REG - Record PLC - Half Yearly Report <Origin Href="QuoteRef">RECL.L</Origin> - Part 2
24/11/2015 07:01
- Part 2: For the preceding part double click ID:nRSX6768Ga
equity as non-controlling interests, being 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 two funds where
it was in a position to be able to control those funds, and during the period
gained control of another fund in which it has invested. 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 2015.
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' (NCI) 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 15 30 Sep 14 31 Mar 15
Revenue by product type £'000 £'000 £'000
Management fees
Dynamic Hedging 4,397 4,722 9,376
Passive Hedging 4,493 3,825 8,105
Currency for Return 2,066 1,160 2,774
Total management fee income 10,956 9,707 20,255
Performance fee income - - 480
Other income (199) 186 130
Underlying revenue 10,757 9,893 20,865
Revenue attributable to NCI holding in seed funds (373) 165 192
Total revenue 10,384 10,058 21,057
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 revenue
originated in the UK.
Six months Six months Year
ended ended ended
30 Sep 15 30 Sep 14 31 Mar 15
Revenue by geographical region £'000 £'000 £'000
Currency management income
UK 2,343 2,434 5,501
US 1,758 1,910 3,660
Switzerland 6,329 4,761 10,352
Other 526 602 1,222
Total currency management income 10,956 9,707 20,735
Other income (199) 186 130
Underlying revenue 10,757 9,893 20,865
Revenue attributable to NCI holding in seed funds (373) 165 192
Total revenue 10,384 10,058 21,057
Revenue attributable to NCI holding in seed funds and other income are not
analysed by geographical region.
c) Major clients
During the six months ended 30 September 2015, five clients individually
accounted for more than 10% of the Group's revenue during the period. In
aggregate the five largest clients generated revenues of £6.6m in the period.
4. Earnings per share
Basic earnings per share is 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 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 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 15 30 Sep 14 31 Mar 15
Weighted average number of shares used in calculation of basic earnings per share 217,807,851 218,530,962 217,501,040
Effect of potential dilutive ordinary shares - share options 1,266,237 962,518 892,093
Weighted average number of shares used in calculation of diluted earnings per share 219,074,088 219,493,480 218,393,133
Basic earnings per share 1.36p 1.23p 2.66p
Diluted earnings per share 1.35p 1.23p 2.65p
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 9,910,750 shares. During the six months ended 30
September 2015, options over 453,750 shares were exercised, and options over
50,000 shares were forfeited.
5. Dividends
The dividends paid 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. An interim dividend of £1,631,496 (0.75p per
share) was paid in the six months ended 31 March 2015, thus the full dividend
in respect of the year ended 31 March 2015 was 1.65p per share. The dividend
paid by the Group during the six months ended 30 September 2014 totalled
£1,634,833 (0.75p per share), which was the final dividend paid in respect of
the year ended 31 March 2014.
The interim dividend proposed in respect of the six months ended 30 September
2015 is 0.825p per share.
6. Investments
The Group may hold certain securities through its seeded fund vehicles. The
Group has held US government treasury inflation protected securities (TIPS),
which are designated as fair value through profit or loss, and the fair value
is determined by reference to quoted market price. These securities are
classified as a Level 1 investment.
Investments in funds which are not consolidated on a line-by-line basis are
designated as fair value through profit or loss. Record Currency FTSE FRB10
Index Fund was consolidated on a line-by-line basis from 1 September 2015
until the end of the period, but prior to this, the Group's investment in the
fund was designated as fair value through profit or loss.
