REG - Record PLC - Half-year Report <Origin Href="QuoteRef">RECL.L</Origin> - Part 2
17/11/2017 07:05
- Part 2: For the preceding part double click ID:nRSQ7682Wa
computation applied in
the interim financial statements are consistent with those applied in the
financial statements for the year ended 31 March 2017, except as described in
note 1 above in respect of the classification of external investment in the
seed funds and the presentation of other income.
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. Other
currency services income includes income from data licensing and ancillary
services.
Six months Six months Year
ended ended ended
30 Sep 17 30 Sep 16 31 Mar 17
Revenue by product type £'000 £'000 £'000
Management fees
Dynamic Hedging 2,801 2,596 5,542
Passive Hedging 6,400 5,613 12,130
Currency for Return 826 469 1,025
Multi-product 1,927 1,907 4,021
Total management fee income 11,954 10,585 22,718
Performance fee income - - -
Other currency services income 249 150 234
Total revenue 12,203 10,735 22,952
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 17 30 Sep 16 31 Mar 17
Revenue by geographical region £'000 £'000 £'000
Currency management income
UK 1,851 2,019 3,863
US 2,787 2,256 4,979
Switzerland 5,859 5,606 11,576
Other 1,457 704 2,300
Total currency management income 11,954 10,585 22,718
Other currency services income 249 150 234
Total revenue 12,203 10,735 22,952
Other currency services income is not analysed by geographical region.
4 Earnings per share
Basic earnings per share is calculated by dividing the profit for the
financial period 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 used in the
basic and diluted earnings per share calculations.
Six months Six months Year
ended ended ended
30 Sep 17 30 Sep 16 31 Mar 17
Weighted average number of shares used in calculation of basic earnings per share 208,687,194 216,800,927 217,401,660
Effect of potential dilutive ordinary shares - share options 3,945,594 405,007 591,036
Weighted average number of shares used in calculation of diluted earnings per share 212,632,788 217,205,934 217,992,696
Basic earnings per share 1.55p 1.33p 2.91p
Diluted earnings per share 1.52p 1.33p 2.90p
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 13,656,564 shares. During the six months ended 30
September 2017, options over 510,500 shares were forfeited. As at 30
September 2017, there were share options in place over 13,146,064 shares.
5 Dividends
The dividends paid during the six months ended 30 September 2017 totalled
£4,549,878 (2.085 pence per share) being a final ordinary dividend in respect
of the year ended 31 March 2017 of 1.175 pence per share, and a special
dividend of 0.91 pence per share. An interim dividend of £1,800,715 (0.825
pence per share) was paid in the six months ended 31 March 2017, thus the full
ordinary dividend in respect of the year ended 31 March 2017 was 2.00 pence
per share. The dividend paid by the Group during the six months ended 30
September 2016 totalled £1,790,888 (0.825 pence per share), which was the
final dividend paid in respect of the year ended 31 March 2016.
The interim dividend proposed in respect of the six months ended 30 September
2017 is 1.15 pence 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 17 30 Sep 16 31 Mar 17
£'000 £'000 £'000
Bank deposits with maturities > 3 months 10,305 20,069 15,203
Treasury bills with maturities > 3 months 2,999 - 2,899
Money market instruments with maturities > 3 months 13,304 20,069 18,102
Cash 3,016 6,587 7,457
Bank deposits with maturities <= 3 months 10,007 9,527 11,663
Cash and cash equivalents 13,023 16,114 19,120
Total assets managed as cash by the Group 26,327 36,183 37,222
7 Cash flow from operating activities
Unaudited Restated Restated
Six months Six months Year
ended ended ended
30 Sep 17 30 Sep 16 31 Mar 17
£'000 £'000 £'000
Operating profit 3,757 3,534 7,744
Adjustments for non-cash movements:
Depreciation of property, plant and equipment 99 29 99
Amortisation of intangible assets 75 123 243
Share-based payments 162 8 587
Release of shares held by EBT 365 211 24
Other non-cash movements 22 (66) (146)
4,480 3,839 8,551
Changes in working capital
Decrease/(increase) in receivables 16 (254) (1,268)
Increase in payables 284 76 641
(Increase)/decrease in other financial assets (475) 52 53
Increase in other financial liabilities 343 264 700
Cash inflow from operating activities 4,648 3,977 8,677
Corporation taxes paid (718) (777) (1,570)
Net cash inflow from operating activities after tax 3,930 3,200 7,107
8 Called up share capital
The share capital of Record plc consists only of fully paid ordinary shares
with a par value of 0.025 pence. 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 17 30 Sep 16 31 Mar 17
£'000 Number £'000 Number £'000 Number
Authorised
Ordinary shares of 0.025 pence each 100 400,000,000 100 400,000,000 100 400,000,000
Called up, allotted and fully paid
Ordinary shares of 0.025 pence each 50 199,054,325 55 221,380,800 55 221,380,800
On 17 July 2017 a total of 22,326,475 Ordinary Shares were purchased by the
Company for a total cost of £10,000,028.15. The share purchase was made
following the Tender Offer announced on 21 June 2017 and approved by special
resolution at the general meeting on 14 July 2017. Following the share
purchase, the 22,326,475 shares were cancelled.
