt
element and a cash element. The fair value of the debt component of the
amounts payable to the employee is calculated as the cash amount alternative
offered to the employee at grant date and the fair value of the equity
component of the amounts payable to the employee is calculated as the market
value of the share award at grant date less the cash forfeited in order to
receive the share award. The debt component is charged to profit or loss over
the period in which the award is earned and remeasured at fair value at each
reporting date. The equity component is charged to profit or loss over the
period in which the award is earned.
The Group Profit Share Scheme allocates a proportion of operating profits to a
profit share pool to be distributed between all employees of the Group. The
Remuneration Committee has the discretion to vary the proportion awarded to
the profit share pool between 25% and 35% of operating profits, with the
intention of maintaining an average level of 30% of operating profits over the
medium term. Directors and senior employees receive one third of their profit
share in cash, one third in shares ("Earned Shares") and may elect to receive
the final third as cash only or to allocate some, or all, of the amount for
the purchase of Additional Shares. The charge to profit or loss in respect of
Earned Shares in the period was £683,978 (2014: £660,043). Other employees
receive two thirds of their profit share in cash and may elect to receive the
final third as cash only or to allocate some, or all, of the amount for the
purchase of Additional Shares.
If an individual elects to receive Additional Shares, the Group simultaneously
awards a Matching Share value amount using a multiple decided by the
Remuneration Committee. The multiple is dependent on the level of seniority
of the employee. The number of shares is determined by the post-tax cash
attributed to Earned Shares plus Additional Shares plus Matching Shares
divided by the aggregate market value achieved on the purchase of all such
shares in the market. The charge to profit or loss in respect of Matching
Shares in the period was £273,155 (2014: £260,541). Shares awarded under the
Profit Share Scheme do not include any vesting restrictions but rather
restrictions over subsequent sale and transfer. All shares the subject of
share awards vest immediately and are transferred to a nominee allowing the
individual to retain full rights in respect of the shares purchased. These
shares cannot be sold, transferred or otherwise disposed of without the
consent of the Remuneration Committee except as follows:
§ Earned Shares - one third on each anniversary of the Profit Share Payment
date; and
§ Additional or Matching Shares - the third anniversary of the Profit Share
Payment date for Directors and senior employees and the second anniversary of
the Profit Share Payment date for all other employees.
The Group Profit Share Scheme rules contain claw back provisions allowing for
the repayment of profit share payments under certain circumstances including a
material breach of contract, an error in performance of duties or a
restatement of accounts which leads to a change in any prior award under the
scheme.
Shares awarded under this scheme are purchased in the market.
b) The Record plc Share Scheme
Equity-settled share-based payments
The fair value of the amounts payable to employees under these awards is
recognised as an expense over the vesting period of the award, with a
corresponding increase in equity. All such awards made by the Group involve
the parent company granting rights to its equity instruments to employees of
its subsidiary. Consequently the subsidiary measures the services received
from its employees in accordance with the above classification under IFRS 2
and recognises a corresponding increase in equity as a contribution from the
parent. The parent has the obligation to settle the transaction with the
subsidiary's employees and therefore recognises an increase in its investment
in the subsidiary and a corresponding increase in equity.
The fair value of options granted is measured at grant date using an
appropriate valuation model, taking into account the terms and conditions upon
which the instruments were granted. The fair value amounts for the options
issued since listing on the London Stock Exchange were determined using quoted
share prices.
The Record plc Share Scheme (the "Share Scheme") was adopted by the Company on
1 August 2008 and was initially created to allow deferred share awards to be
granted to new senior employees.
During 2011, the Share Scheme was amended to include the ability to grant HMRC
approved options ("Approved Options") to employees of Record plc or its
subsidiaries whilst retaining the ability to grant unapproved options
("Unapproved Options"). The exercise price per share of Approved Options must
be no lower than the market value of a share on the dealing day immediately
preceding the date of grant. Each participant may be granted Approved Options
over shares with a total market value of up to £30,000 on the date of grant.
There is no such limit on the value of grant for Unapproved Options, which may
be granted with any exercise price (including £nil), but have recently been
granted with a market value exercise price in the same way as for the Approved
Options.
Options over an aggregate of 4,327,000 shares were granted under the Share
Scheme during the year (2014: 3,560,000), of which 4,007,000 were made subject
to Unapproved Options and 320,000 to Approved Options (2014: 2,945,000 made
subject to Unapproved Options and 615,000 to Approved Options). All options
were granted with an exercise price per share equal to the share price
prevailing at the time of grant.
