REG - Record PLC - Final Results
21/06/2022 07:00
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RNS Number : 5488P Record PLC 21 June 2022
PRESS RELEASE
Record plc
21 June 2022
FINAL RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 MARCH 2022
New strategy delivers significant increases in revenue, operating margin,
profit and earnings, with increased final dividend and special dividend
declared
Record plc, the specialist currency and derivatives manager, today announces
its audited results for the year ended 31 March 2022.
Financial headlines:
§ 38% increase in revenue to £35.1m (FY-21: £25.4m)
§ 76% increase in Profit Before Tax (PBT) to £10.9m (FY-21: £6.2m)
§ 7% increase in operating profit margin to 31% (FY-21: 24%)
§ 57% increase in proposed final ordinary dividend of 1.80p per share
(FY-21: 1.15p); total ordinary dividend for the year of 3.60p per share
(FY-21: 2.30p)
§ 104% increase in special dividend for the year to 0.92p per share
(FY-21: 0.45p)
Key developments:
§ Material growth in management fees diversified across all current
product lines.
§ Momentum in AUME growth continues with a 4% increase to $83.1bn,
including net inflows of $2.4bn.
§ Inflows into both new and existing higher revenue-margin products
increases operating margin, following transitional year of change and
investment in FY-21.
§ Collaboration with specialist partners and clients opens new
opportunities for growth and diversification of products and geographies.
§ Successful launch of new Sustainable Finance product in the year in
collaboration with UBS Global Wealth Management adds to an increasingly
diversified suite of products.
§ Move towards broader asset management expertise with growth of asset
management team.
(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.
Commenting on the results, Neil Record, Chairman of Record plc, said:
"The year has provided an outstanding set of results, which underlines the
confidence shown by the Board in the new strategy and the leadership under
Leslie Hill and her senior team.
Commenting on the results, Leslie Hill, CEO of Record plc, said:
"We remain focused on building upon this momentum with further diversification
of products and revenue streams as we move from a pure currency management
specialist to having a broader offering in the alternative asset management
space. Whilst our core skills in currency and derivatives will continue to
provide an important and robust source of hedging revenue, our focus on
innovating and collaborating on higher revenue-margin products will continue
to increase our profitability, as evidenced this year by the increase in our
operating margin.
"Our approach of partnering with clients and with likeminded specialists in
alternative assets to collaborate on new and innovative products has already
provided results in the form of the successful launch of the Record EM
Sustainable Finance Fund during the year. We are confident this approach
will continue to provide opportunities for the development of relevant and
well-rewarded products to satisfy specific client demand.
"Notwithstanding a particularly challenging environment over the last two
years brought about by the pandemic and more recently the war in Ukraine, the
Group has not changed its dividend policy, has continued to pay dividends, to
be self-financing, cash-generative and completely independent with no external
debt.
"We remain confident that the strategy will continue to deliver against its
long-term goal of achieving material growth and a stronger and more
diversified business. Against this backdrop, the Board has recommended
payment of an increased final ordinary dividend and also a special dividend in
line with the Group's capital and dividend policy."
Analyst presentation
There will be a presentation for analysts at 9.30am on Tuesday 21 June 2022
held via a Zoom call. Please contact the team at Buchanan via
record@buchanan.uk.com for further details. A copy of the presentation
will be made available on the Group's website at www.recordcm.com
(http://www.recordcm.com) .
For further information, please contact:
Record plc +44 (0) 1753 852222
Neil Record - Chairman
Leslie Hill - Chief Executive Officer
Steve Cullen - Chief Financial Officer
Buchanan +44 (0) 20 7466 5163
Giles Stewart
Simon Compton
Henry Wilson
George Beale
Consolidated statement of comprehensive income
Year ended 31 March 2022
2022 2021
£'000 £'000
Revenue 35,152 25,412
Cost of sales (219) (399)
Gross profit 34,933 25,013
Administrative expenses (23,726) (18,934)
Other income or expense (372) 41
Operating profit 10,835 6,120
Finance income 44 71
Finance expense (23) (38)
Profit before tax 10,856 6,153
Taxation (2,225) (802)
Profit after tax 8,631 5,351
Total comprehensive income for the year 8,631 5,351
Profit and total comprehensive income for the year attributable to
Owners of the parent 8,631 5,351
Total comprehensive income for the year 8,631 5,351
Earnings per share for profit attributable to the equity holders of the parent
during the year
Basic earnings per share 4.52 2.75
Diluted earnings per share 4.37 2.73
Consolidated statement of financial position
As at 31 March 2022
2022 2021
£'000 £'000
Non‑current assets
Intangible assets 562 420
Right‑of‑use assets 1,421 684
Property, plant and equipment 401 683
Investments 3,447 3,046
Deferred tax assets 253 212
Total non‑current assets 6,084 5,045
Current assets
Trade and other receivables 9,883 8,006
Derivative financial assets - 260
Money market instruments with maturities > 3 months 13,913 12,932
Cash and cash equivalents 3,345 6,847
Total current assets 27,141 28,045
Total assets 33,225 33,090
Current liabilities
Trade and other payables (4,721) (3,426)
Corporation tax liabilities (924) (315)
Provisions (75) -
Lease liabilities (366) (539)
Financial liabilities - (1,696)
Derivative financial liabilities (124) (16)
Total current liabilities (6,210) (5,992)
Non-current liabilities
Provisions (125) (200)
Lease liabilities (960) (99)
Total non-current liabilities (1,085) (299)
Total net assets 25,930 26,799
Equity
Issued share capital 50 50
Share premium account 3,238 2,418
Capital redemption reserve 26 26
Retained earnings 22,616 24,305
Equity attributable to owners of the parent 25,930 26,799
Total equity 25,930 26,799
CHAIRMAN'S STATEMENT
"While the general economic, political and security environment has noticeably
worsened in the past year, Record plc has enjoyed contrasting fortunes with
strong rises in its revenues and profits."
Neil Record
Chairman
The year ending 31 March 2022 ("FY-22") has been one of enormous change for
the business. Revenue is up 38% on the comparative year and pre-tax profit up
76%. We have successfully launched and expanded our EM Sustainable Finance
Fund; our European subsidiary, Record Asset Management GmbH, is bringing new
ideas, new products and new clients; and our US hedging business has grown
substantially on the back of large Dynamic Hedging mandates.
I consider FY-22 to be the start of a new chapter in Record's history. It is
clear from the pipeline of projects, clients and ideas that the firm is no
longer going to be a purely currency management specialist. While we will
maintain our currency speciality, we are widening our offering in the
alternative asset management space.
We plan to diversify into areas where specialist skills are well rewarded;
where investor appetite is high, and where our existing expertise can be put
to use. We have already demonstrated that we can work closely with large
international bank partners to launch the EM Sustainable Finance Fund (moving
us for the first time in scale into the frontier currency world); and I am
pleased to report that we plan to launch further funds with a variety of
different investor appetites and asset classes.
The invasion of Ukraine and the resulting humanitarian crisis is like no other
experienced in our generation in Europe. Our thoughts are with the people
experiencing untold pain and hardship, and we hope that negotiations to end
the conflict will prevail. I would like to offer particular thanks to the
group of Ukrainian nationals who have been working to upgrade our IT
infrastructure, despite the incredibly challenging conditions. We are doing
everything we can to offer them our support.
I am very enthusiastic about our company's future. We have in place an
extremely talented and effective CEO, Leslie Hill, who since her appointment
in early 2020 has masterminded many of the growth orientated changes focused
on delivering results that we are now seeing. I also see a rising generation
of talented and energetic individuals with the skills, background and support
to continue to bring about change and growth. I believe these individuals will
add significant value to the business by taking responsibility and bringing
broader strength in depth to the future leadership team.
Financial overview
This new chapter for Record has been accompanied by an exceptional set of
results, which not only go to illustrate the strength of the leadership team,
but also underlines the credibility of the new strategy. Growth in management
fees of 37% has driven the reversal of the short-term reduction in
profitability seen in FY-21, with Record's operating margin increasing to 31%
from 24% last year. Encouragingly, this growth is linked to a positive change
in our revenue weighting towards higher revenue-margin products from both
existing and newly launched products, supporting the change in strategic
direction towards a more diversified set of products and services.
Notwithstanding an increase in both personnel and non-personnel costs as the
business continues to invest in its people and systems, the Group has
delivered a 64% increase in earnings and continues to be supported by its
robust and liquid Balance Sheet, with total equity of almost £26 million.
Further information on financial results can be found in the Financial review.
Capital and dividend
The Board is pleased with the progress made from the change in strategy and
remains confident in the future growth prospects of the business.
Our capital and dividend policies have not changed during the last two years
and we have continued to pay both ordinary and special dividends over this
period, notwithstanding the significant disruption and uncertainty arising
from the pandemic when many companies were cutting or cancelling their
dividends.
Our capital policy aims to ensure retention of capital assessed as required
for regulatory purposes, for working capital purposes and for investing in new
opportunities for the business. Our dividend policy now targets a level of
ordinary dividend within the range of 70% to 90% of annual earnings, and which
allows for progressive and sustainable dividend growth in line with the trend
in profitability. It is also the Board's intention, subject to financial
performance and market conditions at the time, to return excess earnings over
ordinary dividends for the financial year and adjusted for changes in capital
requirements, to shareholders, normally in the form of special dividends.
The Board is recommending a final ordinary dividend of 1.80 pence per share
(2021: 1.15 pence) with the full-year ordinary dividend at 3.60 pence per
share (2021: 2.30 pence), representing a 57% increase in the ordinary dividend
and an ordinary payout ratio of 80% of earnings. The interim dividend of 1.80
pence was paid on 30 December 2021, and the final ordinary dividend of 1.80
pence will be paid on 9 August 2022 to shareholders on the register at 1 July
2022, subject to shareholder approval.
Having carefully reviewed the current level of Group capital against its
ongoing requirements for regulatory and investment purposes and to support its
continued growth, the Board considers the current level of capital to be
sufficient and is announcing a special dividend of 0.92 pence per share to be
paid simultaneously with the final ordinary dividend. Total proposed dividends
per share for the year are 4.52 pence per share (2021: 2.75 pence) compared to
earnings per share of 4.52 pence (2021: 2.75 pence).
The Board
We have welcomed two new Non-executive Directors to the plc Board in FY-22 -
Matt Hotson and Krystyna Nowak. We have said goodbye to both Rosemary Hilary,
who retired from the Board in September 2021 and, as I reported in my
statement last year, to Jane Tufnell who stood down from the Board at the
Company AGM in July 2021, when Tim Edwards took over the role of Senior
Independent Director.
I would like to thank Rosemary, who ably chaired the Audit and Risk Committee
during her tenure on the Board and brought to that role a forensic mind and
long experience of the management of financial and business risk.
We have split the Audit and Risk Committee functions, and Matt Hotson has
taken on the Chair of the non-executive Audit Committee, while we have
established a Risk Committee as an executive function.
Matt comes to us with senior CFO experience, and brings a sharp intellect and
a current executive role elsewhere to our Board team.
Krystyna Nowak has taken on the Chair of the Nomination Committee. Krystyna's
background is in executive search following a career in banking. She brings
wide experience of managing our most valuable asset - our people - and we look
forward to benefiting from her expertise.
Outlook
There appears to be a contrast between the outlook for Record plc on the one
hand, and the wider economic environment on the other.
Taking first Record's prospects. As I have already mentioned, we are
witnessing a fundamental change in the business, which I believe has the
potential to transform for the better Record's scale and resilience within the
next few years. This leaves me feeling very optimistic for the firm.
By contrast, I am concerned that the current economic, financial and
geopolitical pressures facing Western democracies may well see a prolonged
period of very difficult conditions - high inflation; low, zero or negative
growth; overstretched fiscal positions; and the likelihood of political
instability. One way or another, these conditions may well impact on Record's
growth prospects, but my current judgement is that our growth will outweigh
the headwinds imposed on us by these global economic problems.
Neil Record
Chairman
20 June 2022
CHIEF EXECUTIVE OFFICER'S STATEMENT
"Two years after taking on the role of CEO, I can now confidently report that
we are making real progress against our stated objectives to modernise,
diversify and build our business."
Leslie Hill
Chief Executive Officer
The team and I are very pleased with the development of our strategy, and have
great plans for the future. To that end, I am now detailing our aspirations
in more concrete terms than we have in the past. We can, I believe, achieve
revenue of approximately £60 million by this time in 2025 and will continue
to improve our operating margin, inflation willing. This will give our
investors a clearer sense of our trajectory and confidence in the future.
Progress against strategy
Our "house", to continue an analogy I used last year, is now much more robust
in so many ways, as you will see detailed below and further on in this report.
Our new ventures and products are bearing fruit, and we are expanding our
strategic partnerships around the world, while also developing interesting new
opportunities with our loyal client base. The longevity of our relationships
continues to be a source of great pride to us all, but we are also finding new
major groups and institutions who value what we have to offer, and want to
work with us. I will detail each of the key pillars of our strategy as
follows:
Diversification
In June of 2021 we did indeed launch our EM Sustainable Finance Fund, and it
has gone well. We now run approximately $1.2 billion in this strategy, which
was built for and in partnership with UBS Global Wealth Management in
Switzerland. Despite a turbulent year in the world of Emerging Markets we have
succeeded in outperforming our benchmark and growing assets while weathering
some unusually volatile geopolitical waters. We continue to invest
considerable resource in this opportunity and it is providing results. We are
working on some new and interesting Impact and Sustainable Finance initiatives
of which I look forward to reporting more in the coming year. In addition, we
set up a Senior Sustainability Office this year to make sure we observe and
are at the forefront of best practice in this demanding area.
However, we are all about diversification and there are a few other notable
milestones reached this year which are worth highlighting. We have been
informed by BaFin that our application has been approved, which will enable us
to build our asset management business in Continental Europe, and have created
a strong core team in Zürich, Germany and Amsterdam. Some of our projects are
coming to fruition, with clients added in Holland, and a new Municipal Bond
fund developed for the German market. We acquired our first ever Japanese
hedging client this year, and will plan to build on this milestone.
