REG - Record PLC - Final Results <Origin Href="QuoteRef">RECL.L</Origin> - Part 4
16/06/2017 07:05
- Part 4: For the preceding part double click ID:nRSP2591Ic
- (2,655) (2,655)
Fixed rate Floating rate No interest rate Total
At 31 March 2016 £'000 £'000 £'000 £'000
Financial assets
Trade receivables - - 4,027 4,027
Accrued income - - 1,055 1,055
Other receivables - - 25 25
Derivative financial assets at fair value through profit or loss - - 106 106
Money market instruments with maturities > 3 months 13,020 - - 13,020
Cash and cash equivalents 16,281 5,439 - 21,720
Total financial assets 29,301 5,439 5,213 39,953
Financial liabilities
Trade payables - - (171) (171)
Accruals - - (1,951) (1,951)
Derivative financial liabilities at fair value through profit or loss - - (108) (108)
Total financial liabilities - - (2,230) (2,230)
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 held by the Record Currency - Strategy Development Fund (formerly
Global Alpha Fund). The principal currencies giving rise to this risk are the
US dollar, the Swiss franc, the euro and the Canadian dollar.
During the year ended 31 March 2017, the Group invoiced the following amounts
in currencies other than sterling:
Local currency value Value in reporting currency
'000 £'000
Swiss franc (CHF) 14,083 11,021
US dollar (USD) 8,046 6,297
Euro (EUR) 2,055 1,750
Canadian dollar (CAD) 660 390
Swedish Krona (SEK) 482 43
Singapore dollar (SGD) 36 20
19,521
The value of revenues for the year ended 31 March 2017 that were denominated
in currencies other than sterling was £19.5 million (31 March 2016: £16.7
million).
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 settlement of these forward foreign exchange contracts is expected to
occur within the following 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 - Strategy Development Fund
(totalling £1,042,229) 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 - Strategy Development Fund, which are
consolidated into the Group financial statements. The impact of the valuation
of the net assets of this seed fund is incorporated into the analysis of
sensitivity to the sterling / US dollar rate below.
Foreign currency risk - sensitivity analysis
The Group has considered the sensitivity to exchange rate movements by
considering the impact on those revenues, costs, assets and liabilities
denominated in foreign currencies as experienced in the given period.
Impact on profit after tax Impact on total equity
for the year ended 31 March as at 31 March
2017 2016 2017 2016
£'000 £'000 £'000 £'000
10% weakening in the £/$ exchange rate 673 653 673 653
10% strengthening in the £/$ exchange rate (673) (653) (673) (653)
10% weakening in the £/CHF exchange rate 682 583 682 583
10% strengthening in the £/CHF exchange rate (682) (583) (682) (583)
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 on a historical basis and market expectations for future movement.
When applied to the average sterling/USD exchange rate of $1.30/£ this would
result in a weakened exchange rate of $1.19/£ and a strengthened exchange rate
of $1.44/£.
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 on a historical basis and market expectations for future movement.
When applied to the average sterling/CHF exchange rate of CHF1.29/£ this would
result in a weakened exchange rate of CHF1.17/£ and a strengthened exchange
rate of CHF1.43/£.
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 2017 were
£5,411,855 (2016: £4,583,029).
The Group is not materially exposed to any of the 19 Emerging Market
currencies traded in its portfolio, but the Group has considered sensitivity
to Emerging Market currencies as a group in the following table:
Impact on profit after tax for the year ended 31 March Impact on total equity
as at 31 March
2017 2016 2017 2016
£'000 £'000 £'000 £'000
10% depreciation in the Emerging Market portfolio (490) (412) (490) (412)
10% appreciation in the Emerging Market portfolio 490 412 490 412
The impact of a change to the portfolio value of 10% has been selected as this
is considered reasonable given the current level of exchange rates and the
volatility observed on a historical basis and expectations for future movement
in emerging markets.
