REG - Record PLC - Interim Results
23/11/2021 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20211123:nRSW1880Ta&default-theme=true
RNS Number : 1880T Record PLC 23 November 2021
RECORD plc
23 November 2021
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021
Profit growth and diversification of products and revenues supports interim
dividend increase
Record plc ("Record" or "the Company"), the specialist currency and
derivatives manager, today announces its unaudited results for the six months
ended 30 September 2021 ("H1-22").
Financial headlines:
· Revenue growth of 38% to £16.3m (H1-21: £11.8m)
· Interim dividend increased by 56% to 1.80 pence per share (H1-21:
1.15 pence per share)
· Growth in AUME 1 (#_ftn1) of 5% in USD terms to $84.1bn (31 March
2021: $80.1bn) and 7% in GBP terms to £62.4bn (31 March 2021: £58.1bn)
· Client numbers remained at 89 (31 March 2021: 89)
· Management fee growth of 44% to £16.1m (H1-21: £11.2m)
· Increased operating margin of 32% (H1-21: 22%)
· Profit before tax doubled to £5.2m (H1-21: £2.6m)
· Basic EPS of 2.08 pence (H1-21: 1.10 pence)
· Strong financial position with shareholders' equity of £25.2m
(H1-21: £25.7m)
Key developments:
· New product launch of Record EM Sustainable Finance Fund in June
with USD 750 million AUME at launch in collaboration with UBS Global Wealth
Management provides first milestone in developing ESG and sustainable
investment capabilities
· Further diversification into higher revenue and more scalable
products increases operating margin
· Anticipated launch of Municipal Loan Fund before the end of this
financial year
· Reduced concentration on lower-margin Passive Hedging product
· Focus on modernisation of business continues with investment in
technology to enhance business processes and to develop our product/service
offering
Commenting on the results, Leslie Hill, Chief Executive Officer of Record plc,
said:
"Since I assumed the role of CEO last year, our business has encountered the
significant challenge of implementing a change in strategic direction during
the unprecedented conditions of a global pandemic. Over the last 18 months,
our business has faced this challenge head on and we have now started to see
the tangible benefits in the form of a more diversified business aligned with
stronger financial performance.
"The benefits of our change in approach to partnering with other third-party
specialists can be seen across all areas of our business. In this respect
we've taken our first steps into the rapidly growing area of sustainable
finance with the successful launch of Record's EM Sustainable Finance fund
alongside UBS Global Wealth Management, whilst expanding our knowledge and
expertise in financial instruments outside of pure currency. We are also
seeing the benefits in the form of enhanced efficiencies and scalability from
the adoption and integration of new technology.
"Work continues on the modernisation of our business and in the development of
new products, and we anticipate the launch of a Municipal Loan fund focused on
the German institutional market before the end of the financial year, which we
hope will provide opportunities for further growth in Europe.
"Such transformational change is never easy. However, we have an excellent
team and strong relationships both with clients and our partners, which I
believe will continue to deliver growth and achieve our goal of building a
more modern, profitable and diversified business."
Analyst presentation
There will be a presentation for analysts at 10.00am on Tuesday 23 November
2021 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.
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 5000
Giles Stewart
Victoria Hayns
Henry Wilson
George Beale
About us
Our purpose: to deliver innovative, thought leading and practical solutions to
the needs of currency market users and investors, while maintaining
independence and integrity.
We are an independent, specialist currency and derivatives manager with over
38 years of experience which has allowed us to develop a deep and fundamental
understanding of the risk and reward opportunities within those markets.
Record plc has a premium listing on the Main Market of the London Stock
Exchange.
Chief Executive Officer's statement
We continue with our inexorable move to a more technologically agile and
diversified business. We are expanding our offering to clients and yet
remaining a go-to provider for currency and derivative products and solutions.
We will always have currency as our core competence, in all its forms, but as
you will see reading below we are branching out, as promised. This is a
critical part of our future success.
Progress against strategy
Our EM Sustainable Finance Fund, launched with our client UBS in June of this
year, continues to develop its Frontier Currency and Sustainable Bond
portfolios and interest in the area is growing. Our total current Frontier
and EM currency portfolio stands at $3.3 billion and we are starting to engage
with other clients who need help with innovative solutions in this area, in
the realms of both debt and currency.
Our European business, particularly in Germany, continues to grow and our
first material German Dynamic Hedging mandate started this summer. We set up
our German subsidiary, Record Asset Management GmbH with offices in Frankfurt,
in the final calendar quarter of 2020 and applied for a BaFin licence earlier
this year. Our Head of Sales Dr Jan Witte is spearheading these efforts,
supported by a growing European team based out of Zurich, Amsterdam and
Frankfurt.
Most promisingly, we anticipate launching a Luxembourg‑based Municipal Loan
Fund with Universal‑Investment as Fund Manager by the end of the financial
year; this fund will combine European Municipal Loans managed by our Fixed
Income and Derivatives teams with European trade receivables provided by our
collaboration partners Siegfried and VTeam. This new development will expand
our range of products and further increase the scalability and diversification
of our revenue sources.
Modernisation
This work continues at a strong but measured pace, with initiatives to build a
robust and secure data storage warehouse and enhanced FX execution
capabilities engaging our growing in‑house team and working in
conjunction with subject matter experts. This is all part of bringing the
latest technology and design approaches into the heart of our business,
definitely a journey not a "destination" but one that I am confident will
continue to yield new revenue sources through new offerings, as well as cost
savings by continuing to deliver efficiencies. The house is not finished and
we are working away covered in dust with all the windows open, but we have a
good architect and a great building team whom we try and give all the TLC they
need to make the place a home that all our clients, old and new, want to
visit, and never leave.
Succession
We have made some new appointments and promotions in the last year, and plan
to give more opportunity to our young talent. The addition of our London
office will help to continue to attract and retain talent, while retaining
some of our most experienced directors as consultants during the transition to
ensure stability and resilience. This is one of the best parts of my job,
getting the right people in the right jobs and then supporting and mentoring
them, although to be fair they teach me just as much.
We also continue to award equity options through our JSOP and share option
schemes and these are proving popular with staff. In our recent appointments,
Matt Hotson and Krystyna Nowak, we have two new Non-executive Directors who
are bringing a very interesting strategic dynamic to the Board, and this will
be very helpful to me going forward.