In addition, we are building a suite of Luxembourg-based funds this year which
will allow us to further realise our aspirations to become a fully fledged
asset manager, adding to our existing credentials as an overlay and
derivatives manager. Our growth agenda is on target and we continue to add
clients for our currency and derivatives offerings, particularly in the Asset
Management field, where we acquired four new clients this year, with more to
come.
Modernisation
So much work has been done to bring our infrastructure up to date and both
strengthen and protect our business, and therefore our clients. We are now
established as a company with sophisticated IT infrastructure, with hybrid
cloud and on-premise capabilities to ensure maximum flexibility, and we have
managed to keep all of this work both on target and on budget.
We are also working hard to continue expanding our software development team,
offering customised and cost‑effective solutions to our business partners as
well as to more and more clients. Particularly of note is the enthusiasm with
which our Asset Management clients greet our willingness to take the currency
burden off their shoulders so they can concentrate on growing their own
businesses. Doing what others do not want to do may not be glamorous but we
have the experience and the history of reliably taking on the challenges of
our clients and as a team we receive them with open arms! We now view our
technology stack as a journey of constant evolution, not a single destination,
and I think we will have more interesting announcements in the coming year.
Succession
We continue the progression - enabling young, vibrant members of our team to
become equity owners and take on more responsibility. This year saw more
promotions within our ranks than any other year in our history, which is a
testament to our desire to develop talent. Our new London office has allowed
us to attract this talent and our continued flexible working arrangements are
enhancing rather than reducing productivity.
However, we do know that you simply cannot replace idea sharing and training
face-to-face, and have found the implementation of a working schedule that
includes core office days essential to teamwork and collaboration. In
addition to all of this, we are building strong and modern Diversity and
Inclusion policies and working to attract more women and ethnic minorities
into our senior roles; we just this year implemented our first ever Mentoring
and Coaching programme for our mid and senior-level women which we sourced
from a cutting-edge US-based company. We will do more of this as it was well
received by our staff.
Financial performance
In terms of results, rewardingly we have achieved a 38% increase in revenues
year on year and a 76% increase in profits, and an increase in our operating
margins from 24% to 31%, all of which I think speaks for itself. We are just
starting to get into our stride here and while I want to keep everything
steady and calm I do believe we have a long way to go. In addition we have
seen a return to performance fees earned this year after a hiatus, and while
these earnings are somewhat episodic, our clients' patience and belief in us
has gratifyingly been proved worthwhile, for them and for us.
Outlook
We have so much yet to do, and so much further to go, as we move from a niche
overlay manager into the world of mainstream asset management while not losing
sight of our core expertise and the importance of this part of our business. I
believe we can combine the flexibility and agility of a small business - as is
shown by our Tech transformation, with the scale and credibility of a much
larger business, as is demonstrated by our asset base, our growing global
reach and the scalability of our product and service offering. This will be
the secret of success in coming years, and it is making this company, and
indeed my job, most interesting and rewarding.
Leslie Hill
Chief Executive Officer
20 June 2022
MARKETS
Our market environment and industry trends.
Our market
The currency market represents the biggest and most liquid financial market
available, with exceptionally low transaction costs and daily FX volumes
averaging $6.6 trillion (source: BIS Triennial Central Bank Survey of Foreign
Exchange and OTC Derivatives Markets 2019). The FX market is essential to
global trade and finance and includes a high proportion of not‑for‑profit
or forced participants, resulting in profit‑seeking financial institutions
continuing to represent a minority of FX market participants. Consequently,
the market displays persistent patterns of behaviour or inefficiencies which
we believe can best be exploited by a combination of systematic and
discretionary processes.
The FX market continues to offer opportunities for investors. Record's
expertise is in identifying and understanding these opportunities and then
working with clients to understand how such opportunities may be used to their
best advantage, taking account of each client's individual circumstances and
attitude to risk.
Industry trends
Increase in demand for sustainable investment products
The last twelve months have seen an acceleration in the widespread
incorporation of sustainability-linked factors in investment products as
investors become ever more focused on resilience. With broad understanding
that "non‑financial" data (climate, social, governance, etc.) can more
completely fortify portfolios to weather global shocks, asset managers have
had to review the remits of fiduciary duty to take account of these
fast‑evolving investor preferences and broader understanding of material
risk. Pandemic contagion flagged risks that occur concomitant with an
increasingly interconnected world, reliant upon global supply chains and
geared by closely intertwined national economies. Long-term climate risks and
the global consequences of seemingly idiosyncratic sovereign-level physical
risks are therefore now better comprehended in their magnitude, and the
importance of international co-operation more seriously acknowledged.
Investors have translated macroeconomic risks into portfolio risks, using
frameworks such as that of the Sustainability Accounting Standards Board
("SASB") and the Task Force on Climate-Related Financial Disclosures ("TCFD")
to understand what this means for the resilience of their investments, and it
is the responsibility of asset managers to respond with credible and prudent
sustainable solutions.
Global and macro trends
Inflation comeback amidst covid-19 policy overhang and geopolitical conflicts
As the covid-19 pandemic showed signs of morphing into an endemic following a
successful vaccination campaign and the natural course of virus mutations,
market attention turned towards pandemic policy overhangs and the implications
for global asset classes. Pent-up demand from precautionary savings, commodity
price increases and supply side disruptions all contributed to an inflation
comeback in the second half of FY-22. This fuelled debate as to whether the
new-found ability of developed economies to generate price increases was only
transitory in nature or now a permanent fixture of the global economy. Adding
to the complexity of this assessment were further commodity price shocks as
Russia began its invasion of Ukraine; with inflation no longer appearing
transitory, central banks telegraphed their respective responses and most
developed market central banks saw rapid tightening cycles priced. Although
most central banks indicated higher forthcoming interest rates, these were not
always commensurate with the expected levels of inflation, and stagflationary
dynamics began to weigh on the euro and British pound in particular. The Bank
of Japan was steadfast in its commitment to loose monetary policy, which saw
the currency decline significantly versus the US dollar. The US dollar on
aggregate made an impressive recovery from the year prior, benefiting from the
"USD smile", referring to positive performance during both risk-off (via safe
haven demand), and risk-on (via US economic exceptionalism and Fed
hawkishness) economic environments.
What this means for our business
Record's Currency for Return strategies are designed to target persistent
market patterns and risk premia. As economic, political and societal norms
change, so must our approach. As such, we constantly challenge the assumptions
underlying our investment process. During the period we evolved our flagship
Emerging Markets ("EM") product to move away from a long-only currency
approach and towards a long-short methodology, which seeks to capture the
trend towards greater heterogeneity of economic outlooks and return outlooks
within the EM universe.
Such an approach is better placed to exploit the various risk premia available
in EM currencies, while benefiting from reduced sensitivity to broader risk
sentiment emanating from external factors such as financial tightening
elsewhere in the world including the US. The strong performance of the US
dollar during the period emphasised the benefits of active hedging strategies;
Dynamic Hedging performed as expected, protecting US investors against
foreign currency losses with higher hedge ratios when the US dollar
strengthened, whilst limiting associated costs for strengthening base
currencies such as the euro investors via lower hedge ratios. The rapid
repricing of inflation risk and monetary policy tightening breathed life into
short-term interest rates and the FX basis, which presented opportunities to
add value in enhanced Passive Hedging programmes through the active management
of hedging tenor lengths. In addition, building on the prolonged effects from
the pandemic, various idiosyncratic country crises affirmed interest in the
bespoke management of EM currency exposures, where we are working with clients
to help understand the risks emanating from EM currency and the various
approaches that can be taken to manage such risks.
Record has also focused on developing sustainable finance strategies with a
defined goal of achieving meaningful positive impact within the emerging
market community. Record and UBS Global Wealth Management announced a
strategic partnership by collaborating on the launch of the Record Emerging
Market Sustainable Finance Fund ("EMSF"). This unique investment strategy
demonstrates a commitment to innovation and the development of new sustainable
investment products, which Record expects to have broad and growing appeal.
The strategy's impact thesis spans a multidimensional investment process,
remaining active across the economic cycle in liquid and illiquid EM and
Frontier currencies in pursuit of stabilising local market exchange rates and
absorbing currency risks, whilst simultaneously investing in an underlay of
sustainable development bonds issued by multilateral development banks with a
strong track record of deploying sustainable development capital in emerging
economies. The strategy's ambitions are reinforced through an active
engagement strategy with counterparty banks, incentivising improvements in
counterparties' performance across the ESG spectrum.
Market review
Review of the year ended 31 March 2022.
The financial year began in a risk-on fashion as a number of economies emerged
from winter lockdowns following heavy vaccination drives which helped to
alleviate stress on healthcare systems. It was heterogeneity in vaccination
rates that initially captured investors' attention, in particular the
developed versus emerging market divide, with IMF officials warning of
disparate recovery paths given developing countries' dependence on tourism and
weaker public finances. Indeed, the currencies of countries with favourable
inoculation rates received "vaccine dividends" as markets priced in faster
recoveries and faster monetary policy tightening cycles.
The early summer gave way to the "transitory inflation" narrative in central
bank communique, with Fed officials attributing temporary pressures to a range
of factors including base effects, pandemic stimuli, ongoing supply chain
issues, and economic re-opening. Similarly elevated inflation prints across
the developed market spectrum saw a hawkish tilt in central bank forward
guidance with the Reserve Bank of New Zealand ("RBNZ") and Norges Bank
signalling rate hikes later in the year, the Bank of England ("BoE") signalled
the tapering of asset purchases in late 2021, whilst the Bank of China ("BoC")
reduced asset purchases in April.
Mid-summer marked a significant convergence in the vaccine race as Developed
Markets ("DMs") and several Emerging Markets ("EMs") including the likes of
the Euro Area, Canada, Turkey, Chile and Brazil made marked headway in
vaccination distribution, closing the gap with leaders of the US and UK.
Though growth prospects looked rosier, global covid-19 nervousness remained
elevated in view of the highly infectious but seemingly less-deadly Delta
variant. Government responses varied, including pockets of localised lockdowns
linked with small outbreaks (particularly in the Asia-Pacific region including
Australia and New Zealand), delayed reopening schedules (UK by a month through
to July) and upping the ante with quarantine/travel restrictions (notably seen
between UK and EU countries).
The Fed Jackson Hole Economic Symposium in August passed uneventfully, with
Fed Chair Powell noting higher interest rates were still "a way away",
reiterating the "transitory" nature of recent inflation prints. Another
notable dynamic remained the increasing hawk-dove division as a few regional
Fed presidents, including Waller and Bullard, vocally advocated for immediate
bond purchase tapering in light of inflation risks and healthier labour market
dynamics. Hawkish moves were initiated by DM policymakers into the last
quarter of the year as committees aimed to balance inflation targets and
expectations against economic growth and labour market recoveries. The RBNZ
and Norges Bank became the first central banks to embark on their rate hiking
cycle, whilst markets were also surprised by the BoC ending their bond buying
programme, and the Reserve Bank of Australia ("RBA") abandoning Yield Curve
Control on three-year bonds.
The second half of the year saw several idiosyncratic risk episodes in
emerging markets. In China, a heavy regulatory crackdown on its education and
big technology sectors, followed by rising concerns that China's real estate
behemoth Evergrande faced a major solvency and default crisis, generated
market volatility. The Turkish lira again experienced a crisis episode in Q4,
triggered by consecutive Central Bank of the Republic of Turkey's interest
rate cuts since mid-summer despite headline inflation reading in excess of 19%
year-on-year during this time period.
Global market sentiment then took pause towards calendar year end with the
emergence of the highly infectious Omicron variant, with multiple countries
scrambling to levy stringent travel restrictions and a degree of local
restrictions re-introduced. Yet, global daily caseloads declined towards the
end of the financial year, supporting risk sentiment, and owing to combined
efforts of local restrictions and viral resistance from boosters/previous
infections which saw a general "living with covid-19" theme emerge. China
remained an outlier as the last major country which keeps up to its
zero-covid-19 policy with the recent rise in infections seeing multiple
cities/provinces placed under stringent lockdowns.
The last months of the financial year were largely characterised by the
escalation and eventual invasion of Ukraine by Russia. Western countries
enacted a swift and unified economic response, imposing a moratorium on
transactions with the Central Bank of Russia, freezing Russian assets held in
domestic banks and blocking the Nord Stream 2 pipeline project. Consequently,
the risk of a larger regional war and surging energy and agriculture prices
fed into market concerns and risk-off sentiment. Investors were particularly
concerned about the European growth and inflation picture given oil and gas
dependence on Russia. Rallying commodity prices as a result of the
Russia-Ukraine war markedly benefited commodity-linked currencies, such as the
Norwegian Krona ("NOK"), Australian Dollar ("AUD") and the Canadian Dollar
("CAD") towards the end of the year.
Faced with the ongoing uncertainty of inflationary pressures and persistent
inflation overshooting relative to its targets, G10 central banks largely
abandoned all notions of transitory inflation by the end of the fiscal year,
escalating their fight against inflation with more aggressive hiking language
and several banks enacting rate hikes, including the Federal Open Market
Committee ("FOMC") (+25bps) and BoE (+50bps). The latest Fed dot plot showed
officials' median projection was for the benchmark rate to reach around 2.0%
towards the end of 2022, then 2.8% in 2023 and 2024. The Bank of Japan ("BoJ")
and Swiss National Bank ("SNB") remained at the back of the pack with regard
to policy tightening, whilst the European Central Bank ("ECB") sought to
balance the risks from surging inflation, a fragile economy and the potential
for financial market "fragmentation" as emergency bond purchases are unwound.
The prospect of premature policy tightening forced by a sudden resurgence in
inflation remains a key risk in the minds of investors going into the 2022
financial year. Overall, the US dollar performed well for most of the year,
reflecting a mixture of risk-off market sentiment, US economic exceptionalism,
and relative insulation to commodity price shocks from the war in Ukraine.
KEY PERFORMANCE INDICATORS
Measuring our performance against our strategy.
The Board uses both financial and non‑financial key performance indicators
("KPIs") to monitor and measure the performance of the Group against its
strategic priorities. Some KPIs link to specific strategic areas as noted
below, whilst others represent higher level key metrics in terms of the
Group's business and financial performance.