22. Fair value measurement
The following table presents financial assets and liabilities measured at fair
value in the consolidated statement of financial position in accordance with
the fair value hierarchy. This hierarchy groups financial assets and
liabilities into three levels based on the significance of inputs used in
measuring the fair value of the financial assets and liabilities. The fair
value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2: inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The level within which the financial asset or liability is classified is
determined based on the lowest level of input to the fair value measurement.
The financial assets and liabilities measured at fair value in the statement
of financial position are grouped into the fair value hierarchy as follows:
2017 Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for hedging 18 - 18 -
Forward foreign exchange contracts used for seed funds 35 - 35 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging (5) - (5) -
Forward foreign exchange contracts used for seed funds (43) - (43) -
Total 5 - 5 -
2016 Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for seed funds 106 - 106 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging (108) - (108) -
Total (2) - (2) -
There have been no transfers between levels in the reporting period (2016:
none).
Basis for classification of financial instruments classified as level 2 within
the fair value hierarchy
Both forward foreign exchange contracts and options are classified as level 2.
Both of these instruments are traded on an active market. Options are valued
using an industry standard model with inputs based on observable market data
whilst the fair value of forward foreign exchange contracts may be established
using interpolation of observable market data rather than from a quoted
price.
Classes and fair value of financial instruments
It is the Directors' opinion that the carrying value of all financial
instruments approximates to their fair value.
Categories of financial instrument
Loans and receivables Financial liabilities measured at amortised cost Assets at fair value through profit or loss Liabilities at fair value through profit or loss
At 31 March 2017 Note £'000 £'000 £'000 £'000
Trade and other receivables (excludes prepayments) 14 6,051 - - -
Money market instruments with maturities > 3 months 16 18,102 - - -
Cash and cash equivalents 16 19,120 - - -
Derivative financial assets at fair value through profit or loss 15 - - 53 -
Trade payables 17 - (418) - -
Accruals 17 - (2,189) - -
Derivative financial liabilities at fair value through profit or loss 15 - - - (48)
Total 43,273 (2,607) 53 (48)
Loans and receivables Financial liabilities measured at amortised cost Assets at fair value through profit or loss Liabilities at fair value through profit or loss
At 31 March 2016 Note £'000 £'000 £'000 £'000
Trade and other receivables (excludes prepayments) 14 5,107 - - -
Money market instruments with maturities > 3 months 16 13,020 - - -
Cash and cash equivalents 16 21,720 - - -
Derivative financial assets at fair value through profit or loss 15 - - 106 -
Trade payables 17 - (171) - -
Accruals 17 - (1,951) - -
Derivative financial liabilities at fair value through profit or loss 15 - - - (108)
Total 39,847 (2,122) 106 (108)
23. Operating lease commitments
Leases in which substantially all the risks and rewards are retained by the
lessor are classified as operating leases. Payments made under these operating
leases are recognised in profit or loss on a straight-line basis over the term
of the lease. Benefits received as an incentive to sign a lease, whatever form
they may take, are credited to profit or loss on a straight-line basis over
the lease term.
On 25 January 2006, the Group signed a ten year lease on premises at First
Floor, Morgan House, Madeira Walk, Windsor, at an annual commitment of
£229,710 per annum and this expired on 19 June 2016. On 20 May 2016, a lease
extension was signed allowing the business to remain in its current offices
from 20 June 2016, for a maximum of nine months to 20 March 2017.
Simultaneously, an agreement for lease was signed on alternative space in the
same building, subject to the completion of refurbishment works, allowing the
business to remain in the same building until September 2022.
On 7 September 2016, the Group signed a new lease on premises at Second and
Third Floors, Morgan House, Madeira Walk, Windsor, at an annual commitment of
£507,603 per annum, expiring 1 September 2022. On 28 November 2016 staff
relocated from First Floor, Morgan House to the new offices on Second and
Third Floor, Morgan House. The lease extension for First Floor, Morgan House
was terminated on 30 November 2016.
