REG - Record PLC - Half-year Report <Origin Href="QuoteRef">RECL.L</Origin> - Part 2
18/11/2016 07:06
- Part 2: For the preceding part double click ID:nRSR5175Pa
unqualified and did not contain statements under
Section 498(2) or Section 498(3) of the Companies Act 2006.
Going concern
The Directors are satisfied that the Group has adequate resources with which
to continue to operate for the foreseeable future, and therefore these
financial statements have been prepared on a going concern basis.
Consolidation
The accounting policies adopted in these interim financial statements are
identical to those adopted in the Group's most recent annual financial
statements for the year ended 31 March 2016.
The consolidated financial information contained within the financial
statements incorporates financial statements of the Company and entities
controlled by the Company (its subsidiaries) drawn up to 30 September 2016.
Control is achieved where the Company has the power to govern the financial
and operating policies of an entity so as to obtain benefits from its
activities. Where the Group controls an entity, but does not own all the share
capital of that entity, the interests of the other shareholders are stated
within equity as non-controlling interests, being the proportionate share of
the fair value of identifiable net assets on date of acquisition plus the
share of changes in equity since the date of consolidation.
An Employee Benefit Trust ("EBT") has been established for the purposes of
satisfying certain share-based awards. The Group has 'de facto' control over
this entity. This trust is fully consolidated within the financial
statements.
At the beginning of the period, the Group had investments in three funds which
it was in a position to control. These fund investments are held by Record
plc and represent seed capital investments by the Group. The funds are
consolidated on a line-by-line basis from the time that the Group gains
control over the fund.
2) Critical accounting estimates and judgements
The accounting policies, presentation and methods of computation applied in
the interim financial statements are consistent with those applied in the
financial statements for the year ended 31 March 2016.
3) Revenue
Segmental analysis
The Executive Committee (comprising the Executive Directors together with two
senior managers) which is the entity's Chief Operating Decision Maker,
considers that its services comprise one operating segment (being the
provision of currency management services) and that it operates in a market
that is not bound by geographical constraints. The Group provides management
with revenue information disaggregated by product, whilst operating costs,
assets and liabilities are presented on an aggregated basis. This reflects the
unified basis on which the products are marketed, delivered and supported.
a) Product revenues
The Group has split its currency management revenues by product. Revenue
attributable to the non-controlling interests' holding in seed funds and other
income arises mainly from gains/losses on derivative financial instruments.
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
Revenue by product type £'000 £'000 £'000
Management fees
Dynamic Hedging 2,596 2,998 5,514
Passive Hedging 5,613 4,493 9,438
Currency for Return 469 397 790
Multi-product 1,907 3,068 5,199
Total management fee income 10,585 10,956 20,941
Performance fee income - - 315
Other income 495 (572) (122)
Total revenue 11,080 10,384 21,134
Other income includes gains attributable to the non-controlling interests'
holding in the funds of £441,492 (six months ended 30 September 2015: losses
of £372,721; year ended 31 March 2016: losses of £112,274).
b) Geographical analysis
The geographical analysis of revenue is based on the location of the client to
whom the services are provided. All revenue originated in the UK.
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
Revenue by geographical region £'000 £'000 £'000
Currency management income
UK 2,019 2,343 4,501
US 2,256 1,758 3,746
Switzerland 5,606 6,329 11,939
Other 704 526 1,070
Total currency management income 10,585 10,956 21,256
Other income 495 (572) (122)
Total revenue 11,080 10,384 21,134
Other income is not analysed by geographical region.
4) Earnings per share
Basic earnings per share are calculated by dividing the profit for the
financial period attributable to equity holders of the parent by the weighted
average number of ordinary shares in issue during the period.
Diluted earnings per share are 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 period
attributable to equity holders of the parent used in the basic and diluted
earnings per share calculations.