Financial KPIs
Revenue (£m)
Revenue is earned predominantly from the provision of currency management
services in the form of management fees and performance fees.
Revenue £ million
FY-22 35.1
FY-21 25.4
FY-20 25.6
FY-19 25.0
FY-18 23.8
Why this is important
Revenue is a key indicator of client experience, growth and a key driver of
profitability. Growth in AUME, especially into Record's higher revenue-margin
products, resulted in a 37% increase in management fees. Revenue also includes
performance fees, which increased by £0.4m to £0.5m (2021: £0.1m).
Link to strategy
Diversification
Modernisation
Operating profit margin (%)
Operating profit margin is an alternative performance measure, calculated by
dividing operating profit by revenue.
Operating profit margin %
FY-22 31
FY-21 24
FY-20 30
FY-19 32
FY-18 31
Why this is important
Operating profit margin is an indicator of the efficiency of the business in
turning revenue into profit. Inflows into higher revenue-margin products in
addition to efficiencies seen from the adoption of technology in operational
areas both contributed to the increase in operating margin to 31% for the
year.
The Group aims to increase the operating profit margin over time through
investment in resources and technology to maintain its premium products and
services, whilst increasing operating efficiency and developing more
diversified revenue streams in higher-margin products.
Link to strategy
Diversification
Modernisation
Basic earnings per share ("EPS") (pence per share)
The Group aims to create shareholder value over the long term, delivered
through progressive and sustainable growth in EPS.
EPS pence
FY-22 4.52
FY-21 2.75
FY-20 3.26
FY-19 3.27
FY-18 3.03
Why this is important
EPS measures the overall effectiveness of the business model and drives both
our dividend policy and the value generated for shareholders. Similarly to
operating profit, EPS has increased this year as the benefits from the
implementation of the new strategy begin to deliver results in
financial terms.
Link to strategy
Diversification
Modernisation
Succession
Dividends per share ("DPS") (pence per share)
Our dividend policy targets a level of ordinary dividend within the range of
70% to 90% of annual earnings, and which allows for progressive and
sustainable dividend growth in line with the trend in profitability.
DPS Ordinary dividend per share pence Special dividend per share pence
FY-22 3.60 0.92
FY-21 2.30 0.45
FY-20 2.30 0.41
FY-19 2.30 0.69
FY-18 2.30 0.50
Why this is important
Progressive and sustainable dividend payments illustrate the cash-generative
nature of Record's business, and its strength in converting profits into cash
and providing a suitable return to shareholders. The ordinary dividend per
share has increased by 57%, reflecting the Board's confidence in the ability
of the business to deliver its strategy and to achieve sustainable growth. The
special dividend per share has increased by 0.47 pence, resulting in a 64%
increase in total dividends to 4.52 pence per share (2021: 2.75 pence per
share).
Link to strategy
Diversification
Modernisation
Succession
Non-financial KPIs
AUME ($ billion)
As a currency and derivatives manager, Record manages only the impact of
foreign exchange and not the underlying assets of its clients, therefore its
Assets Under Management ("AUM") are notional. 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.
AUME $ billion
FY-22 83.1
FY-21 80.1
FY-20 58.6
FY-19 57.3
FY-18 62.2
Why this is important
AUME is a key driver of future revenue and an indicator of business growth.
AUME increased by 3.7% for the year, including net inflows of $2.4 billion
diversified across product lines.
Link to strategy
Diversification
Modernisation
Succession
Client longevity (%)
Client longevity measures how long Record has been providing currency and
derivative management services to each client with a mandate active
as at 31 March 2022.
Client longevity %
0-1 yrs 13
1-3 yrs 27
3-6 yrs 29
6-10 yrs 11
>10 yrs 20
Why this is important
Client longevity is both an indicator of recent client growth, and also of the
Group's success in sustaining quality client relationships through investment
cycles. Building long-standing and trusted adviser relationships with clients
provides opportunities for collaboration and partnerships on new and
innovative investment products.
Link to strategy
Diversification
Average number of employees
The average number of employees through the year includes Non‑executive
Directors.
Average number of employees
FY-22 82
FY-21 83
FY-20 82
FY-19 85
FY-18 81
Why this is important
Average employee numbers is an indicator of business growth and also of how
effectively the Group is using technology to make processes more efficient.
Implementing the new strategy has required a change in mix of required skill
sets of employees, so whilst the average number of employees has not changed
significantly, a degree of employee turnover has brought additional knowledge
and experience into the Group required to drive innovation and the
diversification into new products and technology.
Link to strategy
Diversification
Modernisation
Succession
Staff retention (%)
Staff retention is the number of employees who were employed by Record
throughout the period as a percentage of the number of employees at the
beginning of the period.
Staff retention %
FY-22 74
FY-21 90
FY-20 81
FY-19 84
FY-18 93
Why this is important
Planning for generational change is key to the Group's strategy. A decrease in
staff retention in the year reflects the focus on rebalancing the skill sets
required by the business to drive the innovation and growth required to
deliver the strategy. The Group remains cognisant of ensuring the retention
and development of key talent as well as the factors affecting all of our
employees' wellbeing.
Link to strategy
Diversification
Modernisation
Succession
Employees with equity interest (%)
The percentage of employees who own shares in Record plc at year end.
Employees with equity interest %
FY-22 61
FY-21 68
FY-20 69
FY-19 70
FY-18 72
Why this is important
The alignment of employee interests with those of our shareholders is an
important factor in ensuring the longer-term success of our business and is an
important tool in managing generational change. The decrease this year is
linked to changes made under the new strategy resulting in a higher turnover
of staff and consequently a short-term decrease in employees holding shares.
The Group's remuneration structure includes schemes with both mandatory and
voluntary equity participation, reflecting the importance the Group places on
alignment.
Link to strategy
Succession
OPERATING REVIEW
Growth in AUME has continued during the year, increasing by $3.0 billion to
$83.1 billion including net inflows of $2.4 billion.
Product investment performance
Hedging
Our hedging products are predominantly systematic in nature. The effectiveness
of each client mandate is assessed regularly and adjustments are made when
necessary in order to respond to changing market conditions or to bring the
risk profile of the hedging mandate in line with the client's risk tolerance.
Passive Hedging
Record's enhanced Passive Hedging service aims to reduce the cost of hedging
by introducing flexibility into the implementation of currency hedges without
changing the hedge ratio. While the strategy is partly systematic, the
episodic nature of many opportunities exploited by the strategy means it
requires a higher level of discretionary oversight than has historically been
associated with Passive Hedging. Global markets have seen steepening interest
rate curves from the end of 2021, which stems from central banks being forced
to engage in more hawkish monetary policy as they try to keep inflationary
pressures under control. This has had the effect of introducing a high degree
of volatility into short-term interest rate markets, from which FX forward
pricing is determined. The heightened volatility has increased the opportunity
set for our clients' portfolios, and as such we positioned client portfolios
appropriately to add value from this volatility, achieving
positive performance.
The table below shows the total value added relative to a fixed-tenor
benchmark for an enhanced Passive Hedging programme for a representative
account. The base currency used is Swiss francs.
Return for Return
year to since
31 March 2022 inception
Value added by enhanced Passive Hedging programme relative to a fixed‑tenor 0.13% 0.09% p.a.
benchmark
Dynamic Hedging
The performance of our Dynamic Hedging product depends on how the foreign
currencies change in value relative to the base currency of our client. During
the year, US investors saw losses from currency on international assets when
valuing positions in US dollars, as the US dollar appreciated against the
majority of G10 currencies. Record's Dynamic Hedging product adjusted hedge
ratios in line with US dollar fluctuations, reducing hedging losses when the
US dollar was weaker and helping to protect against currency losses when the
US dollar was episodically stronger - as a result, Dynamic Hedging performance
was positive, partially offsetting currency losses on the underlying foreign
currency exposure.
The performance of the Dynamic Hedging programmes hedging US dollar exposures
into other currencies was opposing and reflective of the mandates' specific
objectives, benchmarks and inception dates in the reported period.
Return for Return
year to since
31 March 2022 inception
Value added by Dynamic Hedging programme for a representative account 0.60% 0.46% p.a.
Currency for Return
Sustainable investing
Record EM Sustainable Finance ("EMSF") Fund
The Record EMSF Fund USD class A returned -0.94% from inception (28 June 2021)
to 31 March 2022, outperforming the relevant emerging market local debt
benchmark by 11.13%.
The currency portfolio was a net positive contributor to fund returns,
although performance was mixed as the escalation of the Russia-Ukraine
conflict in calendar Q1-22 drained market sentiment, reflecting the degree of
regional interdependence and highlighting the fragility of cross-border
banking and trade flows. Pockets of tumult emerged as investors weighed the
aftermath and set out to gauge the extent of spillovers across the global
supply chain.
The positive performance of the currency overlay was led by the notable
performance of the diversified hard currency funding basket (particularly JPY
and GBP shorts) and long exposures in Latin American emerging market
currencies, given their geographical insulation from the conflict, net
positive exposure to commodity prices, and the relatively aggressive
tightening cycles embarked on by regional central banks. Discretionary
management proved prudent, as timely intervention in the period across a
number of currency positions delivered a net contribution to returns, such as
in the fallout of the CBRT's monetary unorthodoxy, and Russia's invasion of
Ukraine where rouble positions had already been closed. Within the frontier
universe, the Ukrainian hryvnia, Egyptian pound, Ghanaian cedi and Kazakhstan
tenge detracted materially from returns.
Rising U.S. treasury yields, amid stubbornly high inflation prints and a
hawkish Fed backdrop, posed broad-based headwinds for external emerging market
debt investors in the period; the USD bond portfolio underlay resultantly
detracted from fund performance as market conditions remained challenging for
investors. The fund did, however, benefit from a lower duration positioning
versus the benchmark, cushioning downside sensitivity as yields rallied.
The table below shows the performance of the EMSF Fund USD class A and the
relevant benchmark, being the JP Morgan GBI-EM Global Diversified. The
performance is since inception of the EMSF Fund on 28 June 2021 to 31 March
2022.
Return since
inception
EMSF Fund USD Share Class (0.94%)
JP Morgan GBI-EM Global Diversified (12.07%)
Currency Multi-Strategy
Record's Currency Multi-Strategy product combines a number of diversified
return streams, which include:
· Forward Rate Bias ("FRB", also known as Carry) and Emerging Market
strategies which are founded on market risk premia and as such perform more
strongly in "risk on" environments; and
· Momentum, Value and Range Trading strategies which are more
behavioural in nature, and as a result are less risk‑sensitive.
Record's Multi-Strategy mandates delivered positive overall performance over
the year which was driven by the outperformance in FRB and EM strategies given
their positive correlation to sentiment whilst heterogeneity in DM central
bank rate normalisation also provided conducive DM carry opportunities.
Positive vaccine news supported the global growth outlook and the mitigation
of negative tail risk scenarios around a prolonged recession, which enticed
inflows into EM and risk-on DM currencies. Intervention by portfolio managers
in the factor investing process on the back of major idiosyncratic events
including the Russia-Ukraine conflict offered significant protection to
strategy performance. The long-only EM module within the Currency
Multi-Strategy was replaced with a long-short EM strategy at the end of
February, reflecting the latest in-house thinking on Currency for Return
investing in EM FX.
Return for
12 months to Return since Volatility since
31 March 2022 inception inception
Returns % % p.a. % p.a.
Record Multi‑Strategy composite 0.58% 0.83% 3.08%
Scaling
The Multi-Strategy product allows clients to select the level of exposure they
desire in their currency programmes by selecting the required level of scaling
and/or the volatility target.
It should be emphasised that in this case "scaling" refers to the multiple of
the aggregate notional value of forward contracts in the currency programme to
the mandate size. This is limited by the willingness of counterparty banks to
take exposure to the client. The AUME of those mandates where scaling or a
volatility target is selected is represented in Record's AUME at the scaled
value of the mandate, as opposed to the mandate size.
AUME development
AUME expressed in US dollar terms finished the year at $83.1 billion, an
increase of 4% (2021: $80.1 billion). When expressed in sterling, AUME
increased by 9% to £63.1 billion (2021: £58.1 billion).
AUME movements ($bn)
AUME at 1 April 2021 80.1
Net flows + 2.4
Markets + 0.3
FX and scaling + 0.3
AUME at 31 March 2022 83.1
Passive Hedging AUME increased by 2% to $62.8 billion (2021: $61.5 billion)
driven by net inflows of $1.1 billion for the year from new and existing
clients. Further positive impacts arose from market movements ($0.6 billion)
which were partially offset by negative movements in exchange rates ($0.4
billion).
Dynamic Hedging AUME increased by 14%, ending the year at $10.6 billion (2021:
$9.3 billion). The majority of the $1.3 billion increase is attributable to
net inflows ($1.4 billion), of which $0.6 billion were from new clients with
the remaining $0.8 billion from existing clients. Market movements reduced
AUME slightly by $0.1 billion.
Currency for Return AUME increased to $5.0 billion (2021: $3.9 billion) by the
end of the year, with the launch of the Record EMSF Fund during the year
contributing $1.2 billion of inflows, offset by outflows of $0.9 billion from
one client exiting the Multi-Strategy product. There were positive movements
both in exchange rates of $0.5 billion and market movements of $0.3 billion.
Multi-product AUME decreased to $4.5 billion (2021: $5.2 billion). Net
outflows of $0.5 billion were driven primarily by the reversal of $0.4 billion
of inflow from a tactical bespoke mandate announced in QE 31 December 2020
which had been expected to be temporary in nature. There were negative market
movements of $0.2 billion.
Market performance
Record's AUME is affected by movements in market levels because substantially
all the Passive and Dynamic Hedging, and some of the Multi-product mandates,
are linked to equity, fixed income and other market levels. Market movements
increased AUME by $0.3 billion in the year ended 31 March 2022 (2021:
increase of $8.4 billion).
Further detail on the composition of assets underlying our Hedging and
Multi-product mandates is provided below in an attempt to illustrate more
clearly the impact of equity and fixed income market movements on these
mandate sizes.