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 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
Net change in holding of own shares by EBT in period (484,505)
Record plc shares held by EBT as at 31 March 2017 3,618,995
Net change in holding of own shares by EBT in period (457,759)
Record plc shares held by EBT as at 30 September 2017 3,161,236
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.
335,000 shares were purchased by the EBT on 10 April 2017 to meet future
obligations.
On 20 June 2017, the EBT released 792,759 shares with a market value of
£364,669 to settle obligations under the Group Profit Share Scheme.
9 Financial liabilities
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. 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.
Record has seeded three funds which have been active during the period ended
30 September 2017.
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 (formerly known as the Record Currency -
Global Alpha 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 financial liabilities in the Group financial
statements, in accordance with IFRS.
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 17 30 Sep 16 31 Mar 17
£'000 £'000 £'000
Record Currency - Emerging Market Currency Fund 4,296 3,802 4,308
Record Currency - Strategy Development Fund - - -
Record Currency - FTSE FRB10 Index Fund 465 454 471
4,761 4,256 4,779
The financial liabilities relate only to the fair value of the external
investors' holding in the seed funds, and are in no sense debt.
Financial liabilities relating to the fair value of external investors'
holdings in the seed funds were previously classified in equity as
non-controlling interests. A reconciliation of the historic presentation to
the revised presentation is provided in note 13.
10 Fair value measurement for derivative financial instruments
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 2017 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for seed funds 22 - 22 -
Futures contracts used for seed funds 2 - 2 -
Forward foreign exchange contracts used for hedging 505 - 505 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for seed funds (57) - (57) -
Futures contracts used for seed funds (5) - (5) -
Forward foreign exchange contracts used for hedging (348) - (348) -
119 - 119 -
Total Level 1 Level 2 Level 3
As at 31 March 2017 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for hedging 18 - 18 -
Forward foreign exchange contracts used for seed funds 35 - 35 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging (5) - (5) -
Forward foreign exchange contracts used for seed funds (43) - (43) -
5 - 5 -
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) -
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 and futures are classified as Level 2.
These instruments are traded on an active market. The fair value of forward
foreign exchange contracts is 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 17 30 Sep 16 31 Mar 17
£'000 £'000 £'000
Short-term employee benefits 2,480 2,243 4,651
Post-employment benefits 110 83 184
Share-based payments 568 600 1,387
3,158 2,926 6,222
The dividends paid to key management personnel in the six months ended 30
September 2017 totalled £2,442,980 (year ended 31 March 2017: £1,915,103; six
months ended 30 September 2016: £954,074).
12 Post reporting date events
No adjusting or significant non-adjusting events have occurred between the
reporting date and the date of approval.
13 Restatement of previously published financial statements
The Directors have reviewed the basis of preparation of the Group's
consolidated accounts, and have implemented the following changes.
Classification of the external investment in the seed funds
External investment in the seed funds which are consolidated into the Group
accounts has previously been classified as a non-controlling interest as the
investment was considered to be an equity instrument. The Directors have
reviewed this treatment and now recognise the external investment as a
financial liability. This change in approach has a material change to the
statement of financial position affecting both current liabilities and equity.
The adjustment also affects the statement of comprehensive income as the
pro-rata share of the gains or losses derived from the seed funds which are
attributable to the external investors in the funds are not included within
operating profit as opposed to being included in profit attributable to the
non-controlling interest.