The 2,160,000 Unapproved Options issued on 26 November 2014 each become
exercisable in three equal tranches on the third, fourth and fifth anniversary
of the date of grant, subject to the employee being in employment with the
Group at the relevant vesting date and to the extent personal performance
conditions have been satisfied.
The 1,847,000 Unapproved Options issued on 24 March 2015 each become
exercisable in four equal tranches on the first, second, third and fourth
anniversary of the date of grant, subject to the employee being in employment
with the Group at the relevant vesting date and to the extent performance
conditions have been satisfied.
The 320,000 Approved Options issued on 24 March 2015 each become exercisable
on the fourth anniversary of the date of grant, subject to the employee being
in employment with the Group at the relevant vesting date and to the extent
performance conditions have been satisfied.
Options without performance conditions are valued using the Black-Scholes
method, options with performance conditions are valued using a risk-neutral
Monte Carlo valuation. Expected volatilities used are based on historic
volatilities.
The Group share-based payment expense in respect of the Share Scheme was
£166,587 in the year ended 31 March 2015 (2014: £155,625).
Outstanding share options
At 31 March 2015, the total number of ordinary shares of 0.025p outstanding
under Record plc share compensation schemes was 9,910,750 (2014: 6,955,000).
These deferred share awards and options are over issued shares, a proportion
of which are hedged by shares held in an Employee Benefit Trust. Details of
outstanding share options and deferred shares awarded to employees are set out
below:
Date of grant At 1 April 2014 Granted Exercised Lapsed / forfeited At 31 March 2015 Earliest vesting date Latest vesting date* Exercise price
08/08/11 750,000 - - (750,000) - 08/08/13 08/08/15 £0.3180
08/08/11 225,000 - - (75,000) 150,000 08/08/13 08/08/15 £0.3225
02/12/11 600,000 - - - 600,000 02/12/15 02/12/15 £0.1440
18/12/12 1,615,000 - - (125,000) 1,490,000 18/12/16 18/12/16 £0.3098
18/12/12 205,000 - (51,250) - 153,750 18/12/13 18/12/16 £0.3098
27/09/13 615,000 - - (135,000) 480,000 27/09/17 27/09/17 £0.3085
27/09/13 1,545,000 - - (235,000) 1,310,000 27/09/14 27/09/17 £0.3085
18/11/13 1,400,000 - - - 1,400,000 18/11/16 18/11/18 £0.3000
26/11/14 - 2,160,000 - - 2,160,000 26/11/17 26/11/19 £0.3586
24/03/15 - 320,000 - - 320,000 24/03/19 24/03/19 £0.3450
24/03/15 - 1,847,000 - - 1,847,000 24/03/16 24/03/19 £0.3450
Total options 6,955,000 4,327,000 (51,250) (1,320,000) 9,910,750
Weighted average exercise price of options £0.29 £0.35 £0.31 £0.31 £0.32
*Note that under the terms of the deeds of grants, Unapproved Options are
exercisable for a year following the vesting date and Approved Options are
exercisable for up to six years after vesting.
During the year 51,250 options granted on 18 December 2012 were exercised. The
share price at date of exercise was £0.34. At 31 March 2015 a total of 453,750
options had vested and were exercisable.
The Directors' interests in the combined share schemes are as follows:
Ordinary shares held as at
31 March 2015 31 March 2014
Record plc Group Profit Share Scheme (interest in restricted share awards)
James Wood-Collins 753,377 1,272,732
Leslie Hill 294,528 278,748
Bob Noyen 303,378 292,022
Steve Cullen 146,220 67,173
Record plc Share Scheme (interest in unvested share options)
James Wood-Collins 2,030,000 1,400,000
Leslie Hill 630,000 -
Bob Noyen 630,000 -
Steve Cullen 345,000 75,000
Performance measures
The Approved Option Scheme includes certain performance criteria. At vesting
date, a percentage of the total options granted will vest according to the
median total shareholder return ("TSR") as measured against the FTSE 350
General Financial - Price Index. The performance target table is given
below:
Percentage by which Record's TSR is below the median TSR performance of the Index Percentage of shares subject to the award which vest
Equal to or above the median TSR performance 100%
Equal to or above 75% of the median TSR performance 75%
Equal to or above 50% of the median TSR performance 50%
Below 50% of the median TSR performance 0%
Grants of options made to Board Directors under the Unapproved Option Scheme
include certain performance criteria and claw back provisions. At vesting
date, a percentage of the total options granted will vest according to the
average growth in Earnings Per Share ("EPS") over a three year period, as
follows:
Record's 3 year average EPS growth Percentage of shares subject to the award which vest
>RPI growth + 13% 100%
>RPI growth + 10%, = RPI growth + 7%, = RPI growth + 4%, = 3 months 18,100 15,488
Cash and cash equivalents 12,010 11,503
39,096 34,943
The debtors' age analysis is also evaluated on a regular basis for potential
doubtful debts. It is management's opinion that no provision for doubtful
debts is required. The table below is an analysis of trade receivables and
accrued income by due date:
Carrying amount Neither impaired nor past due 0-3 months past due More than 3 months past due
At 31 March 2015 £'000 £'000 £'000 £'000
Trade receivables 4,648 4,648 - -
Accrued income 1,078 1,078 - -
5,726 5,726 - -
100% 0% 0%
Carrying amount Neither impaired nor past due 0-3 months past due More than 3 months past due
At 31 March 2014 £'000 £'000 £'000 £'000
Trade receivables 4,431 4,226 205 -
Accrued income 518 518 - -
4,949 4,744 205 -
96% 4% 0%
The Group offers standard credit terms of 30 days from invoice date. It is
the Group's policy to assess debtors for recoverability on an individual basis
and to make a provision where it is considered necessary. In assessing
recoverability the Group takes into account any indicators of impairment up
until the reporting date. The application of this policy generally results in
debts between 0-3 months overdue not being provided for unless individual
circumstances indicate that a debt is impaired.