AUME composition by underlying asset class as at 31 March 2022
Fixed
Equity income Other
% % %
Passive Hedging 26% 32% 42%
Dynamic Hedging 91% -% 9%
Multi-product -% -% 100%
Forex
Approximately 81% of the Group's AUME is non‑US dollar denominated.
Therefore, foreign exchange movements may have an impact on AUME when
expressing non-US dollar denominated AUME in US dollars. Foreign exchange
movements increased AUME by $0.3 billion over the year. This movement does not
have an equivalent impact on the sterling value of fee income.
At 31 March 2022, the split of AUME by base currency was 12% in sterling, 43%
in Swiss francs, 19% in US dollars, 15% in euros and 11% in other currencies.
AUME composition by base currency
Base currency 31 March 2022 31 March 2021
Sterling GBP 7.6bn GBP 6.7bn
US dollar USD 17.6bn USD 16.2bn
Swiss franc CHF 33.1bn CHF 35.2bn
Euro EUR 11.4bn EUR 9.9bn
Australian dollar AUD 2.9bn AUD 2.1bn
Canadian dollar CAD 6.1bn CAD 4.8bn
Swedish krona SEK 0.0bn SEK 0.4bn
Product mix
AUME composition by product
31 March 2022 31 March 2021
US $bn % US $bn %
Passive Hedging 62.8 76% 61.5 77%
Dynamic Hedging 10.6 13% 9.3 12%
Currency for Return 5.0 6% 3.9 5%
Multi-product 4.5 5% 5.2 6%
Cash 0.2 -% 0.2 -%
Total 83.1 100% 80.1 100%
Notwithstanding the product mix remaining broadly constant year on year, the
growth and inflows into both Dynamic Hedging and the newly launched Record
EMSF Fund both represent higher revenue-margin AUME which continues to
diversify the Group's revenue streams and to dilute historical concentration
on the lower revenue-margin Passive Hedging product.
FINANCIAL REVIEW
"Two years into the Group's change in strategic direction, the financial
benefits are now starting to be seen, with material increases in revenue,
profits, operating margin and earnings."
Steve Cullen
Chief Financial Officer
Overview
The Group has continued to implement its change in strategy whilst building on
its existing strong core of hedging products. Further inflows into Dynamic
Hedging this year plus diversification into new and innovative products with
higher revenue-margins have both served to drive the increase in revenue and
operating profit. We continue to invest in the modernisation of our systems
and to provide additional resources required for the running of new products
and services, which has inevitably led to an increase in our running costs.
Whilst we expect to see a continuation of this increase in the current
financial year (FY-23), not least due to high inflationary pressures, we
anticipate seeing growth in our operating margin as the new products gain
further traction alongside the efficiencies and new opportunities arising from
investing in the modernisation our systems and processes.
The Group remains independent and profitable, supported by its strong and
liquid balance sheet.
Revenues have grown to £35.1 million (2021: £25.4 million) supported by a
37% increase in management fees. Operating profit for the year increased by
77% to £10.8 million (2021: £6.1 million) and the operating profit margin
increased to 31% (2021: 24%) with a 76% increase in profit before tax to
£10.9 million (2021: £6.2 million). The increase in operating profit
reflects the change in product mix as a result of the inflows into Record's
higher revenue-margin products, and to a lesser extent the efficiencies
starting to emerge from the investments made in the modernisation of the
Group's technology.
Profit and loss (£m)
2022 2021
Revenue 35.1 25.4
Cost of sales (0.2) (0.4)
Gross profit 34.9 25.0
Personnel (excluding GPS) (10.8) (10.3)
Non‑personnel costs (7.2) (5.4)
Other income or expense (0.4) -
Total expenditure (excluding GPS) (18.4) (15.7)
GPS (5.7) (3.2)
Operating profit 10.8 6.1
Operating profit margin 31% 24%
Net interest received 0.1 0.1
Profit before tax 10.9 6.2
Tax (2.3) (0.8)
Profit after tax 8.6 5.4
Revenue
Record's revenue derives from the provision of currency and derivative
management services, fees for which can be charged through management fee only
or management plus performance fee structures, which are available across
Record's product range. Management fee only mandates are charged based upon
the AUME of the product, and management plus performance fee structures
include a lower percentage fee applied to AUME, and a proportional share of
the specific product performance measured over a defined period.
Management fees are typically charged on a quarterly basis, although Record
may charge fees monthly for some of its larger clients. Performance fees can
be charged on quarterly, six-monthly or annual performance periods on the
basis agreed with the particular client.
Management fees earned during the year increased by 37% to £34.1 million
(2021: £24.9 million) driven predominantly by inflows into higher
revenue-margin products, with the launch of the Record EM Sustainable Finance
Fund in June 2021 under Currency for Return, and the continuation of the
growth seen in the latter part of FY-21 in Dynamic Hedging. Revenues increased
in the second half by 12% from £16.3 million to £18.3 million (ignoring
performance fees).
Revenue analysis (£m)
Year Year
ended ended
31 Mar 31 Mar
2022 2021
Management fees
Passive Hedging 11.8 11.4
Dynamic Hedging 10.0 5.6
Currency for Return 5.5 2.0
Multi-product 6.8 5.9
Total management fees 34.1 24.9
Performance fees 0.5 0.1
Other currency services income 0.5 0.4
Total revenue 35.1 25.4
Management fees
Passive Hedging management fees increased by 3% to £11.8 million for the
year (2021: £11.4 million) predominantly linked to the net inflows of $1.1
billion in the year. Whilst Passive Hedging commands a significantly lower
average fee rate than Record's other products, it continues to provide a
robust and valuable revenue stream from a long-standing client base which
itself provides potential synergies to the Group in the form of future
partnerships and product innovation.
Dynamic Hedging management fees increased by 78% to £10.0 million (2021:
£5.6 million) as a result of the full-year impact of the $6.1 billion of
inflows seen in the second half of FY-21, combined with the total net inflows
of $1.4 billion in FY-22 from new and existing clients.
Management fees from Currency for Return mandates increased 175% to £5.5
million (2021: £2.0 million). The successful launch of the Record EM
Sustainable Finance Fund in June 2021 added $1.2 billion of AUME, which
attracts significantly higher fee rates than Record's historical Currency for
Return products. This new and innovative product has resulted in a material
increase in Currency for Return revenue, and has more than offset the outflow
of $0.9 billion from the Multi-Strategy product in the third quarter of the
year.
Multi-product management fees increased by 15% to £6.8 million (2021: £5.9
million) as a result of the full-year impact of $1.0 billion of net inflows
seen in the second half of last year. However, net outflows of $0.5 billion in
the second half (including $0.3 billion from a bespoke tactical mandate of a
temporary nature) are expected to reduce revenues slightly in the current year
(FY-23).
Performance fees
Performance fees are derived from a combination of hedging and
return‑seeking products. Our Currency for Return and enhanced Passive
Hedging products gradually made up lost ground during the year versus previous
high water marks, especially towards the end of the year which saw
opportunities arising from increases to interest rate differentials as a
result of changes to central banks' monetary policies, and which we
anticipate may provide further opportunities in the current year (FY-23).
Aggregate performance fees of £0.5 million were earned during the year (2021:
£0.1 million).
Other currency services income
Other currency services income totalled £0.5 million (2021: £0.4 million)
and consists of fees from ancillary currency management services including
collateral management, signal hedging and tactical execution services. Fees
charged for these ancillary services are not linked to AUME.
Expenditure
Cost of sales
Cost of sales decreased to £0.2 million from £0.4 million in FY-21 and
comprises referral fees and costs in relation to the Record Umbrella Fund,
which was closed during the year.
Operating expenditure
The Group operating expenditure (excluding variable remuneration and other
expenses) increased by 15% to £18.0 million for the year (2021: £15.7
million).
Average employee numbers for the year remained broadly constant,
notwithstanding the changes made linked to the succession plans of the
business. Consequently, growth in personnel costs of 5% to £10.8 million
(2021: £10.3 million) reflects salary increases linked to internal promotions
and some costs associated with restructuring.
Non-personnel costs increased by 33% during the year to £7.2 million (2021:
£5.4 million). The Group has continued to invest in technology and systems to
support the growth and modernisation required under the change in strategy,
including additional associated running costs, for example significant new
data requirements and office space in London.
The Group remains conscious of the need for good cost control balanced with
ensuring the business is appropriately resourced to achieve its strategic
goals of growth, modernisation and succession. However, it is anticipated that
inflationary pressures in the current environment will inevitably lead to an
increase in its cost base in the current year (FY-23).
Other expenses were £0.4 million for the year (2021: income of £41k) and
represent net losses/gains made on derivative financial instruments employed
by the Group's seed funds, hedging activities and other FX adjustments or
revaluations.
Group Profit Share ("GPS") Scheme
The GPS pool has increased by 78% to £5.7 million (2021: £3.2 million) in
line with the 77% increase in operating profit for the year. The GPS pool has
been calculated at 34% of pre‑GPS operating profit.
Operating profit and margin
Group operating profit increased by 77% to £10.8 million (2021: £6.1
million) and the Group operating margin increased to 31% (2021: 24%). As
expected, the decrease in the Group's operating margin to 24% last year proved
temporary during its transitional year and has since rebounded as the inflows
into new and existing products has changed the revenue mix towards higher
revenue-margin products in line with the strategic priority of
diversification.
Cash flow
The Group consolidated statement of cash flows is shown in the financial
statements.
The Group's year‑end cash and cash equivalents stood at £3.3 million (2021:
£6.8 million) and the total assets managed as cash were £17.3 million (2021:
£19.8 million). The cash generated from operating activities before tax
increased by 55% to £12.7 million (2021: £8.2 million). During the year,
taxation of £1.4 million was paid (2021: £1.4 million) and £6.5 million
was paid in dividends (2021: £5.3 million). The Group spent £4.5 million
(2021: £1.8 million) on the purchase of its own shares for the EBT to set
against the future vesting of share options.
At the year end, the Group held money market instruments with maturities
between three and twelve months worth £13.9 million (2021: £12.9 million).
These instruments are managed as cash by the Group but are not classified as
cash under IFRS rules (see note 18 of the financial statements for more
details).
Dividends
An interim ordinary dividend of 1.80 pence per share (2021: 1.15 pence) was
paid to shareholders on 30 December 2021, equivalent to £3.4 million.
As disclosed in the Chairman's statement, the Board is recommending a final
ordinary dividend of 1.80 pence per share, equivalent to £3.4 million, taking
the overall ordinary dividend for the financial year to 3.60 pence per share.
Simultaneously, the Board is also paying a special dividend of 0.92 pence
equivalent to £1.8 million, making the total dividend in respect of the year
ending 31 March 2022 of £8.6 million equivalent to 100% of total earnings.
The total ordinary and special dividends paid per share in respect of the
prior year ended 31 March 2021 were 2.30 pence and 0.45 pence respectively,
equivalent to total dividends of £5.3 million and representing 100% of total
earnings per share of 2.75 pence.
Financial stability and capital management
The Group's balance sheet is strong and liquid with total net assets of £25.9
million at the end of the year, including current assets managed as cash
totalling £17.3 million. The cash generated by the business has increased in
line with the rise in profitability, with net cash inflows from operating
activities after tax of £11.4 million for the year (2021: £6.8 million). For
further information on cash flows, see the consolidated statement of cash
flows in the financial statements.
Under the Board's capital and dividend policies, the Group can pay up to a
maximum of 100% of earnings for that financial year, thereby ensuring the
continued strength of its balance sheet.
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 UK MiFID investment firm
authorised and regulated by the Financial Conduct Authority ("FCA") registered
as an Investment Adviser with the SEC and as a Commodity Trading Adviser with
the CFTC, and is a wholly owned subsidiary of Record plc. Both RCML and the
Group submit regular capital adequacy returns to the FCA, and held significant
surplus capital resources relative to the regulatory financial resource
requirement throughout the year.
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)
2022 2021
Core Tier 1 capital 25.9 26.8
Deductions: intangible assets (0.6) (0.4)
Regulatory capital resources 25.3 26.4
Cautionary statement
This Annual Report contains certain forward‑looking statements with respect
to the financial condition, results, operations and business of Record. These
statements involve risk and uncertainty because they relate to events and
depend upon circumstances that will occur in the future. There are a number of
factors that could cause actual results or developments to differ materially
from those expressed or implied in this Annual Report. Nothing in this Annual
Report should be construed as a profit forecast.
Directors' responsibility statement pursuant to DTR4
The Directors confirm to the best of their knowledge that:
· the financial statements have been prepared in accordance with
international financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union and give a true and fair
view of the assets, liabilities, financial position and profit and loss of the
Group; and
the annual report includes a fair review of the development and performance of
the business and the financial position of the Group, together with a
description of the principal risks and uncertainties that they face.
FINANCIAL STATEMENTS
Consolidated statement of comprehensive income
Year ended 31 March 2022
2022 2021
Note £'000 £'000
Revenue 4 35,152 25,412
Cost of sales (219) (399)
Gross profit 34,933 25,013
Administrative expenses (23,726) (18,934)
Other income or expense 5 (372) 41
Operating profit 5 10,835 6,120
Finance income 44 71
Finance expense (23) (38)
Profit before tax 10,856 6,153
Taxation 7 (2,225) (802)
Profit after tax 8,631 5,351
Total comprehensive income for the year 8,631 5,351
Profit and total comprehensive income for the year attributable to
Owners of the parent 8,631 5,351
Total comprehensive income for the year 8,631 5,351
Earnings per share for profit attributable to the equity holders of the parent
during the year
Basic earnings per share 8 4.52 2.75
Diluted earnings per share 8 4.37 2.73
The notes below are an integral part of these consolidated financial
statements.