On 16 March 2016, the Group signed a three year lease on premises in New York
City, at an average annual commitment of $125,840 per annum.
The Group has considered the risks and rewards of ownership of the leased
properties, and considers that they remain with the lessors. Consequently,
all property leases are recognised as operating leases.
At 31 March 2017 the Group had commitments under non-cancellable operating
leases relating to land and buildings as set out below:
2017 2016
£'000 £'000
Not later than one year 608 143
Later than one year and not later than five years 2,134 177
Later than five years 211 -
Total 2,953 320
24. Cash flow from operating activities
This note should be read in conjunction with the cash flow statements. It
provides a reconciliation to show how operating profit, which is based on
accounting rules, translates to cash flows.
Group
2017 2016
£'000 £'000
Operating profit 8,563 6,790
Adjustments for non-cash movements:
Depreciation of property, plant and equipment 99 77
Amortisation of intangible assets 243 244
Net release of shares previously held by EBT 587 374
Share-based payments 24 388
Other non-cash movements (146) (282)
9,370 7,591
Changes in working capital
(Increase)/decrease in receivables (1,268) 610
Increase/(decrease) in payables 641 (600)
Decrease in other financial assets 53 1,182
Decrease in other financial liabilities (60) (1,664)
Cash inflow from operating activities 8,736 7,119
Corporation taxes paid (1,570) (1,610)
Net cash inflow from operating activities 7,166 5,509
Company
2017 2016
£'000 £'000
Operating profit/(loss) 330 (114)
Adjustment for:
(gain)/loss on investments (330) 113
Changes in working capital
Decrease in payables - (470)
Cash outflow from operating activities - (471)
Corporation taxes paid - -
Net cash outflow from operating activities - (471)
25. Related parties transactions
Company
Details of transactions between the Company and other Group undertakings,
which are related parties of the Company, are shown below:
Transactions with subsidiaries
The Company's subsidiary undertakings are listed in note 12, which includes a
description of the nature of their business.
2017 2016
£'000 £'000
Amounts due to subsidiaries (11) (11)
Net dividends received from subsidiaries 3,592 4,205
Amounts owed to and by related parties will be settled in cash. No guarantees
have been given or received. No provisions for doubtful debts have been raised
against amounts outstanding (2016: £nil). No expense has been recognised
during the period in respect of bad or doubtful debts due from related
parties.
Group
Transactions or balances between Group entities have been eliminated on
consolidation and in accordance with IAS 24, are not disclosed in this note.
Key management personnel compensation
2017 2016
£'000 £'000
Short-term employee benefits 4,651 3,894
Post-employment benefits 184 280
Share-based payments 1,387 989
Total 6,222 5,163
The dividends paid to key management personnel in the year ended 31 March 2017
totalled £1,915,103 (2016: £1,963,285).
Directors' remuneration
2017 2016
£'000 £'000
Emoluments (excluding pension contribution) 2,571 2,326
Pension contribution (including payments made in lieu of pension contributions) 164 150
Aggregate emoluments of the Directors 2,735 2,476
During the year, one Director of the Company (2016: three) participated in the
Group Personal Pension Plan, a defined contribution scheme.
Transactions with seeded funds
From time to time, the Group injects capital into funds operated by the Group
to trial new products (seed capital). If the Group is able to exercise control
over such a seeded fund by holding a majority interest (whether the majority
interest is held by Record plc alone, or by combining the interests of Record
plc and its Directors), then the fund is considered to be a related party.
Record Currency - Strategy Development Fund (formerly Global Alpha Fund) and
Record Currency - Emerging Market Currency Fund are both related parties on
this basis. Similarly, the Record Currency - FTSE FRB10 Index Fund has been a
related party since the Record plc holding became a majority interest as a
result of a divestment of an external investment from the fund. There were no
transactions between the Company and these funds during the year.