As at As at As at
30 Sep 15 30 Sep 14 31 Mar 15
£'000 £'000 £'000
TIPS - 1,753 1,462
Investments in funds - 1,124 1,105
Investments - 2,877 2,567
7. 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. 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 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 15 30 Sep 14 31 Mar 15
£'000 £'000 £'000
Bank deposits with maturities > 3 months 14,181 14,843 17,500
Treasury bills with maturities > 3 months - 599 600
Money market instruments with maturities > 3 months 14,181 15,442 18,100
Cash 4,604 3,863 2,730
Bank deposits with maturities <= 3 months 14,637 8,472 9,280
Cash and cash equivalents 19,241 12,335 12,010
Total assets managed as cash by the Group 33,422 27,777 30,110
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 15 30 Sep 14 31 Mar 15
£'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 2014 3,873,983
Net change in holding of own shares by EBT in period (54,135)
Record plc shares held by EBT as at 30 September 2014 3,819,848
Net change in holding of own shares by EBT in period 28,214
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
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 17 June 2015, the EBT released 496,255 shares with a market value of
£181,375 to settle obligations under the Group Profit Share Scheme, and on 27
July 2015 453,750 shares with a market value of £172,471 were released on
exercise of options, and 404,348 shares with a market value of £153,693 were
acquired.
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 2015.
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 - 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 was not under the control of the
Group at the beginning of the period, but 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 1
September 2015 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 15 30 Sep 14 31 Mar 15
£'000 £'000 £'000
Record Currency - FTSE FRB10 Index Fund 413 - -
Record Currency - Emerging Market Currency Fund 2,434 2,626 2,687
Record Currency - Global Alpha Fund 481 1,309 1,189
3,328 3,935 3,876
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. This hierarchy groups financial assets and
liabilities into three levels based on the significance of inputs used in
measuring the fair value of the financial assets and liabilities. The fair
value hierarchy has the following levels:
· Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities;
· Level 2: inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
· Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is
determined based on the lowest level of input to the fair value measurement.
The financial assets and liabilities measured at fair value in the statement
of financial position are grouped into the fair value hierarchy as follows:
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) -
Total Level 1 Level 2 Level 3
As at 31 March 2015 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
TIPS 1,462 1,462 - -
Investment in seed fund 1,105 1,105 - -
Forward foreign exchange contracts used for seed funds 35 - 35 -
Options used for seed funds 576 - 576 -
Forward foreign exchange contracts used for hedging 8 - 8 -
Financial liabilities at fair value through profit or loss -
Options used for seed funds (680) - (680) -
2,506 2,567 (61) -
Total Level 1 Level 2 Level 3
As at 30 September 2014 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
TIPS 1,753 1,753 - -
Investment in seed fund 1,124 1,124 - -
Forward foreign exchange contracts used for seed funds 203 - 203 -
Options used for seed funds 170 - 170 -
Forward foreign exchange contracts used for hedging 2 - 2 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for seed funds (189) - (189) -
Options used for seed funds (115) - (115) -
Forward foreign exchange contracts used for hedging (10) - (10) -
2,938 2,877 61 -
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 options are classified as Level 2.
Both of these instruments are traded on an active market. Options are valued
using an industry standard model with inputs based on observable market data
whilst the fair value of forward foreign exchange contracts may be established
using interpolation of observable market data rather than from a quoted
price.
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 15 30 Sep 14 31 Mar 15
£'000 £'000 £'000
Short-term employee benefits 1,938 1,695 3,568
Post-employment benefits 139 117 229
Share-based payments 555 411 940
2,632 2,223 4,737
The dividends paid to key management personnel in the six months ended 30
September 2015 totalled £1,019,193 (year ended 31 March 2015: £1,677,173; six
months ended 30 September 2014: £835,321).
12. Post reporting date events
No adjusting or significant non-adjusting events have occurred between the
reporting date and the date of approval.
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.
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 real. To distinguish this from the AUM of conventional
asset managers, Record uses the concept of assets under management equivalents
"AUME" and by convention this is quoted in US dollars.
2 The underlying results are those before consolidating the non-controlling
interests in the seed funds, and reflect internal management reporting of the
revenues and costs driving future cash flows of the business.
3 FTSE FRB10 Index Fund return data is since inception in December 2010.
4 Emerging Market Currency Fund return data is since inception in December
2010
5 An investment return track record generated by the aggregation of all
standard segregated track records for Record's active forward rate bias
Currency for Return product. The Currency Alpha composite is asset weighted,
based on AUME for each account.
6 Multi-Strategy return data is since inception in August 2012.
7 Multi-Strategy with FRB10 return data is since inception in February
2015.
This information is provided by RNS
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