Consolidated statement of financial position
As at 31 March 2022
2022 2021
Note £'000 £'000
Non‑current assets
Intangible assets 11 562 420
Right‑of‑use assets 12 1,421 684
Property, plant and equipment 13 401 683
Investments 14 3,447 3,046
Deferred tax assets 15 253 212
Total non‑current assets 6,084 5,045
Current assets
Trade and other receivables 16 9,883 8,006
Derivative financial assets 17 - 260
Money market instruments with maturities > 3 months 18 13,913 12,932
Cash and cash equivalents 18 3,345 6,847
Total current assets 27,141 28,045
Total assets 33,225 33,090
Current liabilities
Trade and other payables 19 (4,721) (3,426)
Corporation tax liabilities 19 (924) (315)
Provisions (75) -
Lease liabilities 12 (366) (539)
Financial liabilities 20 - (1,696)
Derivative financial liabilities 17 (124) (16)
Total current liabilities (6,210) (5,992)
Non-current liabilities
Provisions 21 (125) (200)
Lease liabilities 12 (960) (99)
Total non-current liabilities (1,085) (299)
Total net assets 25,930 26,799
Equity
Issued share capital 22 50 50
Share premium account 3,238 2,418
Capital redemption reserve 26 26
Retained earnings 22,616 24,305
Equity attributable to owners of the parent 25,930 26,799
Total equity 25,930 26,799
Approved by the Board on 20 June 2022. Company registered number: 1927640
The notes below are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 March 2022
Equity
attributable to
equity
Called‑up Share Capital holders Non-
share premium redemption Retained of the controlling Total
capital account reserve earnings parent interests equity
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2021 50 2,418 26 24,305 26,799 - 26,799
Profit and total comprehensive income for the year - - - 8,631 8,631 - 8,631
Dividends paid 9 - - - (6,512) (6,512) - (6,512)
Own shares acquired by EBT - - - (5,807) (5,807) - (5,807)
Release of shares held by EBT - 820 - 2,258 3,078 - 3,078
Share-based payment reserve movement - - - (259) (259) - (259)
Transactions with shareholders - 820 - (10,320) (9,500) - (9,500)
As at 31 March 2022 50 3,238 26 22,616 25,930 - 25,930
Year ended 31 March 2021
Equity
Capital attributable to
Called‑up Share premium redemption Retained equity holders Non-controlling Total
share capital account reserve earnings of the parent interests equity
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2020 50 2,259 26 25,694 28,029 132 28,161
Profit and total comprehensive income for the year - - - 5,351 5,351 - 5,351
Trade Record sale - - - 32 32 (132) (100)
Dividends paid 9 - - - (5,290) (5,290) - (5,290)
Own shares acquired by EBT - - - (2,338) (2,338) - (2,338)
Release of shares held by EBT - 159 - 994 1,153 - 1,153
Share-based payment reserve movement - - - (138) (138) - (138)
Transactions with shareholders - 159 - (6,772) (6,613) - (6,613)
As at 31 March 2021 50 2,418 26 24,305 26,799 - 26,799
The notes below are an integral part of these consolidated financial
statements.
Consolidated statement of cash flows
Year ended 31 March 2022
2022 2021
Note £'000 £'000
Profit after tax 8,631 5,351
Adjustments for non-cash movements
Depreciation of right‑of‑use assets 12 489 490
Depreciation of property, plant and equipment 13 357 298
Amortisation of intangible assets 11 192 168
Share-based payments 559 486
Decrease/(increase) in other non-cash items 877 (492)
Finance income (44) (71)
Finance expense 23 38
Tax expense 7 2,225 802
Changes in working capital
(Increase)/decrease in receivables (1,877) 696
Increase in payables 1,296 417
Cash inflow from operating activities 12,728 8,183
Corporation tax paid (1,373) (1,385)
Net cash inflow from operating activities 11,355 6,798
Purchase of intangible assets 11 (334) (189)
Purchase of property, plant and equipment 13 (75) (230)
Purchase of investments (1,773) (881)
Payment to seed fund holders (1,808) (335)
Redemption of bonds 1,462 -
Investment in subsidiaries - (23)
Purchase of money market instruments with maturity > 3 months (983) (4,973)
Sale of Trade Record shares - 120
Interest received 44 71
Net cash outflow from investing activities (3,467) (6,440)
Cash flow from financing activities
Lease repayments 12 (557) (560)
Purchase of own shares (4,462) (1,808)
Dividends paid to equity shareholders 9 (6,512) (5,290)
Net cash outflow from financing activities (11,531) (7,658)
Net decrease in cash and cash equivalents in the year (3,643) (7,300)
Exchange gains/(losses) 141 (147)
Cash and cash equivalents at the beginning of the year 6,847 14,294
Cash and cash equivalents at the end of the year 3,345 6,847
Closing cash and cash equivalents consist of:
Cash 3,345 2,372
Cash equivalents - 4,475
Cash and cash equivalents 18 3,345 6,847
The notes below are an integral part of these consolidated financial
statements.
Company statement of financial position
As at 31 March 2022
2022 2021
Note £'000 £'000
Non‑current assets
Right‑of‑use assets 12 1,232 642
Investments 14 5,029 4,315
Deferred tax 1 7
Total non‑current assets 6,262 4,964
Current assets
Corporation tax 3 17
Trade and other receivables 16 3,522 1,387
Cash and cash equivalents 18 43 173
Total current assets 3,568 1,577
Total assets 9,830 6,541
Current liabilities
Trade and other payables 19 (4,161) (16)
Lease liabilities 12 (326) (501)
Provisions 75 -
Total current liabilities (4,562) (517)
Non-current liabilities
Lease liabilities 12 (812) (96)
Provisions 21 (125) (200)
Total non-current liabilities (937) (296)
Total net assets 4,331 5,728
Equity
Issued share capital 22 50 50
Share premium account 1,809 1,809
Capital redemption reserve 26 26
Retained earnings 2,446 3,843
Total equity 4,331 5,728
The Company's total comprehensive income for the year (which is principally
derived from intra-group dividends) was £4,558,705 (2021: £5,133,381).
Approved by the Board on 20 June 2022. Company registered number: 1927640
The notes below are an integral part of these consolidated financial
statements.
Company statement of changes in equity
Year ended 31 March 2022
Called‑up Share Capital Total
share premium redemption Retained shareholders'
capital account reserve earnings equity
Note £'000 £'000 £'000 £'000 £'000
As at 1 April 2021 50 1,809 26 3,843 5,728
Profit and total comprehensive income for the year - - - 4,559 4,559
Dividends paid 9 - - - (6,512) (6,512)
Share option reserve movement - - - 556 556
Transactions with shareholders - - - (1,356) (1,356)
As at 31 March 2022 50 1,809 26 2,446 4,331
Year ended 31 March 2021
Called‑up Share Capital Total
share premium redemption Retained shareholders'
capital account reserve earnings equity
Note £'000 £'000 £'000 £'000 £'000
As at 1 April 2020 50 1,809 26 3,819 5,704
Profit and total comprehensive income for the year - - - 5,133 5,133
Dividends paid 9 - - - (5,290) (5,290)
Share option reserve movement - - - 181 181
Transactions with shareholders - - - (5,109) (5,109)
As at 31 March 2021 50 1,809 26 3,843 5,728
The notes below are an integral part of these consolidated financial
statements.
Company statement of cash flows
Year ended 31 March 2022
2022 2021
Note £'000 £'000
Loss after tax (41) (137)
Adjustments for non-cash movements
Depreciation of right‑of‑use assets 453 453
Loss on investments - 167
Decrease in other non-cash items 45 -
Finance expense 16 35
Tax expense (19) (30)
Changes in working capital
Increase in receivables (2,134) (1,245)
Increase in payables 2,470 6
Cash inflow/(outflow) from operating activities 790 (751)
Corporation taxes received 37 4
Net cash inflow/(outflow) from operating activities 827 (747)
Cash flow from investing activities
Dividends received 4,600 5,270
Investment in subsidiaries (325) (23)
Purchase of investments - (881)
Payments to seed fund holders 1,798 -
Disposal of subsidiary - 120
Net cash inflow from investing activities 6,073 4,486
Net cash flow from financing activities
Lease repayments (518) (517)
Dividends paid to equity shareholders (6,512) (5,290)
Net cash outflow from financing activities (7,030) (5,807)
Net decrease in cash and cash equivalents in the year (130) (2,068)
FX revaluation - -
Cash and cash equivalents at the beginning of the year 173 2,241
Cash and cash equivalents at the end of the year 43 173
Closing cash and cash equivalents consist of:
Cash 43 173
Cash equivalents - -
Cash and cash equivalents 18 43 173
The notes below are an integral part of these consolidated financial
statements.
Notes to the financial statements
for the year ended 31 March 2022
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 provide more clarity to the notes to the financial statements,
accounting policy descriptions appear at the beginning of the note to which
they relate.
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
This is an announcement of the Annual Financial Report of Record plc as
required to be published under DTR 4 of the UKLA Listing Rules.
The financial information set out in this Annual Financial Report does not
constitute the Company's statutory accounts for 2021 or 2022. Statutory
accounts for the years ended 31 March 2021 and 31 March 2022 have been
reported on by the Independent Auditor. The Independent Auditor's Reports on
the Annual Report and Financial Statements for 2021 and 2022 were unqualified,
did not draw attention to any matters by way of emphasis and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006.
Statutory accounts for the year ended 31 March 2021 have been filed with the
Registrar of Companies. The statutory accounts for the year ended 31 March
2022 will be delivered to the Registrar in due course.
The financial information in this Annual Financial Report has been prepared
using the recognition and measurement principles of UK adopted international
accounting standards. The accounting policies adopted in this Annual Financial
Report have been consistently applied to all the years presented and are
consistent with the policies used in the preparation of the statutory accounts
for the year ended 31 March 2022. The principal accounting policies adopted
are unchanged from those used in the preparation of the statutory accounts for
the year ended 31 March 2021.
The Group financial statements have been prepared in accordance with UK
adopted international accounting standards and the Company and other Group
entities financial statements have also been prepared in accordance with UK
adopted international accounting standards. The financial statements have been
prepared on a historical cost basis, modified to include fair valuation of
derivative financial instruments. Investments are measured at fair value
through profit or loss.
The Directors are satisfied that the Company and the Group have adequate
resources with which to continue to operate for the foreseeable future. In
arriving at this conclusion, the Directors have considered in detail the
impact of the covid‑19 pandemic on the Group, the market it operates in and
its stakeholders. For this reason, the financial statements have been prepared
on a going concern basis. Please refer to the Directors' report for more
detail on going concern, and also see management's detailed review of the
impact of covid-19 and the Russia/Ukraine crisis.
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.
Future accounting developments
The Group did not implement the requirements of any other standards or
interpretations that were in issue but were not required to be adopted by the
Group at the year end date. No other standards or interpretations have been
issued that 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 2022. 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. The Group has applied UK adopted IFRSs
for periods commencing on or after January 2021.
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.
Significant judgement
The Group uses judgement to determine whether investments in its seed funds
constitute controlling interests in accordance with IFRS 10 - "Consolidated
Financial Statements". The Group considers all relevant facts and
circumstances in assessing whether it has control over specific funds or other
entities. This includes consideration of the extent of the Group's exposure to
variability of returns as an investor and the Group's ability to direct the
relevant activities, through exercising its voting rights as an investor, or
as investment manager. We consider that the Group exerts such control in cases
where (either in isolation or together with its related parties) it holds a
majority of units in the fund.
If the Group is in a position to be able to control a fund, then the fund is
consolidated within the Group financial statements. Such funds are
consolidated either on a line-by-line basis, or if the fund 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.
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. In the case of the funds
controlled by the Group, the interests of any external investors in such funds
are recognised as a financial liability as investments in the fund are not
considered to be equity instruments.
The financial statements of subsidiary undertakings, which are prepared using
uniform accounting policies, are coterminous with those of Record plc,
referred to as the "Company", apart from those of the seed funds which have
accounting reference dates of 30 September. The consolidated financial
statements incorporate the financial performance and the financial position of
the seed funds in the year ended 31 March 2021. The seed funds were closed in
June 2021.
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 Company and its
subsidiaries are collectively referred to as the Group; the Group's total
comprehensive income for the year includes a profit of £4,558,705
attributable to the Company (2021: £5,133,381). The Company's principal
activity is that of a holding company.
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
remeasurement of monetary items at year‑end exchange rates are recognised
in the statement of comprehensive income under "other income or expense".
d. Administrative expenses
Administrative expense includes staff costs, marketing and IT costs, which are
recognised on an accruals basis as services are provided to the Group.
e. 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.
f. 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.
g. 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.
h. 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.
From time to time, the Group has bought in ordinary shares for cancellation.
The cost of the buy-ins was taken directly to retained earnings. The nominal
value of the shares was taken to a capital redemption reserve. 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
In order to prepare the financial statements in accordance with IFRS,
management make certain critical accounting estimates. Management are also
required to exercise judgement in the process of applying the Group's
accounting policies and in determining the reported amount of certain assets
and liabilities.
The estimates and associated assumptions are based on historical experience
and various other factors including expectations of future events 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. As a
consequence, 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.
Areas of significant judgement - consolidation of seed funds
Note 1b describes the basis which the Group uses to determine whether it
controls seed funds; further detail on consolidation of seed funds is
provided in note 14.
Sources of estimation uncertainty
Management recognise that the use of estimates is important in calculating
both the fair value of share options offered by the Group to its employees
(see note 23) and deferred tax (see note 15), however the sources of
estimation uncertainty do not present a significant risk of material
adjustment to the carrying amounts of assets or liabilities within the next
financial year in either case.
Calculation of leased assets and liabilities requires the use of both
estimation and judgement. The identification of an appropriate discount rate
to use in the calculation of the lease liability involves both estimation and
judgement. Where the lease's implicit rate is not readily determinable, an
incremental borrowing rate must be calculated by the Group. The discount rate
used has a direct effect on the size of the lease liability capitalised and
although this has been included as an area where the use of estimation and
judgement in note 12 is important, it is unlikely to materially impact the
Group. Intangible assets are written down in accordance with the Group's
amortisation policy. The assets are reviewed by management to ensure the
amortisation period is appropriate. Investments are revalued at market value
monthly and any potential impairments would be written down as and when the
Group is notified.
3. 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 and derivatives 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. Revenue analysed by product is provided in note 4.
4. Revenue
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable
for the provision of currency management services. Our revenues typically
arise from charging management fees, performance fees and other currency
services income and are accounted for in accordance with IFRS 15 - "Revenue
from contracts with customers".