Trade receivables are made up of 44 debtors' balances (2014: 42). The largest
individual debtor corresponds to 17% of the total balance (2014: 20%). Debtor
days, based on the generally accepted calculation of debtor days, is 82 days
(2014: 80 days). This reflects the quarterly billing cycle used by the Group
for the vast majority of its fees. As at 31 March 2015 no debt was overdue
(2014: 4%). No debtors' balances have been renegotiated during the year or in
the prior year.
Liquidity risk
The Group is exposed to liquidity risk, namely that it may be unable to meet
its payment obligations as they fall due. The Group maintains sufficient cash
and marketable securities to be able to meet all such obligations. Management
review cash flow forecasts on a regular basis to determine whether the Group
has sufficient cash reserves to meet the future working capital requirements
and to take advantage of business opportunities. The average creditor payment
period is 15 days (2014: 24 days).
Contractual maturity analysis for financial liabilities:
Carrying amount Due or due in less than 1 month Due between 1 and 3 months Due between 3 months and 1 year
At 31 March 2015 £'000 £'000 £'000 £'000
Trade and other payables 181 117 14 50
Accruals 2,455 129 1,254 1,072
Derivative financial liabilities 680 70 344 266
Carrying amount Due or due in less than 1 month Due between 1 and 3 months Due between 3 months and 1 year
At 31 March 2014 £'000 £'000 £'000 £'000
Trade and other payables 305 305 - -
Accruals 2,097 146 1,080 871
Derivative financial liabilities 122 110 8 4
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or
cash flows associated with the instrument will fluctuate due to changes in
market interest rates. Interest rate risk arises from interest bearing
financial assets and liabilities used by the Group. Interest bearing assets
comprise money market instruments and cash and cash equivalents which are
considered to be short-term liquid assets. It is the Group's policy to settle
trade payables within the credit terms allowed and the Group does not
therefore incur interest on overdue balances.
A sensitivity analysis has not been disclosed for the impact of interest rate
changes as any reasonable range of change in interest rate would not directly
have a material impact on profit or equity.
Interest rate profiles
Fixed rate Floating rate No interest rate Total
At 31 March 2015 £'000 £'000 £'000 £'000
Financial assets
Investment in Record Currency - FTSE FRB10 Index fund - - 1,105 1,105
Securities (TIPS) - 1,462 - 1,462
Trade receivables - - 4,648 4,648
Accrued income - - 1,078 1,078
Other receivables - - 74 74
Derivative financial assets at fair value through profit or loss - - 619 619
Money market instruments with maturities > 3 months 18,100 - - 18,100
Cash and cash equivalents 9,280 2,730 - 12,010
Total financial assets 27,380 4,192 7,524 39,096
Financial liabilities
Trade and other payables - - (181) (181)
Accruals - - (2,455) (2,455)
Derivative financial liabilities at fair value through profit or loss - - (680) (680)
Total financial liabilities - - (3,316) (3,316)
Fixed rate Floating rate No interest rate Total
At 31 March 2014 £'000 £'000 £'000 £'000
Financial assets
Investment in Record Currency - FTSE FRB10 Index fund - - 1,120 1,120
Securities (TIPS) - 1,634 - 1,634
Trade receivables - - 4,431 4,431
Accrued income - - 518 518
Other receivables - - 51 51
Derivative financial assets at fair value through profit or loss - - 198 198
Money market instruments with maturities > 3 months 15,488 - - 15,488
Cash and cash equivalents 10,027 1,476 - 11,503
Total financial assets 25,515 3,110 6,318 34,943
Financial liabilities
Trade and other payables - - (305) (305)
Accruals - - (2,097) (2,097)
Derivative financial liabilities at fair value through profit or loss - - (122) (122)
Total financial liabilities - - (2,524) (2,524)
Foreign currency risk
Foreign currency risk refers to the risk that the value of a financial
commitment or recognised asset or liability will fluctuate due to changes in
foreign currency rates. The Group makes use of forward foreign exchange
contracts to manage the risk relating to future transactions in accordance
with the Group's risk management policy.