Financial results and dividends
The benefits of our change in strategy are now starting to be reflected in our
financial performance. Our push for diversification into higher-margin and
more scalable products and revenue streams has increased revenue by 38% and
almost doubled our pre-tax profits, with our operating profit margin
increasing to 32% from 22% versus the same period last year. Further financial
information can be found in the Financial review.
Notwithstanding the challenges arising from both covid-19 and our change in
strategy over the last 18 months, neither our capital management policy nor
our dividend policy has changed. The Board continues to remain confident in
the ability of the business to deliver on its planned strategy and to achieve
further growth, and has decided to pay an increased interim dividend of
1.80 pence per share (HY21: 1.15p) on 30 December 2021 to shareholders on
the register at 3 December 2021.
Outlook
I am very aware of the need for revitalisation, evolution and change while we
keep what is so good about us; our special expertise, our integrity and our
experienced staff. The marriage of old and new is a delicate and subtle art
but one that, as we get it right, and I believe we are, will yield exciting
growth and development avenues for us in the future. We are very much at the
start of what we can accomplish.
Leslie Hill
Chief Executive Officer
22 November 2021
Interim management review
Market review
The six months to 30 September 2021 were characterised by a more auspicious
covid-19 outlook as efforts to keep economies open were generally more
successful than the six months prior. The period began on less positive
footing as the highly transmissible Delta variant became widespread, however
high inoculation rates combined with management strategies - rather than
"covid-zero" policies - generally saw economic activity and mobility continue
to recover and global transmission rates moderated towards the end of the
period.
In spite of the progress made towards exiting the pandemic, global economic
reflation slowed in pace on account of both the winding down of government
support measures and supply chain issues. Investor attention instead turned
towards the prospect of a more protracted period of elevated inflation rates.
Reopening demand was unmatched by supply across a range of production factors
including labour, energy commodities and finished goods due to supply
chain disruptions. These factors combined to create a "perfect storm" of
commodity price increases, with energy prices rising significantly through the
period, and in particular natural gas more than doubled in price.
Central banks had the challenge of calibrating policy in response to the
uncertain outlook. Initially thought to be "transitory" in nature, sticky
inflation rates and rising commodity prices began to drive market-based
measures of short‑term inflation expectations higher. The Federal Reserve
("Fed") carefully communicated policy intentions over the period, indicating
with increasing confidence that tapering of asset purchases would be
appropriate towards the end of the year. The Fed remained reluctant to raise
rates this year, with the Fed dot-plot suggesting 2022 was more appropriate.
At the same time, EM central banks - especially those of commodity exporters -
began decisive rate hiking cycles to arrest inflation pressures.
Global risk sentiment was broadly supported up to September, likely helped
along by still exceptionally easy financial conditions. Market appetite shrank
towards the end of the period over concerns around China's Evergrande's
solvency, the European energy crisis, and fears over the US debt ceiling.
Furthermore, a series of Chinese regulatory crackdowns pressured equity
markets. Currency moves during the period were driven by the interplay of
shifts in risk sentiment, relative covid-19 outlooks, inflation surprises, and
the perceived reaction function of central banks. The US dollar declined
during the first two months of the period before appreciating in the remaining
months and ended the period around 1% up on a trade-weighted basis.
Operating review
As the impact of the pandemic on our business now starts to recede, during
the last six months we have begun to see the signs of growth and renewed
interest from clients in innovation, especially in the area of sustainable
investment. We are working closely in collaboration with our preferred
partners to develop innovative solutions, whilst continuing to invest in our
people and infrastructure, more information for which is given below.
Our clients
Record's strong institutional client base responded robustly to the pandemic,
maintaining their strategic hedging programmes in almost all cases. As
lockdowns have lifted in most jurisdictions, the business of investing
has returned to normal with appetite amongst clients to pick up new projects
previously put to one side during the height of the pandemic. Two key themes
continue to dominate investors' focus: adding yield and increasing
sustainability. Record's efforts have therefore been focused on helping our
clients achieve these goals in a number of ways. One highlight of the half
year was the launch of the Record EM Sustainable Finance Fund. This fund not
only solves a number of challenges for our leading global wealth manager
partner, including the ability to offer innovation in sustainable investments
via exposure to EM local currencies, but has received widespread interest both
from existing and new clients.
Other asset managers are also feeling the return of allocators to the market
and we are seeing redoubled interest from alternative managers in bespoke
hedging solutions as clients search globally for yield, as well as alternative
investments in sustainable finance. Finally, we are seeing the appetite for
yield in a number of bespoke projects which combine Record's expertise with
that of best‑in‑class third parties in order to help our clients maximise
their returns in the challenging investment environment. As always, the
strength of our relationships and the trust our clients place in us is at the
heart of all that we do from cutting edge innovation to efficient and
reliable implementation.
Our people
Having successfully navigated through the most critical stages of the
pandemic, we have proved that it's possible to have employees working
remotely without any diminution in client service levels, security or
productivity. Consequently, and looking ahead to the future, we are now able
to offer a much broader degree of flexibility to employees with respect to
where and how they work. Not only does this enhance the work-life balance of
our employees and hence their general wellbeing and mental health, it is
another "tool in the box" for attracting and retaining our talented employees.
Notwithstanding the above, the importance of continuing to provide
high-quality office space to reinforce the benefits of collaborative working,
training and social interaction is not underestimated. In this respect, we
recently opened a new office in London and plan to downsize our Windsor
headquarters upon cessation of the lease in September 2022, which gives
further choice to our employees as to how best utilise their time working,
for example with clients, working alone or working in collaboration with each
other. We believe that offering such a balance and choice both in work
patterns and location will serve to increase overall productivity and employee
retention, in addition to helping to attract new talent to the business.
Our technology and operations
As the UK government's lockdown measures have eased, Record has successfully
continued working from home, with business continuity fully maintained
throughout the period. We are now supporting flexible working across the
business, including remote working, office-based, or hybrid working patterns
enabled for all staff. Remote access systems and security controls have
continued to be enhanced in line with this, as well as further investment in
IT hardware as required. This new normal has therefore become the foundation
for us from which to further automate existing manual tasks, explore new
technologies and processes, and invest in modern
software development projects.