Management fees and other currency services income are recorded on a monthly
basis as the service occurs; there are no other performance obligations
(excluding standard duty of care requirements). Management fees are calculated
as an agreed percentage of the Assets Under Management Equivalents ("AUME")
denominated in the client's chosen base currency. The percentage varies
depending on the nature of services and the level of AUME. Management fees are
typically invoiced to the customer quarterly with receivables recognised for
unpaid invoices. Fees are recognised on a monthly based on the agreed fee rate
and AUME over the period.
The Group is entitled to earn performance fees from some clients where the
performance of the clients' mandates exceeds defined benchmarks over a set
time period, and are recognised when the fee amount can be estimated reliably
and it is highly probable that it will not be subject to significant reversal.
Performance fee revenues are not considered to be highly probable until the
end of a contractual performance period and therefore are not recognised until
they crystallise, at which time they are payable by the client and cannot be
clawed back. There are no other performance obligations or services provided
which suggest these have been earned either before or after crystallisation
date.
a. Revenue from contracts with customers
The following table provides a breakdown of revenue from contracts with
customers, with management fees analysed by product. Other currency services
income includes fees from signal hedging and fiduciary execution.
2022 2021
Revenue by product type £'000 £'000
Management fees
Passive Hedging 11,768 11,377
Dynamic Hedging 10,020 5,623
Currency for Return 5,513 2,005
Multi-product 6,782 5,873
Total management fee income 34,083 24,878
Performance fee income 499 81
Other currency services income 570 453
Total revenue from contracts with customers 35,152 25,412
Management fees are recognised at a point in time and are invoiced typically
on a quarterly basis, although Record may invoice fees monthly for some of its
larger clients. Performance fees are recognised at a point in time and can be
invoiced on a quarterly, six-monthly or annual basis, as agreed with our
clients.
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. Other relates to a number of regions that are
individually immaterial.
2022 2021
Revenue by geographical region £'000 £'000
Management and performance fee income
UK 2,775 2,322
US 13,049 8,619
Switzerland 10,877 9,097
Europe (excluding UK and Switzerland) 6,926 3,223
Other 1,525 2,151
Total revenue 35,152 25,412
c. Major clients
During the year ended 31 March 2022, two clients individually accounted for
more than 10% of the Group's revenue. The two largest clients generated
revenues of £4.9 million and £4.8 million in the year (2021: two largest
clients generated revenues of £4.1 million and £2.7 million in the year).
5. Operating profit
Operating profit for the year is stated after charging/(crediting):
2022 2021
£'000 £'000
Staff costs 16,479 13,470
Other staff-related costs 1,352 864
IT and technology 2,380 1,231
Professional fees 1,139 1,043
Occupancy 668 540
Depreciation of property, plant and equipment 357 299
Depreciation of leased property 489 490
Amortisation of intangibles 192 168
Auditor fees:
Fees payable to the Group's auditor for the audit of the Company's annual 72 70
accounts
Fees payable to the Group's auditor for the audit of subsidiary undertakings 103 80
Auditor fees total 175 150
Fees payable to the Group's auditor and its associates for other services:
Audit-related assurance services required by law or regulation 5 5
Other non-audit services 12 12
Loss/(gain) on forward FX contracts held to hedge cash flow 467 (673)
Loss on derivative financial instruments held by seed funds 42 53
Exchange losses/(gains) on revaluation of external holding in seed funds - 97
Other exchange (gains)/ losses (141) 652
Investment losses/(gains) 4 (170)
6. Staff costs
The average number of employees, including Directors, employed by the Group
during the year was:
2022 2021
Corporate 6 7
Client relationships 14 17
Investment research 16 16
Operations 24 23
Risk management 5 5
Support 17 15
Annual average 82 83
The aggregate costs of the above employees, including Directors, were as
follows:
2022 2021
£'000 £'000
Wages and salaries 11,931 10,542
Social security costs 1,758 1,349
Pension costs 635 574
Other employment benefit costs 2,155 1,005
Aggregate staff costs 16,479 13,470
Other employment benefit costs include share‑based payments, share option
costs, and costs relating to the Record plc Share Incentive Plan.
7. 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.
2022 2021
£'000 £'000
UK current year charge 2,006 1,144
Overseas taxes 56 64
Prior year adjustments (88) (108)
Current tax charge 1,974 1,100
Origination and reversal of temporary differences (12) (298)
Prior year adjustment 240 -
Impact of change in tax rate for deferred tax 23 -
Total deferred tax 251 (298)
Tax on profit on ordinary activities 2,225 802
The total charge for the year can be reconciled to the accounting profit as
follows:
2022 2021
£'000 £'000
Profit before taxation 10,856 6,153
Taxation at the standard rate of tax in the UK of 19% (2021: 19%) 2,062 1,169
Tax effects of:
Other disallowable expenses and non‑taxable income (37) (278)
Higher tax rates on subsidiary undertakings 15 19
Adjustments recognised in current year in relation to Research and Development
claims in respect of prior years (78) (108)
Prior year adjustment 240 -
Change in tax rates 23 -
Total tax expense 2,225 802
The tax expense comprises:
Current tax expense 1,974 1,100
Deferred tax expense/(income) 251 (298)
Total tax expense 2,225 802
The standard rate of UK corporation tax for the year is 19% (2021: 19%). 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 rate
is due to increase to 25% from 1 April 2023.
The tax charge for the year ended 31 March 2022 was 20% of profit before tax
(2021: 13%). Other temporary differences for the year ended 31 March 2022
include the impact of deferred tax expense of £251k (2021: income of £298k).
8. Earnings per share
Basic earnings per share is calculated by dividing the profit after tax 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.
2022 2021
£'000 £'000
Weighted average number of shares used in calculation of basic earnings per 191,068,307 194,461,787
share
Effect of potential dilutive ordinary shares - share options 6,230,794 1,705,089
Weighted average number of shares used in calculation of diluted earnings per 197,299,101 196,166,876
share
pence pence
Basic earnings per share 4.52 2.75
Diluted earnings per share 4.37 2.73
The potential dilutive shares relate to the share options and JSOP awards
granted in respect of the Group's Share Scheme (see note 23). There were
share options and JSOP awards in place at the beginning of the year over
14,344,421 shares. During the year 2,531,875 share options were exercised,
625,000 JSOP awards vested and a further 1,454,501 options lapsed or were
forfeited. The Group granted 3,780,000 share options and JSOP awards with a
potentially dilutive effect during the year. Of the 13,513,045 share options
and JSOP awards in place at the end of the period, 11,362,625 have a dilutive
impact at the year end.
9. Dividends
Ordinary, special and interim dividends are recognised in the financial
statements when paid. Final ordinary dividends are required to be approved by
shareholders.
The dividends paid by the Group during the year ended 31 March 2022 totalled
£6,511,887 (3.40 pence per share) which comprised a final dividend in respect
of the year ended 31 March 2021 of £2,220,404 (1.15 pence per share), a
special dividend in respect of the year ended 31 March 2021 of £868,854 (0.45
pence per share) and an interim dividend for the year ended 31 March 2022 of
£3,422,629 (1.80 pence per share).
The dividends paid by the Group during the year ended 31 March 2021 totalled
£5,290,324 (2.71 pence per share) which comprised a final dividend in respect
of the year ended 31 March 2020 of £2,261,779 (1.15 pence per share), a
special dividend in respect of the year ended 31 March 2020 of £806,374 (0.41
pence per share) and an interim dividend for the year ended 31 March 2021 of
£2,222,171 (1.15 pence per share).
For the year ended 31 March 2022, a final ordinary dividend of 1.80 pence per
share has been proposed and a special dividend of 0.92 pence per share has
been declared, totalling £3.4 million and £1.8 million respectively.
10. 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 disclosed in note 6 to the accounts represents
contributions payable by the Group to the funds.
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
measured 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 comprise both purchased software
and the capitalised cost of software deployment. No internal costs of software
development are capitalised. Internal software costs, which would represent
attributable employee costs, would be capitalised if they meet the IAS 38
criteria. The carrying amounts can be analysed as follows:
Software Total
2022 £'000 £'000
Cost
At 1 April 2021 1,141 1,141
Additions 334 334
Disposals - -
At 31 March 2022 1,475 1,475
Amortisation
At 1 April 2021 721 721
Charge for the year 192 192
Disposals - -
At 31 March 2022 913 913
Net book amounts
At 31 March 2022 562 562
At 1 April 2021 420 420
Software Total
2021 £'000 £'000
Cost
At 1 April 2020 1,903 1,903
Additions 189 189
Disposals (951) (951)
At 31 March 2021 1,141 1,141
Amortisation
At 1 April 2020 1,433 1,433
Charge for the year 168 168
Disposals (880) (880)
At 31 March 2021 721 721
Net book amounts
At 31 March 2021 420 420
At 1 April 2020 470 470
The annual contractual commitment for the maintenance and support of the above
software is £396,710 (2021: £221,004). All amortisation charges are
included within administrative expenses.
12. Leases
The Group's lease arrangements consist of business premises property leases.
Rental contracts are typically made for fixed periods of three to six years
but they may have extension and/or modification options. Lease terms are
negotiated on an individual basis and contain a wide range of different terms
and conditions. The lease agreements do not impose any covenants, but leased
assets cannot be used as security for borrowing purposes.
New and modified leases have been recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is available for
use by the Group. Each lease payment is allocated between the liability and
finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the lease term on
a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Right-of-use assets include the net present value of the
lease payments less any lease incentives receivable.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be determined, the Group's incremental borrowing
rate is used, being the rate that the Group would have to pay to borrow the
funds necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions. As the Group has no borrowings
it has estimated the incremental borrowing rate based on interest rate data
available in the market, adjusted to reflect Record's creditworthiness, the
leased asset in question and the terms and conditions of the lease. For those
leases which existed prior to the IFRS 16 transition date on 1 April 2019, a
discount rate of 4% was used in calculating the lease liability
on transition.
The leases relevant to the twelve months ended 31 March 2022, and the
comparative period, are as described below:
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, expiring on 1 September 2022. On 11 February 2022, the Group signed
a lease on premises at Second Floor, Morgan House, Madeira Walk, Windsor, at
an annual commitment of £267,900, expiring on 1 September 2026. The
1 September 2022 lease modification has been capitalised and discounted at a
rate of 3.95%.
On 1 June 2017, the Group signed a five-year lease on premises in Zürich, at
an annual commitment of CHF 49,680. On 12 August 2021, the Group extended
the lease to 1 June 2027, at an annual commitment of CHF 49,680.
Record assesses whether a contract, is or contains, a lease at the inception
of the contract.
Right‑of‑use ("ROU") assets
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial measurement of lease liability;
· any lease payments made at or before the commencement date, less
any lease incentives received;
· any initial direct costs; and
· an estimate of costs to be incurred to restore the assets to the
condition required by the terms and conditions of the lease.
Depreciation is calculated on a straight-line basis over the lease term and
included within administration costs (note 5).
Net book value of right‑of‑use assets
Group Company
Year ended 31 March 2022 £'000 £'000
Net book value on transition at 1 April 2021 684 642
Addition 1,226 1,043
Depreciation (489) (453)
Net book value at 31 March 2022 1,421 1,232
Group Company
Year ended 31 March 2021 £'000 £'000
Net book value at 1 April 2020 1,175 1,096
Addition - -
Depreciation (490) (454)
FX revaluation (1) -
Net book value at 31 March 2021 684 642
Lease liabilities
Group Company
£'000 £'000
Current 366 326
Non-current 960 812
Total lease liabilities 1,326 1,138
Group Company
£'000 £'000
At 1 April 2021 638 597
Additions 1,226 1,042
Interest expense 17 16
Lease payments (540) (501)
Lease interest payments (17) (16)
Foreign exchange movements 2 -
At 31 March 2022 1,326 1,138
Lease payments
At 31 March 2022, the undiscounted operating lease payments on an annual basis
are as follows:
Maturity of lease liability at 31 March 2022
Group Company
£'000 £'000
Within 1 year 357 330
1-2 years 321 280
2-3 years 321 280
After 3 years 375 327
Total lease liability before discounting 1,374 1,217
The remainder of the movement in the lease liability relates to non-cash
movements. The lease term is determined as the non-cancellable period of a
lease, together with periods covered by an option to extend the lease if the
Group considers that exercise of the option is reasonably certain.
13. 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 as follows:
· 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
2022 £'000 £'000 £'000 £'000
Cost
At 1 April 2021 693 983 305 1,981
Additions - 73 2 75
Disposals - - (14) (14)
At 31 March 2022 693 1,056 293 2,042
Depreciation
At 1 April 2021 520 515 263 1,298
Charge for the year 122 203 32 357
Disposals - - (14) (14)
At 31 March 2022 642 718 281 1,641
Net book amounts
At 31 March 2022 51 338 12 401
At 1 April 2021 173 468 42 683
Leasehold Computer Fixtures
improvements equipment and fittings Total
2021 £'000 £'000 £'000 £'000
Cost
At 1 April 2020 692 952 327 1,971
Additions 1 228 2 231
Disposals - (197) (24) (221)
At 31 March 2021 693 983 305 1,981
Depreciation
At 1 April 2020 397 573 250 1,220
Charge for the year 123 139 37 299
Disposals - (197) (24) (221)
At 31 March 2021 520 515 263 1,298
Net book amounts
At 31 March 2021 173 468 42 683
At 1 April 2020 295 379 77 751
The Group's tangible non-current assets are located predominantly in the UK.
14. Investments
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Investment in subsidiaries at cost - - 2,069 69
Capitalised investment in respect of share-based payments - - 2,019 1,460
Investment in funds 1,070 847 943 2,786
Investment in impact bonds 2,177 2,199 - -
Other Investments 200 - - -
Total investments 3,447 3,046 5,029 4,315
During the year, the Group has embarked on a strategy to invest up to
£2,000,000 in digital assets for the purpose of researching the market.
During the year, the Group signed commitments totalling $550,000 (£417,727)
relating to third-party funds investing in the digital assets sector. As at
the year end, a total of $166,900 (£122,208) has been called up, leaving a
balance of $383,100 (£295,519) which may or may not be called up in future
(see note 27: contingent liabilities for further information).