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
Weighted average number of shares used in calculation of basic earnings per share 216,800,927 217,807,851 217,176,877
Effect of potential dilutive ordinary shares - share options 405,007 1,266,237 711,980
Weighted average number of shares used in calculation of diluted earnings per share 217,205,934 219,074,088 217,888,857
Basic earnings per share 1.33p 1.36p 2.55p
Diluted earnings per share 1.33p 1.35p 2.54p
The potential dilutive shares relate to the share options granted in respect
of the Group's Share Scheme. At the beginning of the period, there were share
options in place over 13,369,249 shares. During the six months ended 30
September 2016, options over 200,000 shares were exercised, and options over
680,540 shares either lapsed or were forfeited. As at 30 September 2016,
there were share options in place over 12,488,709 shares.
5) Dividends
The dividends paid during the six months ended 30 September 2016 totalled
£1,790,888 (0.825p per share), which was the final dividend in respect of the
year ended 31 March 2016. An interim dividend of £1,787,588 (0.825p per share)
was paid in the six months ended 31 March 2016, thus the full dividend in
respect of the year ended 31 March 2016 was 1.65p per share. The dividend paid
by the Group during the six months ended 30 September 2015 totalled £1,962,261
(0.90p per share), which was the final dividend paid in respect of the year
ended 31 March 2015.
The interim dividend proposed in respect of the six months ended 30 September
2016 is 0.825p per share.
6) Cash management
The Group's cash management strategy employs a variety of treasury management
instruments including cash, money market deposits and treasury bills with
maturities of up to one year. We note that 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
greater than three months.
The table below summarises the instruments managed by the Group as cash, and
their IFRS classification:
As at As at As at
30 Sep 16 30 Sep 15 31 Mar 16
£'000 £'000 £'000
Bank deposits with maturities > 3 months 20,069 14,181 11,518
Treasury bills with maturities > 3 months - - 1,502
Money market instruments with maturities > 3 months 20,069 14,181 13,020
Cash 6,587 4,604 5,439
Bank deposits with maturities <= 3 months 9,527 14,637 16,281
Cash and cash equivalents 16,114 19,241 21,720
Total assets managed as cash by the Group 36,183 33,422 34,740
7) Cash flow from operating activities
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
£'000 £'000 £'000
Operating profit 3,965 3,215 6,790
Adjustments for non-cash movements:
Depreciation of property, plant and equipment 29 51 77
Amortisation of intangible assets 123 115 244
Share-based payments 8 360 388
Release of shares held by EBT 211 200 374
Other non-cash movements (66) (51) (282)
4,270 3,890 7,591
Changes in working capital
(Increase)/decrease in receivables (254) 405 610
Increase/(decrease) in payables 76 (513) (600)
Decrease in other financial assets 52 1,164 1,182
Increase/(decrease) in other financial liabilities 27 (1,633) (1,664)
Cash inflow from operating activities 4,171 3,313 7,119
Corporation taxes paid (777) (899) (1,610)
Net cash inflow from operating activities 3,394 2,414 5,509
8) Called up share capital
The share capital of Record plc consists only of fully paid ordinary shares
with a par value of 0.025p. All shares are equally eligible to receive
dividends and the repayment of capital and represent one vote at the
shareholders' meeting.
Unaudited as at Unaudited as at Audited as at
30 Sep 16 30 Sep 15 31 Mar 16
£'000 Number £'000 Number £'000 Number
Authorised
Ordinary shares of 0.025p each 100 400,000,000 100 400,000,000 100 400,000,000
Called up, allotted and fully paid
Ordinary shares of 0.025p each 55 221,380,800 55 221,380,800 55 221,380,800
Movement in Record plc shares held by the Record plc Employee Benefit Trust
(EBT)
The EBT was formed to hold shares acquired under the Record plc share-based
compensation plans. Under IFRS the EBT is considered to be under de facto
control of the Group, and has therefore been consolidated into the Group
financial statements.
Neither the purchase nor sale of own shares leads to a gain or loss being
recognised in the Group statement of comprehensive income. Any such gains or
losses are recognised directly in equity.
Number
Record plc shares held by EBT as at 31 March 2015 3,848,062
Net change in holding of own shares by EBT in period (59,257)
Record plc shares held by EBT as at 30 September 2015 3,788,805
Net change in holding of own shares by EBT in period 1,153,443
Record plc shares held by EBT as at 31 March 2016 4,942,248
Net change in holding of own shares by EBT in period (838,748)
Record plc shares held by EBT as at 30 September 2016 4,103,500
The EBT holds shares in Record plc which are used to meet the Group's
obligations to employees under the Group Profit Share Scheme and the Record
plc Share Scheme. Own shares are recorded at cost and are deducted from
retained earnings.