Our governance and oversight
A comprehensive review of our governance structure is currently underway. This
will ensure that we have the most appropriate structure to support the
strategy, and to continue to provide the relevant level of control and
oversight across all of the Group companies aligned with the expected future
growth of the Group. In the meantime, our governance, risk and management
reporting framework continues to function as expected. Meetings on the whole
take place in the office, with some hybrid meetings allowing participants to
dial in remotely.
Our business model and profitability
Our existing hedging products and client base continue to provide a robust
core of revenue upon which to build, and we continue to work hard in
maintaining our strong relationships and the highest levels of client service
in this regard. However, in order to deliver the growth and longevity demanded
by our change in strategy, it is also necessary to provide innovative and
scalable products, using technology to ensure efficiency of delivery, to
increase margins and to maximise profitability.
Following our transitional year in FY‑21, as expected we are now starting to
see the financial impact from our focus on product diversification into
innovative and higher-margin products flow through to our revenue and ultimate
profitability. In comparison to the same period last year (six months ended
30 September 2020: H1-21), our revenue has increased by 38% and
we've doubled our operating profit, whilst our operating margin has
increased from 22% to 32% over the same period. Further financial information
is given in the Financial review section.
Brexit
As part of our Brexit strategy, the Group has already established a
German subsidiary and its application to BaFin for regulatory approval is on
track. Whilst Brexit has not impacted our ability to service our existing
EU27 client base, it has somewhat constrained our ability to market a small
number of our products to potential EU27 clients, which we anticipate being
fully mitigated once formal authorisation from BaFin is confirmed.
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 has developed and runs an enhanced Passive Hedging service, which aims
to reduce the cost of hedging by introducing additional flexibility into the
implementation of currency hedges without changing the hedge ratio. While the
investment process 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.
Since the aggressive central bank interventions seen in 2020 in response to
the covid-19 pandemic, we have continued to observe large and consistent
levels of government stimulus into global markets. This has introduced large
amounts of cash liquidity into markets, and has caused FX forward pricing to
remain very stable. In light of this lack of volatility, discretionary
decisions have favoured running programmes closer to their benchmarks for
extended periods during the year, as the opportunities to add value have been
limited. FX transaction costs have been at historically low levels, with bank
dealers preferring to compete for market share through competitive pricing.
Half‑year Return since
return inception
Value added by enhanced Passive Hedging programme relative to a fixed-tenor (0.01%) 0.08% p.a.
benchmark
Dynamic Hedging
During the period, US-based Dynamic Hedging clients experienced a
strengthening of the US dollar against developed market currencies. The
Dynamic Hedging programmes responded as expected and hedge ratios were
adjusted systematically in response to currency movements; however, hedging
returns in the programmes were marginally negative, due to elevated costs
associated with varying hedge ratios.
Half‑year Return since
return inception
Value added by Dynamic Hedging programme (0.08%) 0.43% p.a.
Currency for Return
Record's Currency for Return suite of products includes both discretionary and
systematic investment styles. The Record EM Sustainable Finance Fund uses a
more discretionary approach, whilst the Currency Multi-Strategy product is a
more systematic offering combining five individual strategies.
Record EM Sustainable Finance Fund
The new Record EM Sustainable Finance Fund, launched on 28 June 2021, is a
result of the strategic partnership between Record and UBS Wealth Management.
The Fund aims to stabilise currencies in developing economies, improve the
flow of development finance and enhance financing projects in illiquid
markets. The strategy targets positive sustainability outcomes across a
multidimensional investment process, whereby it trades liquid and illiquid EM
currencies designed to help stabilise exchange rates and to absorb currency
risk, and invests in an underlay of sustainable development bonds issued by
multilateral development banks with strong development operations in emerging
economies. Furthermore, an active engagement strategy with counterparty banks
encourages improvements in areas of ESG.
Although returning -0.32% for the half year to 30 September 2021, the Record
EM Sustainable Finance Fund performed well when compared to major market EM
sovereign bond indices. The overweight exposures in the currencies of some
economies in Eastern Europe, and Central and Eastern Asia, contributed
positively to the outperformance in the period. Exposure to currencies in
Latin America performed poorly in the period following growing local political
and fiscal uncertainties, inflationary pressures, concerns over a slowdown in
global growth, in particular in China, and volatile commodity prices. The
return of shorting a diversified basket of developed market currencies to
fund the long exposures in emerging market currencies also added positively to
the outperformance.
The USD-denominated bonds in the portfolio closed slightly weaker on the back
of increasing yields in the US market as the Fed indicated that tapering could
start as early as November 2021 amid rising price pressures and strong growth
momentum.
Half‑year Return since
return inception
Record EMSF Fund USD Share Class (0.32%) (0.32%)
GBI EM Global Diversified(1) (3.56%) (3.56%)
1. Source: J.P. Morgan.
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
("EM") 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.
Currency Multi-Strategy returned positively during the period which was
largely driven by outperformance in the EM and Value modules. Widening EM-DM
rate differentials and a supportive cyclical backdrop created tailwinds for EM
currencies in the period. Value returned positively on the back of short
exposures in Australia where lagging vaccination efforts weighed on economic
activity and the rate outlook. The Momentum strand detracted from returns due
to reversal of multi-month trends in the period.
Half‑year Return since Volatility since
return inception inception
Index/composite returns % % p.a. % p.a.
Record Multi-Strategy Composite(2) 1.69% 1.00% 3.13%
2. Record Multi-Strategy Composite return data is since inception in
July 2012, showing excess returns data gross of fees in USD base and scaled to
a 4% target volatility.
Scaling
The Currency for Return product group allows clients to select the level of
exposure they desire in their currency programmes. The segregated mandates
allow clients to select the level of scaling and/or the volatility target. The
pooled funds have historically offered clients a range of scaling and target
volatility levels.
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 segregated mandate size or the pooled fund's net assets. This is
limited by the willingness of counterparty banks to take exposure to the
segregated client or pooled fund. 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 segregated mandate size or the pooled
fund's net assets.
AUME development
AUME increased over the period by 5% to $84.1 billion in US dollar terms, and
increased in sterling terms by 7% to £62.4 billion. Total net inflows for the
period were $1.9 billion, of which $1.6 billion arose from new client
mandates.