Company
Investments in subsidiaries
Investments in subsidiaries are shown at cost less impairment losses. The
capitalised investment in respect of share‑based payments offered by
subsidiaries is equal to the cumulative fair value of the amounts payable to
employees recognised as an expense by the subsidiary.
2022 2021
£'000 £'000
Investment in subsidiaries (at cost)
Record Currency Management Limited 10 10
Record Group Services Limited 10 10
Record Portfolio Management Limited 10 10
Record Currency Management (US) Inc. - -
Record Currency Management (Switzerland) GmbH 16 16
Record Digital Asset Ventures Limited 2,000 -
Record Asset Management GmbH 23 23
Record Fund Management Limited - -
N P Record Trustees Limited - -
Total investment in subsidiaries (at cost) 2,069 69
Capitalised investment in respect of share‑based payments
Record Group Services Limited 1,801 1,341
Record Currency Management (US) Inc. 89 89
Record Currency Management (Switzerland) GmbH 129 30
Total capitalised investment in respect of share‑based payments 2,019 1,460
Total investment in subsidiaries 4,088 1,529
Particulars of subsidiary undertakings
Name Nature of business
Record Currency Management Limited Currency management services (FCA, SEC and CFTC registered)
Record Group Services Limited Management services to other Group undertakings
Record Currency Management (US) Inc. US advisory and service company (SEC and CFTC registered)
Record Currency Management (Switzerland) GmbH Swiss advisory and service company
Record Digital Asset Ventures Limited UK company investing in opportunities linked to innovation and research
surrounding digital assets
Record Asset Management GmbH German advisory and service company
RAM Strategies GmbH German consultant and distribution agent
Record Portfolio Management Limited Dormant
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 (registered office: Corporation Service
Company, 251 Little Falls Drive, Wilmington, DE 19808), Record Currency
Management (Switzerland) GmbH is incorporated in Zürich (registered office:
Münsterhof 14, 8001 Zürich) and Record Asset Management GmbH and RAM
Strategies GmbH are incorporated Germany (registered office: Königsallee 92a,
40212 Düsseldorf).
Capitalised investment in respect of share-based payments
The accounting treatment of capitalised investment in respect of share-based
payments can be found in note 23.
Investment in seed funds
In addition to the subsidiaries listed above, the Company previously held
investments in seed funds. These funds were seed investments, with various
investment objectives and policies, and are subject to the terms and
conditions of their offering documentation. The principal activity of each is
to invest capital from investors in a portfolio of assets in order to provide
a return for those investors.
The seed fund investments were presented within investments in the Company
statement of financial position, and all seed fund entities were sub-funds of
the Record Umbrella Fund, an open-ended umbrella unit trust authorised in
Ireland. The two seed funds previously invested in by the Company are shown in
the table below.
Group
Entities are consolidated on a line-by-line basis where the Group has
determined that a controlling interest exists through an investment holding in
the entity, in accordance with IFRS 10 - "Consolidated Financial Statements".
Otherwise, investments in entities are measured at fair value through profit
or loss.
Investment in seed funds
The Group controlled the Record Currency - Strategy Development Fund and
Record - Currency Multi-Strategy Fund until the termination of the funds in
June 2021. Both funds were consolidated in full, on a line-by-line basis in
the Group's financial statements until the termination date.
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Investment in seed funds
Record Currency - Strategy Development Fund - - - 1,077
Record - Currency Multi-Strategy Fund - - - 862
Total investment in seed funds - - - 1,939
Investment in impact bonds
In January 2020, the Group invested £2,287,241 in impact bonds; which are
measured at fair value through profit or loss. The fair value at the year end
was £2,177,372 (2021: £2,198,886).
Investment in Funds
The Group has invested £1,211,242 in investment funds, which are measured at
fair value through profit or loss. The fair value at the year end was
£1,069,701 (2021: £847,081).
15. 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 amounts 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 profit or loss nor the taxable profit or loss, is not recognised.
2022 2021
£'000 £'000
Credit to income statement in year 41 298
Asset/(liability) brought forward 212 (86)
Asset/(liability) carried forward 253 212
The deferred tax asset/(liability) consists of the tax effect of temporary
differences in respect of:
2022 2021
£'000 £'000
Deferred tax allowance on unvested share options 393 320
Excess of taxation allowances over depreciation on fixed assets (140) (108)
Total 253 212
At the year end there were share options not exercised with an intrinsic value
for tax purposes of £4,287,634 (2021: £3,755,976). 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. Deferred tax has been calculated based on the current tax
rate of 19% for differences until 31 March 2023; thereafter, deferred tax has
been calculated on a tax rate of 25%, being the tax rate from 1 April 2023. It
is subject to change if tax rates change in future years.
16. Trade and other receivables
Trade and other receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method,
less loss allowances. The amortised cost of trade and other receivables is
stated at 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.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses ("ECLs") for trade receivables at an amount equal to lifetime ECLs. The
ECLs on trade receivables are calculated based on actual historic credit loss
experience over the preceding 25 years on the total balance of non-credit
impaired trade receivables. Accrued income relates to accrued management and
performance fees earned but not yet invoiced.
An analysis of receivables is provided below:
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade receivables 8,231 6,519 3,441 1,345
Accrued income 25 37 - -
Other receivables 497 470 38 -
Prepayments 1,130 980 43 42
Total 9,883 8,006 3,522 1,387
All amounts are short‑term. The Directors consider that the carrying amount
of trade and other receivables approximates to their fair value. The Group has
not renegotiated the terms of any receivables in the year ended 31 March 2022.
The Group's trade receivables are generally short-term and do not contain
significant financing components.
The Group applies the IFRS 9 simplified approach to measuring ECLs for trade
receivables at an amount equal to lifetime ECLs. The ECLs on trade receivables
are calculated based on actual historic credit loss experience over the
preceding 25 years on the total balance of non-credit impaired trade
receivables. The Group has therefore concluded that the ECLs for trade
receivables are reasonable. The Group does not expect to incur any credit
losses and has not recognised any ECLs in the current year (2021: £nil).
17. 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
assets 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 other income or expense.
2022 2021
Derivative financial assets £'000 £'000
Forward foreign exchange contracts held for trading - 215
Foreign exchange options held for trading - 45
Total - 260
2022 2021
Derivative financial liabilities £'000 £'000
Forward foreign exchange contracts held to hedge non-sterling-based assets (15) -
Forward foreign exchange contracts held for trading (109) (16)
Total (124) (16)
Derivative financial instruments held to hedge non-sterling-based assets
At 31 March 2022 there were outstanding contracts with a principal value of
£9,085,804 (31 March 2021: £9,076,940) 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 2022. The Group
does not apply hedge accounting.
The net gain or loss on forward foreign exchange contracts held to hedge
non-sterling-based assets is as follows:
2022 2021
Derivative financial instruments held to hedge non-sterling-based assets £'000 £'000
Net loss on forward foreign exchange contracts at fair value through profit or 467 673
loss
Derivative financial instruments held for trading
The Record - Currency Multi‑Strategy Fund and the Record Currency - Strategy
Development Fund may use 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
Multi-Strategy Fund and the Record Currency - Strategy Development Fund were
classified as held for trading until termination in June 2021.
At 31 March 2022 there were outstanding contracts with a principal value of
£nil (31 March 2021: £10,383,964).
The net gain or loss on derivative financial instruments held for trading for
the year was as follows:
2022 2021
Derivative financial instruments held to hedge non-sterling-based assets £'000 £'000
Net loss on forward foreign exchange contracts and foreign exchange options at 42 53
fair value through profit or loss
18. 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 deposits and treasury bills with maturities in
excess of three 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 from origination.
Group Company
2022 2021 2022 2021
Assets managed as cash £'000 £'000 £'000 £'000
Bank deposits with maturities > 3 months 13,913 12,932 - -
Money market instruments with maturities > 3 months 13,913 12,932 - -
Cash 3,345 2,372 43 173
Bank deposits with maturities <= 3 months - 4,475 - -
Cash and cash equivalents 3,345 6,847 43 173
Total assets managed as cash 17,258 19,779 43 173
Group Company
2022 2021 2022 2021
Cash and cash equivalents £'000 £'000 £'000 £'000
Cash and cash equivalents - sterling 1,169 3,108 43 173
Cash and cash equivalents - USD 450 2,692 - -
Cash and cash equivalents - CHF 318 183 - -
Cash and cash equivalents - other currencies 1,408 864 - -
Total cash and cash equivalents 3,345 6,847 43 173
The Group's cash and cash equivalents balance incorporates the cash and cash
equivalents held by any fund deemed to be under control of Record plc (refer
to notes 1 and 4 for explanation of accounting treatment). As at 31 March
2022, the cash and cash equivalents held by the seed funds were £nil as the
funds terminated in June 2021 (31 March 2021: £3,159,533) and the money
market instruments with maturities > 3 months held by these funds were
£nil (31 March 2021: £427,957).
Details of how the Group manages credit risk are provided in note 24.
19. 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.
Group Company
2022 2021 2022 2021
Trade and other payables £'000 £'000 £'000 £'000
Trade payables 478 384 - -
Amounts owed to Group undertaking - - 4,155 10
Other payables 16 16 - -
Other tax and social security 619 486 - -
Accruals 3,608 2,540 6 6
Total 4,721 3,426 4,161 16
Accruals include £2,506,656 for the Group Profit Share Scheme (31 March 2021:
£1,644,761). The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
Company Company
2022 2021 2022 2021
Current tax liabilities £'000 £'000 £'000 £'000
Corporation tax 924 315 - -
20. Financial liabilities
Record plc had made investments in a number of seed funds where it was in a
position to be able to control those funds by virtue of the size of its
holding. When Record plc is not the only investor in such funds and the
external investment instrument does not meet the definition of an equity
instrument under IAS 32 then the instrument is classified as a financial
liability. The financial liabilities are measured at cost plus movement in
value of the third‑party investment in the fund.
The Record - Currency Multi-Strategy Fund and the Record Currency - Strategy
Development Fund were considered to be under the control of the Group as the
combined holding of Record plc and its Directors constituted a majority
interest throughout the prior year and through to termination of the funds in
June 2021.
The mark‑to‑market value of units held by investors in these funds other
than Record plc are shown as financial liabilities in the Group financial
statements, in accordance with IFRS.
Mark‑to‑market value of external holding in seed funds consolidated into
the accounts of the Record Group
2022 2021
£'000 £'000
Record - Currency Multi-Strategy Fund - 1,696
Total financial liabilities - 1,696
The financial liabilities relate only to the fair value of the external
investors' holding in the seed funds, and are in no sense debt.
21. Provisions
The Group has provisions reflecting its contractual obligations connected to
reaching the end of its contractual lease terms.
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Provisions 200 200 200 200
22. Issued 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.
2022 2020
£'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 50 199,054,325 50 199,054,325
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 2020 3,219,387
Adjustment for net purchases by EBT 3,077,270
Record plc shares held by EBT as at 31 March 2021 6,296,657
Adjustment for net purchases by EBT 3,335,374
Record plc shares held by EBT as at 31 March 2022 9,632,031
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 23.
23. Share-based payments
During the year ended 31 March 2022 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; and
d) the Record plc Jointly Owned Share Plan: participants' interests
awarded under the Jointly Owned Share Plan ("JSOP") are classified as
equity-settled share-based payments under IFRS 2.
All obligations arising from the four schemes have been 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 allocated to
the profit share pool between 25% and 35% of operating profits. 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 £1,463,802 (2021: £765,606). 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.
All shares which are the subject of share awards vest immediately and are
transferred to a nominee, allowing the employee, as beneficial owner, to
retain full rights in respect of the shares purchased. Shares awarded under
the Group Profit Share Scheme are subject to restrictions over subsequent sale
and transfer and these restrictions are automatically lifted over one-third on
each anniversary of the profit share payment date for the next three years. In
the meantime, these shares cannot be sold, transferred or otherwise disposed
of without the consent of the Remuneration Committee.
The Group Profit Share Scheme rules contain clawback 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.
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 including any market or performance
conditions, and using quoted share prices.
The Record plc Share Scheme allows deferred share awards to be granted to
employees and Directors in the Record Group. Part 1 of the scheme allows the
grant of tax-unapproved ("Unapproved") options to employees and Directors and
Part 2 allows the grant of HMRC tax-approved ("Approved") options to employees
and Directors. 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 have
historically been granted with a market value exercise price in the same way
as for the Approved options.
Options over an aggregate of 3,747,500 shares were granted under the Share
Scheme during the year (2021: 3,850,000), of which options over 195,000 shares
were granted as Approved options and options over 3,552,500 shares were
granted as Unapproved options (2021: all granted as Unapproved options). All
Approved options and 952,500 Unapproved options were granted with an exercise
price per share equal to the share price prevailing at the time of grant, the
remaining 2,600,000 Unapproved options were granted with an exercise price
below the share price prevailing at the time of grant.
The 195,000 Approved options issued to employees on 13 August 2021 all 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.
The 3,552,500 Unapproved options issued to employees on 13 August 2021 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 fair value of the services provided by employees has been calculated
indirectly by reference to the fair value of the equity instruments granted.
Fair value amounts for the options granted in the year ended 31 March 2022,
and for which a charge to profit or loss was made in the year, were determined
using a Black-Scholes option-pricing method and the following assumptions:
Weighted
Model input average value
Share price 85.7p
Dividend yield 2.89%
Exercise price 54.0p
Expected volatility 40%
Option life 2.6 years
Risk-free interest rate (%) 52%
Expected volatility is based on historical volatility.
The Group share‑based payment expense in respect of the Share Scheme was
£530,779 for the year ended 31 March 2022 (2021: £181,095).
Outstanding share options
At 31 March 2022, the total number of ordinary shares of 0.025p outstanding
under Record plc share compensation schemes was 11,605,545 (2021: 11,844,421).