Presentation of other income
Management has reviewed the nature of items included in revenue in accordance
with the definitions provided in IAS 1 and IAS 18. Following the review,
management has decided that a re-presentation of certain elements would
improve the clarity of the accounts.
Consequently, the presentation of gains or losses on hedging, gains or losses
on trading within the seed funds and gains or losses on foreign exchange
conversion which were previously included within revenue as "other income" are
now presented separately on the face of the statement of comprehensive income
as other income or expense.
A reconciliation of primary statements previously reported to restated primary
statements is provided below. For completeness, a reconciliation of the
primary statements for the six month period ended 30 September 2017 prepared
under the previous approach and the current approach is also included.
The effect of both changes in future periods is not disclosed as it is not
practicable to do so.
The changes described above have had no impact on the profit attributable to
owners of the parent nor on the earnings per share.
The restated operating profit and profit before tax for the comparative
periods are equivalent to the underlying operating profit and underlying
profit before tax disclosed in previous reports.
Reconciliation of consolidated statement of comprehensive income under
historic interpretation to new interpretation
Six months ended Six months ended Year ended
30 Sep 17 30 Sep 16 31 Mar 17
£'000 £'000 £'000
Historic presentation
Revenue 12,023 11,080 23,928
Gross profit 11,858 10,942 23,630
Other income or expense n/a n/a n/a
Consisting of:
· Gains or losses on derivative financial instruments and foreign exchange conversion n/a n/a n/a
· Adjustment for gain or loss attributable to external investors in the seed fund n/a n/a n/a
Operating profit 3,528 3,965 8,563
Profit before tax 3,564 4,032 8,675
Profit after tax and total comprehensive income 3,011 3,310 7,135
Profit and total comprehensive income attributable to: (229) 431 819
Non-controlling interests
New presentation
Revenue 12,203 10,735 22,952
Gross profit 12,038 10,597 22,654
Other income or expense 49 (86) 157
Consisting of:
· Gains or losses on derivative financial instruments and foreign exchange conversion (180) 345 976
· Adjustment for gain or loss attributable to external investors in the seed fund 229 (431) (819)
Operating profit 3,757 3,534 7,744
Profit before tax 3,793 3,601 7,856
Profit after tax and total comprehensive income 3,240 2,879 6,316
Profit and total comprehensive income attributable to: - - -
Non-controlling interests
Differences
Revenue 180 (345) (976)
Gross profit 180 (345) (976)
Other income or expense 49 (86) 157
Consisting of:
· Gains or losses on derivative financial instruments and foreign exchange conversion (180) 345 976
· Adjustment for gain or loss attributable to external investors in the seed fund 229 (431) (819)
Operating profit 229 (431) (819)
Profit before tax 229 (431) (819)
Profit after tax and total comprehensive income 229 (431) (819)
Profit and total comprehensive income attributable to: 229 (431) (819)
Non-controlling interests
The presentation of gains or losses on hedging, gains or losses on trading
within the seed funds and gains or losses on foreign exchange conversion have
been re-presented from within revenue to other income or expense on the face
of the statement of comprehensive income.
The pro-rata share of the gains or losses derived from the seed funds which
are attributable to the external investors in the funds are not included
within operating profit as opposed to previously being included in profit and
disclosed as the profit after tax attributable to the non-controlling
interest.
Reconciliation of consolidated statement of financial position under historic
interpretation to new interpretation
As at As at As at
30 Sep 17 30 Sep 16 31 Mar 17
£'000 £'000 £'000
Historic presentation
Financial liabilities n/a n/a n/a
Total current liabilities (4,504) (3,303) (3,865)
Total net assets 30,574 39,280 41,610
Non-controlling interests 4,761 4,256 4,779
Total equity 30,574 39,280 41,610
New presentation
Financial liabilities (4,761) (4,256) (4,779)
Total current liabilities (9,265) (7,559) (8,644)
Total net assets 25,813 35,024 36,831
Non-controlling interests - - -
Total equity 25,813 35,024 36,831
Differences
Financial liabilities (4,761) (4,256) (4,779)
Total current liabilities (4,761) (4,256) (4,779)
Total net assets (4,761) (4,256) (4,779)
Non-controlling interests (4,761) (4,256) (4,779)
Total equity (4,761) (4,256) (4,779)
The net asset value of the investment of external investors in the seed fund
has been reclassified from a non-controlling interest in equity, to a
financial liability. There is no other non-controlling interest.