The AUME movement over the six-month period is analysed as follows:
AUME movement analysis in the six months to 30 September 2021
$bn
AUME at 1 April 2021 80.1
Net client flows 1.9
Equity and other market impact 1.8
Foreign exchange impact and mandate volatility scaling 0.3
AUME at 30 September 2021 84.1
( )
Product mix
The product mix has remained broadly constant when compared to the year end.
However, the change in mix across the hedging products means the higher-margin
Dynamic Hedging AUME now accounts for 12% of total AUME versus only 5% when
compared to the same period last year, as shown in the table below.
AUME composition by product
30 Sep 21 30 Sep 20 31 Mar 21
$bn % $bn % $bn %
Passive Hedging 63.0 76 55.6 85 61.5 77
Dynamic Hedging 10.3 12 3.2 5 9.3 12
Currency for Return 5.4 6 3.4 5 3.9 5
Multi-product 5.2 6 3.5 5 5.2 6
Cash and other 0.2 - 0.2 - 0.2 0
Total 84.1 100 65.9 100 80.1 100
Equity and other market performance
Record's AUME is affected by movements in equity and other markets because
Passive and Dynamic Hedging mandates, and some of the Multi-product mandates,
are linked to equity holdings or other asset types such as bonds or real
estate.
Additional details on the composition of assets underlying the Hedging and
Multi-product mandates are provided below to help illustrate more clearly the
impact of equity and fixed income market movements on these mandate sizes.
Class of assets underlying mandates by product as at 30 September 2021
Fixed
Equity income Other
% % %
Passive Hedging 30 34 36
Dynamic Hedging 91 - 9
Multi-product - - 100
Forex
Approximately 79% 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 AUME in US dollars, although this movement does not
have an equivalent impact on the sterling value of fee income. Exchange rate
movements decreased AUME by $0.2 billion in the period and changes to mandate
volatility targeting increased AUME by $0.5 billion.
Client numbers
Client numbers remained at 89 the same as the financial year end 2021, and
have increased by +15 when compared to the same period last year (H1-21: 74).
Financial review
As expected, the benefits from the implementation of the new strategy in FY-21
are now being seen more fully in financial terms with increases in revenue,
profits, operating margin and earnings. The Group continues to work on
developing new and innovative investment products with its chosen partners,
whilst maintaining its focus on the modernisation of systems and processes.
Overview
Operating profit for the period of £5.2 million was £2.6 million higher
than the equivalent period last year and £1.6 million higher than H2-21.
Total revenue increased by 38% to £16.3 million (H1‑21: £11.8 million)
and by 20% versus H2-21 (£13.6 million).
Operating expenses, excluding variable remuneration, increased by 3% to
£7.9 million. Variable remuneration increased to £2.8 million (H1‑21:
£1.3 million), with the operating profit margin increasing to 32% (H1‑21:
22%) and profit before tax doubling to £5.2 million (H1‑21: £2.6
million).
Revenue
Total revenue increased by 38% to £16.3 million over the equivalent period
last year (H1-21: £11.8 million) and by 20% compared to the second half of
last year (H2‑21: £13.6 million) reflecting the full impact of the higher
AUME at the start of the period plus net inflows of $1.9 billion over the
six months.
No performance fees were earned in the period (H1‑21: £nil and H2‑21:
£0.1 million). Passive Hedging management fees of £5.8 million were £0.2
million lower than the equivalent period last year (H1‑21: £6.0 million)
and £0.4 million higher compared to the second half of last year (H2-21:
£5.4 million).
Dynamic Hedging management fees of £4.8 million were £2.9 million higher
than H1-21 and £1.0 million higher than H2‑21 predominantly due to the new
material mandate win announced in September 2020.
Currency for Return management fees of £2.1 million are £1.2 million higher
than the same period last year (H1-21: £0.9 million) and £1.0 million
higher than the second half of last year predominantly due to inflows of $1.0
billion over the period mainly arising from the launch of the EM Sustainable
Finance Fund in the period.
Management fees of £3.4 million from the Multi-product category are £1.0
million higher than the same period last year (H1-21: £2.4 million) and in
line with the second half of last year (H2-21: £3.5 million).
The £0.4 million decrease in other currency services income to £0.2 million
(H1-21: £0.6 million) reflects a reclassification of income to
Multi‑product in H2-21 last year.
Revenue analysis (£m)
Six months Six months Year
ended ended ended
30 Sep 21 30 Sep 20 31 Mar 21
Management fees
Passive Hedging 5.8 6.0 11.4
Dynamic Hedging 4.8 1.9 5.6
Currency for Return 2.1 0.9 2.0
Multi-product 3.4 2.4 5.9
Total management fees 16.1 11.2 24.9
Performance fees - - 0.1
Other investment services income 0.2 0.6 0.4
Total revenue 16.3 11.8 25.4
Other investment services income consists of fees from ancillary investment
management services.
Average management fee rates by product (bps p.a.)
The average management fee rates have remained broadly constant over the six
months ended 30 September 2021 with the exception of an increase in the
Currency for Return average management fee rate for the period as a result of
the inclusion of the higher-margin EM Sustainable Finance Fund from launch in
June 2021.
Expenditure
Expenditure analysis (£m)
Six months Six months Year
ended ended ended
30 Sep 21 30 Sep 20 31 Mar 21
Personnel costs 5.0 5.0 10.3
Non-personnel costs 2.9 2.7 5.4
Administrative expenditure excluding Group Profit Share 7.9 7.7 15.7
Group Profit Share 2.8 1.3 3.2
Total administrative expenditure 10.7 9.0 18.9
Other income and expenditure 0.3 - -
Total expenditure 11.0 9.0 18.9
In line with our strategy to modernise the business, we continue to invest in
new technology and systems, and to plan for succession. Total administrative
expenditure for the period of £10.7 million increased by £1.7 million
compared with the equivalent prior year period (H1-21: £9.0 million) and
increased by £0.8 million versus the second half of last year (H2-21: £9.9
million).
Personnel costs of £5.0 million excluding Group Profit Share ("GPS") were in
line with the first half of last year, and fell by £0.3 million compared to
the second half, reflecting the decrease in some one-off restructuring
payments made before the year end.
As expected, non-personnel costs for the period of £2.9 million were £0.2
million higher than the equivalent period last year. This reflects the
increased investment by the business in the provision of external technical
expertise and consultancy linked to the modernisation of our systems and
technology.