These deferred share awards and options are over issued shares, a proportion
of which are hedged by shares held in an EBT. Details of outstanding share
options awarded to employees are set out below:
Date of At 1 April Lapsed/ At 31 March Earliest vesting Latest vesting Exercise
grant 2021 Granted Exercised forfeited 2022 date date(1) price
30/11/16 90,000 - (90,000) - - 30/11/20 30/11/20 £0.34072
30/11/16 62,500 - (62,500) - - 30/11/19 30/11/20 £0.34072
30/11/16 733,336 - - (733,336) - 30/11/20 30/11/21 £0.34072
26/01/18 1,267,500 - (1,078,000) (34,500) 155,000 26/01/22 26/01/22 £0.4350
26/01/18 127,750 - (122,625) - 5,125 26/01/20 26/01/22 £0.4350
26/01/18 34,667 - - (17,333) 17,334 26/01/21 26/01/23 £0.4350
26/01/18 1,288,668 - - (644,332) 644,336 26/01/21 26/01/23 £0.4350
29/03/19 460,000 - - - 460,000 29/03/23 29/03/23 £0.2830
29/03/19 277,500 - (92,500) - 185,000 29/03/20 29/03/23 £0.2830
21/08/19 1,985,000 - - - 1,985,000 21/08/22 21/08/24 £0.3110
18/03/20 1,667,500 - (405,000) (25,000) 1,237,500 18/03/21 18/03/24 £0.28902
21/09/20 3,425,000 - (606,250) - 2,818,750 21/09/21 21/09/24 £0.3730
25/01/21 300,000 - (75,000) - 225,000 25/01/22 25/01/25 £0.49425
09/03/21 125,000 - - - 125,000 09/03/22 09/03/25 £0.63986
13/08/21 - 195,000 - - 195,000 13/08/25 13/08/25 £0.85713
13/08/21 - 2,600,000 - - 2,600,000 13/08/22 13/08/25 £0.4000
13/08/21 - 952,500 - - 952,500 13/08/22 13/08/25 £0.85713
Total options 11,844,421 3,747,500 (2,531,875) (1,454,501) 11,605,545
Weighted average exercise price of options £0.36 £0.54 £0.39 £0.38 £0.41
During the year 2,531,875 options were exercised. The weighted average share
price at date of exercise was £0.77. At 31 March 2022, a total of 946,375
options had vested and were exercisable (2021: 701,375). At 31 March 2022, the
weighted average exercise price of the options vested and exercisable was
£0.35 (2021: £0.31) and the weighted average contractual life was two years
(2021: two years).
The Directors' interests in the combined share schemes are as follows:
Ordinary shares held as at
31 March 31 March
2022 2021
Record plc Group Profit Share Scheme (interest in restricted share awards)
Leslie Hill 467,296 379,841
Steve Cullen 57,422 75,849
Record plc Share Scheme (interest in unvested share options)
Leslie Hill 668,334 945,001
Steve Cullen 301,668 526,668
Performance measures
Performance conditions attached to all options granted to Board Directors
differ to those granted for all other staff. All Executive Director option
awards are subject to a performance condition and vest on each of the third,
fourth and fifth anniversaries of the date of grant subject to an earnings per
share ("EPS") hurdle linked to the annualised EPS growth for the respective
three, four and five-year periods from grant. Vesting is on a stepped basis,
with 25% of each tranche vesting if EPS growth over the relevant period is at
least RPI plus 4% per annum, increasing through 50%, 75% and with 100% vesting
if EPS growth exceeds RPI plus 13%, as shown in the table below. Options
awarded subject to EPS performance conditions are valued using a Black-Scholes
model, adjusted for the impact of the performance conditions.
Percentage of
shares subject
to the award
Record's average EPS growth which vest
>RPI growth + 13% 100%
>RPI growth + 10%, =RPI growth + 7%, =RPI growth + 4%, = 3 months 13,913 13,613
Cash and cash equivalents 3,345 6,166
Total financial assets 26,011 27,065
The debtors' age analysis is also evaluated on a regular basis for expected
credit losses. It is management's opinion that there is no requirement to
provide for any expected credit losses. The table below is an analysis of
trade receivables and accrued income by due date:
Neither More than
Carrying impaired nor 0-3 months 3 months
amount past due past due past due
At 31 March 2022 £'000 £'000 £'000 £'000
Trade receivables 8,231 8,231 - -
Accrued income 25 25 - -
Total 8,256 8,256 - -
100% 0% 0%
Neither More than
Carrying impaired nor 0-3 months 3 months
amount past due past due past due
At 31 March 2021 £'000 £'000 £'000 £'000
Trade receivables 6,519 6,519 - -
Accrued income 37 37 - -
Total 6,556 6,556 - -
100% 0% 0%
The Group offers standard credit terms of 30 days from invoice date. It is the
Group's policy to assess debtors for expected loss 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
to the reporting date. The application of this policy generally results in
debts that are past due not being provided for unless individual circumstances
indicate that a debt is impaired.
Trade receivables are made up of 91 debtors' balances (2021: 82). The largest
individual debtor corresponds to 16% of the total balance (2021: 15%). Debtor
days, based on the generally accepted calculation of debtor days, is 85 days
(2021: 94 days). This reflects the quarterly billing cycle used by the Group
for the vast majority of its fees. As at 31 March 2022, 0% of debt was overdue
(2021: 0%). 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 28 days (2021: 29 days).
The impact of covid-19 and the Russia/Ukraine crisis has been considered, and
management believe that the Group's ability to meet its obligations is
unaffected.
Contractual maturity analysis for financial liabilities
Due or due Due between Due between
Carrying in less than 1 and 3 months
amount 1 month 3 months and 1 year
At 31 March 2022 £'000 £'000 £'000 £'000
Trade payables 478 318 29 131
Accruals 3,608 302 1,503 1,803
Derivative financial liabilities 124 7 117 -
Total 4,210 627 1,649 1,934
Due or due Due between Due between
Carrying in less than 1 and 3 months
amount 1 month 3 months and 1 year
At 31 March 2021 £'000 £'000 £'000 £'000
Trade payables 384 191 30 163
Accruals 2,538 420 809 1,309
Derivative financial liabilities 16 6 10 -
Total 2,938 617 849 1,472
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 held 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
No
Fixed rate Floating rate interest rate Total
At 31 March 2022 £'000 £'000 £'000 £'000
Financial assets
Trade receivables - - 8,231 8,231
Accrued income - - 25 25
Other receivables - - 497 497
Money market instruments with maturities > 3 months 13,913 - - 13,913
Cash and cash equivalents 3,345 - - 3,345
Total financial assets 17,258 - 8,753 26,011
Financial liabilities
Trade payables - - (478) (478)
Accruals - - (3,608) (3,608)
Lease liability - - (1,326) (1,326)
Derivative financial liabilities at fair value through profit or loss - - (124) (124)
Total financial liabilities - - (5,536) (5,536)
No
Fixed rate Floating rate interest rate Total
At 31 March 2021 £'000 £'000 £'000 £'000
Financial assets
Trade receivables - - 6,519 6,519
Accrued income - - 37 37
Other receivables - - 470 470
Derivative financial assets at fair value through profit or loss - - 260 260
Money market instruments with maturities > 3 months 12,932 - - 12,932
Cash and cash equivalents 682 6,165 - 6,847
Total financial assets 13,614 6,165 7,286 27,065
Financial liabilities
Trade payables - - (384) (384)
Accruals - - (2,538) (2,538)
Lease liability - - (539) (539)
Derivative financial liabilities at fair value through profit or loss - - (16) (16)
Financial liabilities - - (1,696) (1,696)
Total financial liabilities - - (5,173) (5,173)
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 revenue invoices 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. 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 2022, the Group invoiced the following amounts
in currencies other than sterling:
2022 2021
Local Value in Local Value in
currency reporting currency reporting
value currency value currency
£'000 £'000 £'000 £'000
US dollar (USD) 23,949 17,742 13,185 9,912
Swiss franc (CHF) 12,460 10,010 13,375 11,072
Euro (EUR) 4,135 3,498 3,185 3,828
Canadian dollar (CAD) 1,626 960 1,238 719
Australian dollar (AUD) 1,029 563 838 467
Japanese yen (JPY) 4,824 31 - -
Swedish krona (SEK) 36 3 672 49
Singapore dollar (SGD) 4 2 14 8
The value of revenues for the year ended 31 March 2022 that were denominated
in currencies other than sterling was £32.8 million (31 March 2021: £24.7
million).
Record's policy is to reduce the risk associated with the Group's revenues
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.
The cash denominated in currencies other than sterling (refer to note 18) is
covered by the Group's hedging process, therefore the Directors consider that
the foreign currency risk on cash balances is not material.
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 for the year ended 31 March Impact on total equity as at 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Sterling weakening by 10% against the dollar 871 489 871 489
Sterling strengthening by 10% against the dollar (871) (489) (871) (489)
Sterling weakening by 10% against the Swiss franc 445 551 445 551
Sterling strengthening by 10% against the Swiss franc (445) (551) (445) (551)
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 = $1.35 this
would result in sterling weakening to £1 = $1.23 and sterling strengthening
to £1 = $1.50.
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 £1 = CHF 1.24 this
would result in sterling weakening to £1 = CHF 1.13 and sterling
strengthening to £1 = CHF 1.38.
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.
Concentration risk
The Group is exposed to concentration risk in respect of product, client type
and geographical location, which could lead to over-reliance on any one
category of revenue. Note 4 provides detail on clients contributing greater
than 10% of revenue.
Concentration risk - sensitivity analysis
The Group has considered the impact of losing the Group's largest client,
assuming that only variable remuneration costs can be reduced in the short
term.
Impact on profit after tax for the year ended 31 March Impact on total equity as at 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Loss of largest client 2,594 2,352 2,594 2,352
25. 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
financial assets or liabilities;
· Level 2: inputs other than quoted prices included within level 1
that are observable for the financial asset or liability, indirectly (i.e.
derived from prices); and
· Level 3: inputs for the financial 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:
2022 Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Impact bonds 2,177 2,177 - -
Investment in funds 1,070 944 - 126
Other investments 200 - - 200
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts held to hedge non-sterling assets (15) - (15) -
Other investments (110) - (110) -
Total 3,322 3,121 (125) 326
2021 Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Impact bonds 2,199 2,199 - -
Forward foreign exchange contracts used by seed funds 215 - 215 -
Foreign exchange options used by seed funds 45 - 45 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used by seed funds (16) - (16) -
Total 2,443 2,199 244 -
There have been no transfers between levels in the reporting period (2021:
none).
Basis for classification of financial instruments classified as level 1 within
the fair value hierarchy
Impact bonds are classified as level 1. These bonds are valued using the
market price and coupon rate.
Basis for classification of financial instruments classified as level 2 within
the fair value hierarchy
Forward foreign exchange contracts and options are both 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
Assets at Financial Assets at Liabilities at
amortised liabilities fair value fair value
cost measured at through through profit
amortised cost profit or loss or loss
At 31 March 2022 Note £'000 £'000 £'000 £'000
Impact bonds 14 - - 2,177 -
Investment in funds 14 - - 1,070 -
Other investments 14 - - 200 -
Trade and other receivables (excludes prepayments) 16 8,753 - - -
Money market instruments with maturities > 3 months 18 13,913 - - -
Cash and cash equivalents 18 3,345 - - -
Trade payables 19 - (478) - -
Accruals 19 - (3,608) - -
Derivative financial liabilities at fair value through profit or loss 17 - - - (124)
Total 26,011 4,086 3,447 (124)
Assets at Financial Assets at Liabilities at
amortised liabilities fair value fair value
cost measured at through through profit
amortised cost profit or loss or loss
At 31 March 2021 Note £'000 £'000 £'000 £'000
Impact bonds 14 - - 2,199 -
Trade and other receivables (excludes prepayments) 16 7,027 - - -
Money market instruments with maturities > 3 months 18 12,932 - - -
Cash and cash equivalents 18 6,847 - - -
Derivative financial assets at fair value through profit or loss 17 - - 260 -
Trade payables 19 - (384) - -
Accruals 19 - (2,540) - -
Derivative financial liabilities at fair value through profit or loss 17 - - - (16)
Total 26,806 (2,924) 2,459 (16)
26. 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 14, which includes a
description of the nature of their business.
2022 2021
£'000 £'000
Amounts due (to)/from subsidiaries (714) 1,265
Net dividends received from subsidiaries 4,600 5,270
Amounts owed to and by related parties will be settled in cash. No guarantees
have been given or received. No provisions for expected credit losses have
been raised against amounts outstanding (2021: £nil). No expense has been
recognised during the year in respect of expected credit losses 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
2022 2021
£'000 £'000
Short‑term employee benefits 8,457 6,214
Post‑employment benefits 330 309
Share‑based payments 2,467 949
Total 11,254 7,472
Key management personnel dividends
The dividends paid to key management personnel in the year ended 31 March 2022
totalled £3,056,662 (2021: £3,028,563).
Directors' remuneration
2022 2021
£'000 £'000
Emoluments (excluding pension contribution) 2,809 2,015
Pension contribution (including payments made in lieu of pension 96 125
contributions)
Total 2,905 2,140
During the year, no Directors of the Company (2021: one) participated in the
Group Personal Pension Plan, a defined contribution scheme.
Transactions with seed 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 seed 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 and Record - Currency
Multi-Strategy Fund were related parties on this basis until June 2021, when
the funds were closed.
During the year, Record plc Director Leslie Hill redeemed £605,217 from the
Record - Currency Multi‑Strategy Fund.
27. Contingent liabilities and commitments
The Group has committed to subscriptions to equity capital of $550,000, of
which $166,900 has been called.
On 1 October 2021, the Group committed to a licence to use an office in
London. The commitment is to 31 October 2023 and the outstanding amount to be
paid at 31 March 2022 was £558,600. £352,800 is payable within 12 months and
£205,800 the following 12 months.
28. 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:
2022 2021
£m £m
Required regulatory capital 5.4 9.4
Other operating capital 20.5 17.4
Total capital 25.9 26.8
Total capital covers the Groups regulatory capital requirements 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.
29. Ultimate controlling party
As at 31 March 2022 the Company had no ultimate controlling party, nor at 31
March 2021.
30. Post-reporting date events
No adjusting or significant non‑adjusting events have occurred between the
reporting date and the date of authorisation.
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.
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. END FR FLFFDRLIIFIF Recent news on Record
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