The Group is exposed to foreign currency risk on sales and cash holdings that
are denominated in a currency other than Sterling, and also on assets and
liabilities on assets and liabilities held by the Record Currency - Global
Alpha Fund. The principal currencies giving rise to this risk are the US
Dollar, the Swiss Franc, the Euro and the Canadian Dollar.
In the year ended 31 March 2015, the Group invoiced the following amounts in
currencies other than Sterling:
Local currency value Value in reporting currency
'000 £'000
Swiss Franc (CHF) 11,858 7,852
US Dollar (USD) 9,654 6,072
Euro (EUR) 1,105 852
Canadian Dollar (CAD) 660 361
Singapore Dollar (SGD) 35 17
15,154
The value of revenues for the year ended 31 March 2015 that were denominated
in currencies other than Sterling was £15.2 million (72% of total revenues).
For the year ended 31 March 2014: £14.7 million (74% of total revenues).
Record's policy is to reduce the risk associated with the Group's sales
denominated in foreign currencies by using forward fixed rate currency sales
contracts, taking into account any forecast foreign currency cash flows.
The spot transactions relating to the maturity of these forward foreign
exchange contracts are expected to occur within the next three months.
Changes in the fair values of forward foreign exchange contracts are
recognised directly in profit or loss.
Of the cash denominated in currencies other than Sterling (refer to note 16),
only the cash holdings of the Record Currency - Global Alpha Fund (totalling
£807,607) are not covered by the Group's hedging process, therefore the
Directors consider that the foreign currency risk on cash balances is not
material.
The Group is exposed to foreign currency risk on all the assets and
liabilities held by the Record Currency - Global Alpha Fund, which are
consolidated into the Group Accounts. A sensitivity analysis of the impact of
the valuation of the net assets of this seed fund are provided below.
Foreign currency risk - sensitivity analysis
The Group has considered the sensitivity to exchange rate movements by
considering the impact on those revenues, costs and assets denominated in
foreign currencies as experienced in the given period. The sensitivity
analyses below do not consider the impact of exchange rate movements on the
underlying portfolios of our clients which would affect the quantum of fees
earned.
Impact on profit after tax for the year ended 31 March Impact on total equity as at 31 March
2015 2014 2015 2014
£'000 £'000 £'000 £'000
10% weakening in the £/$ exchange rate 588 520 588 520
10% strengthening in the £/$ exchange rate (588) (520) (588) (520)
10% weakening in the £/CHF exchange rate 505 295 505 295
10% strengthening in the £/CHF exchange rate (505) (295) (505) (295)
Sterling/US Dollar exchange rate
The impact of a change of 10% has been selected as this is considered
reasonable given the current level of exchange rates and the volatility
observed both on a historical basis and market expectations for future
movement. When applied to the average Sterling/USD exchange rate of $1.61/£
this would result in a weakened exchange rate of $1.47/£ and a strengthened
exchange rate of $1.79/£.
Sterling/Swiss Franc exchange rate
The impact of a change of 10% has been selected as this is considered
reasonable given the current level of exchange rates and the volatility
observed both on a historical basis and market expectations for future
movement. When applied to the average Sterling/CHF exchange rate of CHF1.50/£
this would result in a weakened exchange rate of CHF1.36/£ and a strengthened
exchange rate of CHF1.67/£.
Sensitivity analyses have not been disclosed for other currencies as any
reasonable range of change in exchange rate would not have a material impact
on profit or equity.
Emerging Market Currency Fund
The Group seeded a product in December 2010 called the Record Currency -
Emerging Market Currency Fund, which manages a portfolio of emerging market
currency deliverable forward exchange contracts and emerging market currency
non-deliverable forward exchange contracts in order to achieve a return. As
Record plc exerts control over the fund, it has been consolidated into the
Group's primary statements. The net assets of the fund at 31 March 2015 were
£3,714,107 (2014: £3,505,641). The Group has provided the following data in
respect of sensitivity to this product:
Impact on profit after tax for the year ended 31 March Impact on total equity as at 31 March
2015
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