Group Profit Share ("GPS") Scheme
The cost of the GPS Scheme is £2.8 million for the period, increasing in
line with operating profit. The GPS cost is calculated as 35% of operating
profits, which is within the previously established range of 25% to 35% of
pre-GPS operating profit. For the equivalent period last year, the GPS equated
to 33% and was 34% for the full year.
Cash flow
The Group generated £6.0 million of cash from operating activities after tax
during the period (H1-21: £2.6 million). Taxation paid during the period fell
to £0.3 million compared to £0.8 million for the same period last year.
During the period an investment of £0.7 million in impact bonds matured
and was reinvested before period end.
During the period the company purchased 4 million of its own shares for £3.4
million to be held by the Employee Benefit Trust to cover future obligations
relating to the Record share schemes.
The Group paid dividends totalling £3.1 million in the period (H1-21:
£3.1 million), more information for which is given in note 5 to the
financial statements.
Dividends and capital
In line with the Board's capital and dividend policy, the Group will pay an
interim dividend of 1.80 pence per share in respect of the six-month period,
equating to a distribution of £3.4 million, following which the business will
retain cash and money market instruments on the balance sheet which are
significantly in excess of financial resource requirements required for
regulatory purposes.
The Group has no debt and its capital and dividend policy aims to ensure
continued balance sheet strength for the Group. Shareholders' funds were
£25.2 million at 30 September 2021 (H1‑21: £25.7 million).
Principal risks and uncertainties
The principal risks currently facing the Group and those that we anticipate
the Group will be exposed to in the short term remain the same as those
outlined in the Annual Report 2021.
These risks are:
· strategic risk - the risk of failure to deliver strategy;
· business risk - including concentration risk, margin compression
risk, people and employment risk and the risk of regulatory change;
· operational risk - including technology and information security
risk and the risk associated with the operational control environment; and
· investment risk - including the risk of product underperformance
and market liquidity risk.
Cautionary statement
This Interim 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 Interim Report. Nothing in this
Interim Report should be construed as a profit forecast.
Statement of Directors' responsibilities
The interim financial report is the responsibility of the Directors, who
confirm that to the best of their knowledge:
· the condensed set of consolidated financial statements has been
prepared in accordance with IAS 34 - "Interim Financial Reporting"; and
· the Interim management review includes a fair review of the
information required by:
· DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of consolidated
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
· DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the Annual Report 2021 that could
do so. Related party transactions are disclosed in note 10.
The Directors of Record plc are listed on the Record plc website at
www.recordcm.com/en/about-us/our-people/board-of-directors/
(http://www.recordcm.com/en/about-us/our-people/board-of-directors/)
Neil Record
Chairman
Steve Cullen
Chief Financial Officer
22 November 2021
Independent review report to Record plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended
30 September 2021 which comprises the consolidated statement of comprehensive
income, the consolidated statement of financial position, the consolidated
statement of changes in equity, the consolidated statement of cash flows and
the notes to the financial statements, including a summary of significant
accounting policies.
We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been
approved by the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group will be
prepared in accordance with UK adopted international accounting standards.
The condensed set of financial statements included in this interim financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, ''Interim Financial Reporting''.
Our responsibility
Our responsibility is to express to the Company a conclusion on the
condensed set of financial statements in the half-yearly financial report
based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information
Performed by the Independent Auditor of the Entity'', issued by the Financial
Reporting Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2021 is not prepared,
in all material respects, in accordance with UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting its responsibilities in respect of half-yearly
financial reporting in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London
22 November 2021
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Consolidated statement of comprehensive income
Six months ended 30 September 2021
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 21 30 Sep 20 31 Mar 21
Note £'000 £'000 £'000
Revenue 3 16,333 11,838 25,412
Cost of sales (206) (213) (399)
Gross profit 16,127 11,625 25,013
Administrative expenses (10,713) (9,016) (18,934)
Other income or expense (264) (36) 41
Operating profit 5,150 2,573 6,120
Finance income 21 42 71
Finance expense (17) (22) (38)
Profit before tax 5,154 2,593 6,153
Taxation (1,156) (449) (802)
Profit after tax 3,998 2,144 5,351
Total comprehensive income for the period 3,998 2,144 5,351
Profit and total comprehensive income for the period attributable to
Owners of the parent 3,998 2,151 5,351
Non-controlling interests 11 - (7) -
3,998 2,144 5,351
Earnings per share for the period (expressed in pence per share)
Basic earnings per share 4 2.08p 1.10p 2.75p
Diluted earnings per share 4 2.01p 1.10p 2.73p
The notes are an integral part of these consolidated financial statements.
Consolidated statement of financial position
As at 30 September 2021
Unaudited Unaudited Audited
As at As at As at
30 Sep 21 30 Sep 20 31 Mar 21
Note £'000 £'000 £'000
Non-current assets
Intangible assets 318 449 420
Right‑of‑use assets 440 931 684
Property, plant and equipment 510 686 683
Investments 6 3,178 2,759 3,046
Deferred tax assets 508 - 320
Total non-current assets 4,954 4,825 5,153
Current assets
Trade and other receivables 8,794 7,276 8,006
Derivative financial assets 8 - 158 260
Money market instruments with maturities > 3 months 7 5,875 12,491 12,932
Cash and cash equivalents 7 11,408 6,848 6,847
Total current assets 26,077 26,773 28,045
Total assets 31,031 31,598 33,198
Current liabilities
Trade and other payables (3,919) (2,422) (3,426)
Corporation tax liabilities (959) (349) (315)
Provisions (200) - -
Lease liabilities (372) (526) (539)
Financial liabilities 6 - (1,800) (1,696)
Derivative financial liabilities 8 (270) (35) (16)
Total current liabilities (5,720) (5,132) (5,992)
Non-current liabilities
Deferred tax liabilities (77) (30) (108)
Provisions - (200) (200)
Lease liabilities - (377) (99)
Total non-current liabilities (77) (607) (407)
Total net assets 25,234 25,859 26,799
Equity
Issued share capital 9 50 50 50
Share premium account 3,008 2,289 2,418
Capital redemption reserve 26 26 26
Retained earnings 22,150 23,369 24,305
Equity attributable to owners of the parent 25,234 25,734 26,799
Non-controlling interests 11 - 125 -
Total equity 25,234 25,859 26,799
Approved by the Board on 22 November 2021 and signed on its behalf by:
Neil Record
Chairman
Steve Cullen
Chief Financial Officer
The notes are an integral part of these consolidated financial statements.