On 20 June 2016, the EBT released 638,748 shares with a market value of
£157,288 to settle obligations under the Group Profit Share Scheme, and
200,000 shares with a market value of £54,125 were released on exercise of
options on 26 September 2016.
9) Non-controlling interests
Record plc has made investments in a number of funds where it is in a position
to be able to control those funds by virtue of the size of its holding.
Non-controlling interests occur when Record plc is not the only investor in
such funds. The non-controlling interests are measured at cost plus movement
in value of the third party investment in the fund.
Record has seeded three funds which have been active during the period ended
30 September 2016.
The Record Currency - Emerging Market Currency Fund was considered to be under
control of the Group as the combined holding of Record plc and its Directors
constituted a majority interest throughout the period. Similarly, the Record
Currency - Strategy Development Fund is considered to be under control of the
Group as the combined holding of Record plc and its Directors has constituted
a majority interest since inception.
The Record Currency - FTSE FRB10 Index Fund has been under the control of the
Group since 1 September 2015, when the redemption of units by two external
investors meant that Record could control the fund as the combined holding of
Record plc and its Directors constituted a majority interest from that point
onwards. This fund has therefore been consolidated into the Group's accounts
from 1 September 2015 onwards.
The mark to market value of units held by investors in these funds other than
Record plc are shown as non-controlling interests in the Group financial
statements, in accordance with IFRS. There were no other non-controlling
interests in the Group financial statements.
Mark to market value of external holding in seeded funds consolidated into the
accounts of the Record Group
As at As at As at
30 Sep 16 30 Sep 15 31 Mar 16
£'000 £'000 £'000
Record Currency - Emerging Market Currency Fund 3,802 2,434 3,583
Record Currency - Strategy Development Fund - 481 -
Record Currency - FTSE FRB10 Index Fund 454 413 436
4,256 3,328 4,019
10) 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 based on the significance of inputs used in measuring
their fair value. The hierarchy has the following levels:
· Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities;
· Level 2: inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
· Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is
determined based on the lowest level of input to the fair value measurement.
The financial assets and liabilities measured at fair value in the statement
of financial position are grouped into the fair value hierarchy as follows:
Total Level 1 Level 2 Level 3
As at 30 September 2016 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for seed funds 54 - 54 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for seed funds (17) - (17) -
Forward foreign exchange contracts used for hedging (118) - (118) -
(81) - (81) -
Total Level 1 Level 2 Level 3
As at 31 March 2016 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for seed funds 106 - 106 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging (108) - (108) -
(2) - (2) -
Total Level 1 Level 2 Level 3
As at 30 September 2015 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for seed funds 23 - 23 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for seed funds (53) - (53) -
Forward foreign exchange contracts used for hedging (86) - (86) -
(116) - (116) -
There have been no transfers between levels in any of the reported periods.
Basis for classification of financial instruments classified as Level 2 within
the fair value hierarchy
Both forward foreign exchange contracts are classified as Level 2. These
instruments are traded on an active market. The fair value of forward foreign
exchange contracts may be established using interpolation of observable market
data rather than a quoted price.
11) Related parties
Related parties of the Group include key management personnel, close family
members of key management personnel, subsidiaries, the EBT and the seed
funds.
Key management personnel
The compensation given to key management personnel is as follows:
Six months Six months Year
ended ended ended
30 Sep 16 30 Sep 15 31 Mar 16
£'000 £'000 £'000
Short-term employee benefits 2,243 1,938 3,894
Post-employment benefits 83 139 280
Share-based payments 600 555 989
2,926 2,632 5,163
The dividends paid to key management personnel in the six months ended 30
September 2016 totalled £954,074 (year ended 31 March 2016: £1,963,285; six
months ended 30 September 2015: £1,019,193).
12) Post reporting date events
No adjusting or significant non-adjusting events have occurred between the
reporting date and the date of approval.
Product classification
Record has historically reported AUME and management fees between four core
products, being Dynamic Hedging, Passive Hedging, Currency for Return and Cash
& other.