26. Capital management
The Group's objectives when managing capital are (i) to safeguard the Group's
ability to continue as a going concern, (ii) to provide an adequate return to
shareholders, and (iii) to meet regulatory capital requirements set by the UK
Financial Conduct Authority.
The Group sets the amount of capital in proportion to risk. The Group manages
the capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. In
order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders, or
issue new shares. The Group had no debt in the current or prior financial year
and consequently does not calculate a debt-to-adjusted capital ratio.
The Group's capital is managed within the categories set out below:
2017 2016
£m £m
Regulatory capital 8.9 8.5
Other operating capital 24.6 22.2
Operating capital 33.5 30.7
Seed capital 3.3 3.0
Total capital 36.8 33.7
Operating capital is intended to cover the regulatory capital requirement plus
capital required for day to day operational purposes and other investment
purposes. The Directors consider that the other operating capital
significantly exceeds the actual day to day operational requirements.
Seed capital is the capital deployed to support the growth of new funds. Seed
capital is limited to 15% of the Group's total capital.
For regulatory capital purposes Record plc is subject to consolidated
financial supervision by the Financial Conduct Authority ("FCA"). Our
regulatory capital requirements are in accordance with FCA rules and
consistent with the Capital Requirements Directive. Our financial resources
have exceeded our financial resource requirements (regulatory capital
requirements) at all times during the year. Further information is provided in
the Business Review.
27. Ultimate controlling party
As at 31 March 2017 the Company had no ultimate controlling party, nor at 31
March 2016.
28. Post reporting date events
No adjusting or significant non-adjusting events have occurred between the
reporting date and the date of authorisation.
29. Statutory Accounts
This statement was approved by the Board on 15 June 2017. The financial
information set out above does not constitute the Company's statutory
accounts.
The statutory accounts for the financial year ended 31 March 2016 have been
delivered to the Registrar of Companies, and those for the year ended in 31
March 2017 will be delivered in due course. The auditor has reported on those
accounts; the reports were unqualified, did not include a reference to any
matters to which the auditor drew attention by way of emphasis without
qualifying the report, and did not contain statements under section 498(2) or
498(3) of the Companies Act 2006 in respect of either set of accounts.
Product classification
Record has historically reported AUME and management fees between four core
products, being Dynamic Hedging, Passive Hedging, Currency for Return and Cash
and other.
However, clients may also elect for mandates with combined hedging and
return-seeking objectives, which cannot readily be separated into hedging and
return-seeking components. Therefore, to reflect such mandates held not only
with current clients but also with potential future clients, a new product
category has been introduced: Multi-product mandates. This new classification
does not represent a new service line, rather seeks to redefine the boundaries
between existing products, and combinations of products.
To assist in understanding the changes, AUME, management fees and management
fee rates by product have been presented under both historic and revised
conventions.
AUME for the Multi-product classification is based on the mandate size of
those mandates, in order to maintain the clear link between AUME, fee levels
and management fees. This change in definition gives rise to an AUME
adjustment in the reconciliation below of -$1.5 billion as at 31 March 2017
(31 March 2016: -$0.8 billion). These adjustments do not represent a genuine
AUME flow.