Consolidated statement of changes in equity
Six months ended 30 September 2021
Called‑up share Share premium account Capital redemption reserve Retained earnings Equity attributable Non-controlling interests Total
capital to owners of the parent equity
Unaudited 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 period - - - 2,151 2,151 (7) 2,144
Dividends paid 5 - - - (3,068) (3,068) - (3,068)
Own shares acquired by EBT - - - (1,589) (1,589) - (1,589)
Release of shares held by EBT - 30 - 419 449 - 449
Share-based payment reserve movement - - - (238) (238) - (238)
Transactions with shareholders - 30 - (4,476) (4,446) - (4,446)
As at 30 September 2020 50 2,289 26 23,369 25,734 125 25,859
Profit and total comprehensive income for the period - - - 3,200 3,200 (125) 3,075
Dividends paid 5 - - - (2,222) (2,222) - (2,222)
Trade Record sale - - - 32 32 - 32
Own shares acquired by EBT - - - (749) (749) - (749)
Release of shares held by EBT - 129 - 574 703 - 703
Share-based payment reserve movement - - - 101 101 - 101
Transactions with shareholders - 129 - (2,296) (2,167) - (2,167)
As at 31 March 2021 50 2,418 26 24,305 26,799 - 26,799
Profit and total comprehensive income for the period - - - 3,998 3,998 - 3,998
Dividends paid 5 - - - (3,089) (3,089) - (3,089)
Own shares acquired by EBT - - - (3,828) (3,828) - (3,828)
Release of shares held by EBT - 590 - 661 1,251 - 1,251
Share-based payment reserve movement - - - 103 103 - 103
Transactions with shareholders - 590 - (6,153) (5,563) - (5,563)
As at 30 September 2021 50 3,008 26 22,150 25,234 - 25,234
The notes are an integral part of these consolidated financial statements.
Consolidated statement of cash flows
Six months ended 30 September 2021
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 21 30 Sep 20 31 Mar 21
Note £'000 £'000 £'000
Profit after tax 3,998 2,144 5,351
Adjustments for non-cash movements
Depreciation of right-of-use assets 245 246 490
Depreciation of property, plant and equipment 175 144 298
Amortisation of intangible assets 102 83 168
Share-based payments 155 322 486
Other non-cash movements 806 (804) (492)
Finance income (21) (42) (71)
Finance expense 17 22 38
Tax expense 1,156 449 802
Change in working capital
(Increase)/decrease in receivables (788) 1,421 696
Increase/(decrease) on payables 494 (588) 417
Net cash inflow from operating activities 6,339 3,397 8,183
Corporation tax paid (303) (756) (1,385)
Net cash inflow from operating activities 6,036 2,641 6,798
Purchase of intangible software - (62) (189)
Purchase of property, plant and equipment (2) (79) (230)
Purchase of investments (782) (411) (881)
Sale/(purchase) of money market instruments with maturity > 3 months 7,056 (4,533) (4,973)
(Redemption) of units in funds (1,808) (354) (335)
Redemption of bonds 724 - -
Investment in subsidiaries - - (23)
Sale of Trade Record shares - - 120
Interest received 21 47 71
Net cash inflow/(outflow) from investing activities 5,209 (5,392) (6,440)
Cash flow from financing activities
Lease repayments (267) (258) (522)
Lease interest payments (11) (22) (38)
Purchase of own shares (3,355) (1,492) (1,808)
Dividends paid to equity shareholders 5 (3,089) (3,068) (5,290)
Cash outflow from financing activities (6,722) (4,840) (7,658)
Net increase/(decrease) in cash and cash equivalents in the period 4,523 (7,591) (7,300)
Effect of exchange rate changes 38 145 (147)
Cash and cash equivalents at the beginning of the period 6,847 14,294 14,294
Cash and cash equivalents at the end of the period 11,408 6,848 6,847
Closing cash and cash equivalents consists of:
Cash 7 4,576 6,334 2,372
Cash equivalents 7 6,832 514 4,475
Cash and cash equivalents 7 11,408 6,848 6,847
The notes are an integral part of these consolidated financial statements.
Notes to the consolidated financial statements
For the six months ended 30 September 2021
These consolidated financial statements exclude disclosures that are
immaterial and judged to be unnecessary to understand our results and
financial position.
1. Basis of preparation
The condensed set of consolidated financial statements included in this
interim financial report has been prepared in accordance with International
Accounting Standard 34 - "Interim Financial Reporting". The financial
information set out in this Interim Report does not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. The Group's
statutory financial statements for the year ended 31 March 2021 were prepared
in accordance with IFRS and have been delivered to the Registrar of Companies.
The auditor's report on those financial statements was unqualified and did not
contain statements under section 498(2) or section 498(3) of the Companies
Act 2006.
The accounting policies for recognition, measurement, consolidation and
presentation as set out in the Group's Annual Report for the year ended 31
March 2021 have been applied in the preparation of the IFRS condensed
consolidated half-year financial information.
Application of new standards
There have been no new or amended standards adopted in the financial year
beginning 1 April 2021 which have a material impact on the Group or any
company within the Group.
Impacts of covid-19 during the period
The Chief Executive Officer's statement and Operating review sections of this
Interim Report provide information as to the broader effects of covid-19 on
the Group's financial results, its operations and prospects. The Group has
given due consideration as to the impact of uncertainty arising from covid-19
related factors on the production of the interim financial statements.
Going concern
As part of the Directors' consideration of the appropriateness of adopting the
going concern basis for the preparation of the interim financial statements,
the Directors have assessed whether the Group can meet its obligations as they
fall due and can continue to meet its solvency requirements over a period of
at least twelve months from the approval of this report.
The Board has considered financial projections which demonstrate the ability
of the Group to withstand market shocks in a range of scenarios, including
very severe ones.
In assessing the appropriateness of the going concern basis, the Board
considered base case liquidity and solvency projections that incorporated an
estimated view of the potential economic downturn that is anticipated to be
experienced due to the impacts of covid-19. In addition, a more onerous
economic downturn was also modelled. The projections demonstrated that excess
capital would remain in the Group under both scenarios, supporting cash
generation in the going concern period.