However, clients may also elect for mandates with combined hedging and
return-seeking objectives, which cannot readily be separated into hedging and
return-seeking components. Therefore, to reflect such mandates held not only
with current clients but also with potential future clients, a new product
category has been introduced: multi-product mandates. This new classification
does not represent a new service line, rather seeks to redefine the boundaries
between existing products, and combinations of products.
To assist in understanding the changes, AUME, management fees and management
fee rates by product under both historic and revised conventions have been
presented.
AUME for the Multi-product classification will be based on the chargeable size
of those mandates, in order to maintain the clear link between AUME, fee
levels and management fees. This change in definition gives rise to an AUME
adjustment in the reconciliation below of -$0.8bn as at 30 September 2016 (31
March 2016: -$0.8bn; 30 September 2015: -$0.9bn). These adjustments do not
represent a genuine AUME flow.
AUME ($ billion) Management fees(£ million) Management fee rates(bps p.a.)
Historic presentation
30-Sep-16 30-Sep-15 31-Mar-16 30-Sep-16 30-Sep-15 31-Mar-16 30-Sep-16 30-Sep-15 31-Mar-16
Dynamic Hedging 7.5 8.7 7.9 4.0 4.4 8.3 14 15 15
Passive Hedging 46.0 42.1 43.8 5.6 4.5 9.4 4 3 3
Currency for Return 2.1 2.3 1.8 1.0 2.1 3.2 14 15 15
Cash & other 0.2 0.2 0.2
Total 55.8 53.3 53.7 10.6 11.0 20.9
Mandate re-classification
30-Sep-16 30-Sep-15 31-Mar-16 30-Sep-16 30-Sep-15 31-Mar-16
Dynamic Hedging -1.8 -2.1 -1.8 -1.4 -1.4 -2.8
Passive Hedging -0.4 -0.4 -0.4 0.0 0.0 0.0
Currency for Return -1.2 -1.7 -1.2 -0.5 -1.7 -2.4
Multi-product +3.4 +4.2 +3.4 +1.9 +3.1 +5.2
Cash & other 0.0 0.0 0.0
Total 0.0 0.0 0.0 0.0 0.0 0.0
AUME redefinition
30-Sep-16 30-Sep-15 31-Mar-16
Dynamic Hedging 0.0 0.0 0.0
Passive Hedging 0.0 0.0 0.0
Currency for Return 0.0 0.0 0.0
Multi-product -0.8 -0.9 -0.8
Cash & other 0.0 0.0 0.0
Total -0.8 -0.9 -0.8
Revised presentation
30-Sep-16 30-Sep-15 31-Mar-16 30-Sep-16 30-Sep-15 31-Mar-16 30-Sep-16 30-Sep-15 31-Mar-16
Dynamic Hedging 5.7 6.6 6.1 2.6 3.0 5.5 13 13 13
Passive Hedging 45.6 41.7 43.4 5.6 4.5 9.4 4 3 3
Currency for Return 0.9 0.6 0.6 0.5 0.4 0.8 17 19 20
Multi-product 2.6 3.3 2.6 1.9 3.1 5.2 20 18 19
Cash & other 0.2 0.2 0.2
Total 55.0 52.4 52.9 10.6 11.0 20.9
Notes to Editors
This announcement includes information with respect to Record's financial
condition, its results of operations and business, strategy, plans and
objectives. All statements in this document, other than statements of
historical fact, including words such as "anticipates", "expects", "intends",
"plans", "believes", "seeks", "estimates", "may", "will", "continue",
"project" and similar expressions, are forward-looking statements.
These forward-looking statements are not guarantees of the Company's future
performance and are subject to risks, uncertainties and assumptions that could
cause the actual future results, performance or achievements of the Company to
differ materially from those expressed in or implied by such forward-looking
statements.
The forward-looking statements contained in this document are based on
numerous assumptions regarding Record's present and future business and
strategy and speak only as at the date of this announcement.
The Company expressly disclaims any obligation or undertaking to disseminate
any updates or revisions to any forward-looking statements contained in this
announcement whether as a result of new information, future events or
otherwise.
This information is provided by RNS
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