Reconciliation of consolidated statement of changes in equity under historic
interpretation to new interpretation
The statement of changes in equity is shown below as it would appear under the
historic presentation.
In the revised format there is no non-controlling interest, and therefore no
changes in non-controlling interest. As a consequence total equity becomes
equivalent to the total equity attributable to owners of the parent.
Called up share capital Share premium account Capital redemption reserve Retained earnings Total attributable to equity holders of the parent Non-controlling interests Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2016 55 1,899 20 31,715 33,689 4,019 37,708
Profit and total comprehensive income - - - 2,879 2,879 431 3,310
Dividends paid - - - (1,791) (1,791) - (1,791)
Release of shares held by EBT - - - 211 211 - 211
Redemption of units in funds - - - - - (194) (194)
Share-based payments - - - 36 36 - 36
Transactions with shareholders - - - (1,544) (1,544) (194) (1,738)
As at 30 September 2016 55 1,899 20 33,050 35,024 4,256 39,280
Profit and total comprehensive income - - - 3,437 3,437 388 3,825
Dividends paid - - - (1,801) (1,801) - (1,801)
Issue of units in funds - - - - - 135 135
Own shares acquired by EBT - - - (775) (775) - (775)
Release of shares held by EBT - 72 - 781 853 - 853
Share-based payments - - - 93 93 - 93
Transactions with shareholders - 72 - (1,702) (1,630) 135 (1,495)
As at 31 March 2017 55 1,971 20 34,785 36,831 4,779 41,610
Profit and total comprehensive income - - - 3,240 3,240 (229) 3,011
Dividends paid - - - (4,550) (4,550) - (4,550)
Share buy-back (5) - 6 (10,000) (9,999) - (9,999)
Own shares acquired by EBT - - - (159) (159) - (159)
Release of shares held by EBT - 64 - 301 365 - 365
Issue of units in funds - - - - - 211 211
Share-based payments - - - 85 85 - 85
Transactions with shareholders (5) 64 6 (14,323) (14,258) 211 (14,047)
As at 30 September 2017 50 2,035 26 23,702 25,813 4,761 30,574
Reconciliation of consolidated statement of cash flows under historic
interpretation to new interpretation
Six months ended Six months ended Year ended
30 Sep 17 30 Sep 16 31 Mar 17
£'000 £'000 £'000
Historic presentation
Operating profit 3,528 3,965 8,563
Changes in working capital:
· Increase/(decrease) in other financial liabilities 361 27 (60)
Cash inflow from operating activities 4,437 4,171 8,736
Net cash inflow from operating activities 3,719 3,394 7,166
Cash flow from financing activities:
· Cash inflow/(outflow) from issue/(redemption) of units in funds 211 (194) (59)
· Cash outflow from financing activities (14,575) (1,957) (3,844)
New presentation
Operating profit 3,757 3,534 7,744
Changes in working capital:
· Increase in other financial liabilities 343 264 700
Cash inflow from operating activities 4,648 3,977 8,677
Net cash inflow from operating activities 3,930 3,200 7,107
Cash flow from financing activities:
· Cash flow from issue/redemption of units in funds n/a n/a n/a
· Cash outflow from financing activities (14,786) (1,763) (3,785)
Differences
Operating profit 229 (431) (819)
Changes in working capital:
· Movement in other financial liabilities (18) 237 760
Cash flow from operating activities 211 (194) (59)
Net cash flow from operating activities after tax 211 (194) (59)
Cash flow from financing activities:
· Cash flow from issue/redemption of units in funds (211) 194 59
· Cash flow from financing activities (211) 194 59
As the external investment in the fund is no longer considered to be equity,
the cash flow arising on issue or redemption of shares is not included as a
financing activity but as a movement in other financial liabilities. The
adjustment to operating profit in the revised presentation which relates to
the pro-rata share of the gains or losses derived from the seed funds which
are attributable to the external investors in the funds has an equal and
opposite effect on the movement in other financial liabilities.
There is no change to cash or cash equivalents at the period end.
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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