As a result of the above assessment, the Directors do not currently foresee
any material uncertainties relating to events or conditions that may be
relevant to the next 12 months, and are satisfied that all mandatory outgoings
can be met over the going concern period, and consider it appropriate to adopt
the going concern basis in the preparation of these interim financial
statements.
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 2021.
The consolidated financial information contained within the financial
statements incorporates financial statements of the Group and entities
controlled by the Group (its subsidiaries) drawn up to 30 September 2021.
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 Company 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 or within current
liabilities as financial liabilities depending on the characteristic of the
investment, 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
(see note 10 for further details).
During the period, the Group had investments in two 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 controlled by the
Group have been consolidated on a line-by-line basis from the time that the
Group gained control over the fund until termination (see Note 6 for further
information).
2. Critical accounting estimates and judgements
The estimates and judgements applied in the interim financial statements are
consistent with those applied in the financial statements for the year ended
31 March 2021.
3. Revenue
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable
for the provision of currency management services. Our revenue typically
arises from charging management fees or performance fees and both are
accounted for in accordance with IFRS 15 - "Revenue from Contracts with
Customers".
Management fees are recorded on a monthly basis as the underlying currency
management service occurs. There are no other performance obligations.
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.
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 are not
subject to any clawback provisions. 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 investment services
income includes fees from signal hedging and fiduciary execution.
Six months Six months
ended ended Year ended
30 Sep 21 30 Sep 20 31 Mar 21
Revenue by product type £'000 £'000 £'000
Management fees
Passive Hedging 5,802 6,027 11,377
Dynamic Hedging 4,783 1,889 5,623
Currency for Return 2,077 937 2,005
Multi-product 3,446 2,379 5,873
Total management fee income 16,108 11,232 24,878
Performance fee income - - 81
Other investment services income 225 606 453
Total revenue 16,333 11,838 25,412
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.
Six months Six months
ended ended Year ended
30 Sep 21 30 Sep 20 31 Mar 21
Revenue by geographical region £'000 £'000 £'000
UK 1,158 1,151 2,322
Europe (excluding UK and Switzerland) 4,740 1,622 3,223
US 5,437 3,273 8,619
Switzerland 4,401 4,800 9,097
Other 597 992 2,151
Total revenue 16,333 11,838 25,412
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 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 used in the
basic and diluted earnings per share calculations.
Six months Six months
ended ended Year ended
30 Sep 21 30 Sep 20 31 Mar 21
£'000 £'000 £'000
Weighted average number of shares used in calculation 192,250,212 195,664,074 194,461,787
Effect of potential dilutive ordinary shares - share options 7,075,489 426,382 1,705,089
Weighted average number of shares used in calculation 199,325,701 196,090,456 196,166,876
Basic earnings per share 2.08p 1.10p 2.75p
Diluted earnings per share 2.01p 1.10p 2.73p
The potential dilutive shares relate to the share options and Joint Share
Ownership Plan ("JSOP") awards granted in respect of the Group's Share Scheme.
At the beginning of the period there were 11,844,421 share options and
2,500,000 JSOP awards outstanding. During the six‑month period 3,747,500
share options and 32,500 JSOP awards were granted. During the period 586,375
share options were exercised and 593,750 JSOP awards vested. No JSOP awards
lapsed in the period and 34,500 share options lapsed in the period.
As at 30 September 2021, there were share options in place over 14,971,046
shares and 1,938,750 JSOP awards.
5. Dividends
The dividends paid during the six months ended 30 September 2021 totalled
£3,089,258 (1.60 pence per share), being a final ordinary dividend in respect
of the year ended 31 March 2021 of 1.15 pence per share and a special dividend
of 0.45 pence per share. An interim dividend of £2,222,171 (1.15 pence per
share) was paid in the six months ended 31 March 2021 thus the full ordinary
dividend in respect of the year ended 31 March 2021 was 2.75 pence per share.
The dividends paid during the six months ended 30 September 2020 totalled
£3,068,153 (1.56 pence per share), being a final ordinary dividend in respect
of the year ended 31 March 2020 of 1.15 pence per share and a special dividend
of 0.41 pence per share. An interim dividend of £2,268,389 (1.15 pence per
share) was paid in the six months ended 31 March 2020, thus the full ordinary
dividend in respect of the year ended 31 March 2020 was 2.71 pence per share.
The interim dividend declared in respect of the six months ended 30 September
2021 is 1.80 pence per share.
6. Accounting for investments
Funds have been consolidated on a line-by-line basis where the Group has
determined that a controlling interest exists through an investment holding in
the fund, in accordance with IFRS 10 - "Consolidated Financial Statements".
Otherwise, investments in funds are measured at fair value through profit or
loss.
Record held seed investments in two funds which have been active during the
period until their termination in June 2021. The Group controlled both the
Record Currency - Strategy Development Fund and the Record - Currency
Multi-Strategy Fund throughout this period and the comparative periods, and
both were consolidated in full, on a line-by-line basis, in the Group's
financial statements throughout these periods up until termination.
Investments
As at As at As at
30 Sep 21 30 Sep 20 31 Mar 21
£'000 £'000 £'000
Impact bonds 2,234 2,365 2,199
Investment in funds 944 394 847
Investments 3,178 2,759 3,046
Financial liabilities
Record plc has made investments in a number of seed 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. Since unitholders have the right to cancel units at any time in
return for cash, these are considered puttable instruments under IAS 32 and
are therefore deemed to represent financial liabilities as opposed to equity.
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 control of the Group as the
combined holding of Record plc and its Directors constituted a majority
interest in the comparative periods, and also in this period until termination
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 included in the
accounts of the Record Group
As at As at As at
30 Sep 21 30 Sep 20 31 Mar 21
£'000 £'000 £'000
Record - Currency Multi-Strategy Fund - 1,800 1,696
Financial liabilities - 1,800 1,696
The financial liabilities relate only to the fair value of the external
investors' holding in the seed funds, and should not be construed as debt.