Historic presentation Mandate reclassification AUME re-definition Revised presentation
AUME Mar-16 Mar-17 Mar-16 Mar-17 Mar-16 Mar-17 Mar-16 Mar-17
US$ billion
Dynamic Hedging 7.9 8.7 -1.8 -2.4 0.0 0.0 6.1 6.3
Passive Hedging 43.8 48.7 -0.4 -0.5 0.0 0.0 43.4 48.2
Currency for Return 1.8 2.1 -1.2 -1.1 0.0 0.0 0.6 1.0
Multi-product N/a N/a 3.4 4.0 -0.8 -1.5 2.6 2.5
Cash and other 0.2 0.2 0.0 0.0 0.0 0.0 0.2 0.2
Total 53.7 59.7 0.0 0.0 -0.8 -1.5 52.9 58.2
Management fees FY-16 FY-17 FY-16 FY-17 FY-16 FY-17
£ million
Dynamic Hedging 8.3 8.4 -2.8 -2.8 5.5 5.6
Passive Hedging 9.4 12.1 0.0 0.0 9.4 12.1
Currency for Return 3.2 2.2 -2.4 -1.2 0.8 1.0
Multi-product N/a N/a 5.2 4.0 5.2 4.0
Total 20.9 22.7 0.0 0.0 20.9 22.7
Management fee rates - bps per annum FY-16 FY-17 FY-16 FY-17
Dynamic Hedging 15 14 13 12
Passive Hedging 3 3 3 4
Currency for Return 15 13 20 15
Multi-product N/a N/a 19 20
Notes to Editors
This announcement includes information with respect to Record's financial
condition, its results of operations and business, strategy, plans and
objectives. All statements in this document, other than statements of
historical fact, including words such as "anticipates", "expects", "intends",
"plans", "believes", "seeks", "estimates", "may", "will", "continue",
"project" and similar expressions, are forward-looking statements.
These forward-looking statements are not guarantees of the Company's future
performance and are subject to risks, uncertainties and assumptions that could
cause the actual future results, performance or achievements of the Company to
differ materially from those expressed in or implied by such forward-looking
statements.
The forward-looking statements contained in this document are based on
numerous assumptions regarding Record's present and future business and
strategy and speak only as at the date of this announcement.
The Company expressly disclaims any obligation or undertaking to disseminate
any updates or revisions to any forward-looking statements contained in this
announcement whether as a result of new information, future events or
otherwise.
The information contained within this announcement is deemed by the Group to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via
Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.
1 As a currency manager Record manages only the impact of foreign exchange
and not the underlying assets, therefore its "assets under management" are
notional rather than tangible. To distinguish this from the AUM of
conventional asset managers, Record uses the concept of Assets Under
Management Equivalents ("AUME") and by convention this is quoted in US
dollars.
2 "Own cash" includes Group assets managed as cash excluding non-controlling
interests
3 "Own cash" includes Group assets managed as cash excluding non-controlling
interests (see Financial statements note 16)
4 During the year ended 31 March 2017, Record introduced a new product
category ("Multi-product") in order to redefine the boundaries between
existing products, and combinations of products, and redefined how AUME is
measured for this new category. A full reconciliation of AUME under the new
classification and the historic classifications is provided after the notes to
the financial statements. All AUME data in the main body of this report is
provided using the new classification basis.
5 The Group uses non-GAAP measures such as "underlying revenue" and
"underlying operating profit". These measures are calculated by removing the
impact of non-controlling interests from the normal GAAP measures presented in
the financial statements calculated in accordance with IFRS. The Group
believes that these non-GAAP measures provide a useful indication of the
performance of the business.
6 Underlying operating profit margin is a non-GAAP measure which
represents the results prior to consolidating the non-controlling interest.
This reflects internal management reporting which management consider to be
more indicative of the revenues and costs driving future profitability and
cash flows of the business.
7 FTSE FRB10 Index Fund return data is since inception in December 2010, GBP
base.
8 Record Currency - Emerging Market Currency Fund return data is since
inception in December 2010, GBP base.
9 FTSE Currency FRB10 GBP Excess return data is since December 1987, GBP
base.
10 Currency Value return data is since inception in July 2012, CAD base.
11 Currency Momentum return data is since inception in July 2012, CAD base.
12 Record Multi-Strategy composite is since inception in July 2012, showing
excess returns data gross of fees in USD base.
13 . During the year, the Group introduced a new product classification
(Multi-product), and has restated the prior year analysis on the revised
basis. A full reconciliation of the analysis under historic classification to
the revised classification is provided after the notes to the financial
statements.
14 Under the terms of the deeds of grants, options are exercisable for a
year following the vesting date.
This information is provided by RNS
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