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. 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 21 30 Sep 20 31 Mar 21
Assets managed as cash £'000 £'000 £'000
Bank deposits with maturities > 3 months 5,875 11,246 12,932
Treasury bills with maturities > 3 months - 1,245 -
Money market instruments with maturities > 3 months 5,875 12,491 12,932
Cash 4,576 6,334 2,372
Bank deposits with maturities <= 3 months 6,832 514 4,475
Cash and cash equivalents 11,408 6,848 6,847
Total assets managed as cash 17,283 19,339 19,779
8. 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 2021 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Impact bonds 2,234 2,234 - -
Other securities 944 888 - 56
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging (270) - (270) -
Total 2,908 3,122 (270) 56
Total Level 1 Level 2 Level 3
As at 30 September 2020 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Impact bonds 2,365 2,365 - -
Other securities 394 394 - -
Forward foreign exchange contracts used for seed funds 41 - 41 -
Foreign exchange options used for seed funds 5 - 5 -
Forward foreign exchange contracts used for hedging 112 - 112 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for seed funds (35) - (35) -
Total 2,882 2,759 123 -
Total Level 1 Level 2 Level 3
As at 31 March 2021 £'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 for hedging - - - -
Forward foreign exchange contracts used by seed funds (16) - (16) -
Total 2,443 2,199 244 -
There have been no transfers between levels in any of the reported periods.
Basis for classification of financial instruments within the fair value
hierarchy
Forward foreign exchange contracts are classified as Level 2. The fair value
of forward foreign exchange contracts is established using interpolation of
observable market data rather than a quoted price.
Options are classified as Level 3. The fair value of an option is established
using a Black-Scholes model.
9. 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 21 30 Sep 20 31 Mar 21
£'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 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. Any such gains or
losses are recognised directly in equity.
Number
Record plc shares held by EBT as at 31 March 2020 3,219,387
Net change in holding of own shares by EBT in period 3,071,133
Record plc shares held by EBT as at 30 September 2020 6,290,520
Net change in holding of own shares by EBT in period 6,137
Record plc shares held by EBT as at 31 March 2021 6,296,657
Net change in holding of own shares by EBT in period 3,105,777
Record plc shares held by EBT as at 30 September 2021 9,402,434
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.
10. 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.
There has been no change in related parties from those disclosed in the Annual
Report 2021.
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
The compensation given to key management personnel is as follows:
Six months Six months
ended ended Year ended
30 Sep 21 30 Sep 20 31 Mar 21
£'000 £'000 £'000
Short-term employee benefits 3,825 2,809 6,214
Post-employment benefits 156 178 309
Share-based payments 926 389 949
4,907 3,376 7,472
The dividends paid to key management personnel in the six months ended 30
September 2021 totalled £1,434,256 (six months ended 30 September 2020:
£1,598,335; year ended 31 March 2021: £3,028,563).
11. Non-controlling interest
From time to time, Record plc may make an investment in an entity where it is
in a position to be able to control the entity. Non‑controlling interests
occur when Record plc is not the only investor in the entity. The
non-controlling interest is measured at cost plus the share of profit or loss
of the third party investment in the entity.
Investment in Trade Record Ltd
On 21 December 2020, Record plc disposed of its entire shareholding in the
ordinary share capital of Trade Record Ltd.
In accordance with IFRS 10, the financial results of Trade Record Ltd were
consolidated on a line-by-line basis within the financial statements of the
Group up until disposal.
Six months Six months Year
ended ended ended
30 Sep 21 30 Sep 20 31 Mar 21
£'000 £'000 £'000
Non-controlling interest in Trade Record Ltd - 125 -
12. Post reporting date events
No adjusting or significant non-adjusting events have occurred between the
reporting date and the date of approval.
Information for shareholders
Record plc
Record plc is a public limited company incorporated in the UK.
Registered in England and Wales Company No. 1927640
Registered office
Morgan House
Madeira Walk
Windsor
Berkshire
SL4 1EP
United Kingdom
Tel: +44 (0)1753 852 222
Fax: +44 (0)1753 852 224
Principal UK trading subsidiaries
Record Currency Management Limited
Registered in England and Wales
Company No. 1710736
Record Group Services Limited
Registered in England and Wales
Company No. 1927639
Both principal UK trading subsidiaries are based in Windsor.
Further information on Record plc can be found on the Group's website:
www.recordcm.com
Dates for 2021 interim dividend
Ex‑dividend date 2 December 2021
Record date 3 December 2021
Interim dividend payment date 30 December 2021
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Further information about the Registrar is available on their website:
www.linkgroup.eu
AUME definition
The basis for measuring AUME differs for each product and is detailed below:
· Passive Hedging mandates - the aggregate nominal amount of passive
hedges actually outstanding in respect of each client;
· Dynamic Hedging mandates - total amount of clients' investment
portfolios denominated in liquid foreign currencies, and hence capable (under
the terms of the relevant mandate) of being hedged;
· Currency for Return mandates - the maximum aggregate nominal amount
of outstanding forward contracts for segregated clients, or the Net Asset
Value where Record acts as Investment Manager to a Fund;
· Multi-product mandates - the chargeable mandate size for each
client; and
· Cash - the total set aside by clients and managed by Record.
Notes to Editors
This announcement includes information with respect to Record's financial
condition, its results of operations and business, strategy, plans and
objectives. All statements in this document, other than statements of
historical fact, including words such as "anticipates", "expects", "intends",
"plans", "believes", "seeks", "estimates", "may", "will", "continue",
"project" and similar expressions, are forward-looking statements.
These forward-looking statements are not guarantees of the Company's future
performance and are subject to risks, uncertainties and assumptions that could
cause the actual future results, performance or achievements of the Company to
differ materially from those expressed in or implied by such forward-looking
statements.
The forward-looking statements contained in this document are based on
numerous assumptions regarding Record's present and future business and
strategy and speak only as at the date of this announcement.
The Company expressly disclaims any obligation or undertaking to disseminate
any updates or revisions to any forward-looking statements contained in this
announcement whether as a result of new information, future events or
otherwise.
The information contained within this announcement is deemed by the Group to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via
Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.
1 (#_ftnref1) As a currency and derivatives 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. A full definition of AUME is provided at the end of this document.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR BIBDBUBDDGBDRecent news on Record
See all newsREG - Record PLC - Fourth Quarter Trading Update
AnnouncementRCS - Record PLC - Senior Subsidiary Appointments
AnnouncementREG - Record PLC - Director/PDMR Shareholding
AnnouncementREG - Record PLC - Director/PDMR Shareholding
AnnouncementREG - Record PLC - Director/PDMR Shareholding
Announcement