REG - Record PLC - Interim Results
29/11/2022 07:00
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RNS Number : 8438H Record PLC 29 November 2022
Record plc
29 November 2022
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022
Material profit growth and diversification of products and revenues supports
strong financial position and dividend increase
Record plc ("Record" or "the Company"), the specialist currency and asset
manager, today announces its unaudited results for the six months ended 30
September 2022 ("H1-23").
Financial headlines:
· Revenue growth of 35% to £22.1m (H1-22: £16.3m)
· Profit before tax increased by 46% to £7.5m (H1-22: £5.2m)
· Interim dividend increased by 14% to 2.05 pence per share (H1-22:
1.80 pence per share)
· AUME(( 1 )) in USD terms of $80.8bn (H1-22: $84.1bn)
· Increased operating profit margin of 34% (H1-22: 32%)
· Basic EPS increased by 57% to 3.27 pence (H1-22: 2.08 pence)
· Strong financial position with shareholders' equity of £28.0m
(H1-22: £25.2m)
Key developments:
· Significant growth in management fees (H1-22: +18%) and
performance fees (FY-22: +468%) underpinned by strong performance across all
product strands
· Ongoing diversification into higher revenue and more scalable
products continues to support increased operating margin and dividend growth
· Awarded a BaFin licence in Germany and launched our Luxembourg
Fund range, expanding our activities and opportunities in Europe
· Exceptional performance across several business strands including
Record's Dynamic Hedging product, G10 and EM Currency Multi-Strategy and the
Company's Emerging Market Sustainable Finance ("EMSF") Fund
· Record Digital Asset Ventures ("RDAV") launched in April, with
the intention of investing in start-up and early-stage entities that aim to
disrupt the financial services sector
Commenting on the results, Leslie Hill, Chief Executive Officer of Record plc,
said:
"Our growth trajectory continues as planned supported by solid product
performance over the period and with good progress made in our plans for
diversification.
"We have close engagement with our clients, listening to their concerns and
understanding their needs - further reinforcing already strong relationships
and leading to new ideas for future collaboration and opportunities for
diversification.
"The Group remains well positioned financially, with increased cash generation
and a strong Balance Sheet to support its future growth plans. The Board
remains confident in the strategy to deliver future growth, an outlook which
is reflected by an increase in the interim dividend."
Analyst presentation
There will be a presentation for analysts at 9.30am today held via a Zoom
call. Please contact the team at Buchanan via record@buchanan.uk.com
(mailto:record@buchanan.uk.com) for further details. A copy of the
presentation will be made available on the Group's website
at www.recordcm.com (http://www.recordcm.com) .
For further information, please contact:
Record plc +44 (0) 1753 852222
Neil Record - Chairman
Leslie Hill - Chief Executive Officer
Steve Cullen - Chief Financial Officer
Buchanan +44 (0) 20 7466 5000
Simon Compton record@buchanan.uk.com (mailto:record@buchanan.uk.com)
Henry Wilson
George Beale
Chief Executive Officer's statement
Our plans for diversification, modernisation and succession are all going
smoothly despite headwinds caused by inflation, events on the global stage and
residual work disruption left over from the pandemic.
Against this backdrop, we are seeing growth in revenue and profits broadly in
line with expectations, our modernisation programme is on course and on
budget, and we have now implemented a Long Term Incentive Plan ("LTIP") scheme
to help us with our succession planning, talent retention, and to further
reward those team members who are willing to take a leading role in our
growth and development trajectory.
To avoid repeating past statements, I would like to focus on the following
three important areas in more detail: investment performance, Record Asset
Management (our European subsidiary) and Record Digital Asset Ventures.
Currency products and investment performance
While a lot of our future growth might come from products other than pure
currency, traditional currency products are and will remain a cornerstone of
our brand and our reputation. Promisingly, we are seeing some growth in our
traditional business and expect this to continue whilst mindful these are at
lower fee rates than other areas of focus. Nonetheless, especially given the
turbulence in the currency markets in recent years, it is encouraging to see
strong performance from our Dynamic Hedging product, our hedging product with
active tenor management (on which we earn performance fees), G10 and EM
Currency Multi-Strategy, and our Emerging Market Sustainable Finance ("EMSF")
Fund.
In addition, there are interesting developments in our Currency for Return
product range, where we have trialled (with our own capital) adding machine
learning features to our Currency for Return strand and, as this is showing
good results so far, it has now been adopted by certain of our clients as an
enhancement to our offering. While we are devoted to diversification as a
source of growth and improved margins, we would not want our investors or
stakeholders to forget our currency roots.
Record Asset Management
Record Asset Management is our relatively new subsidiary based in Germany that
will enable us to offer much more to our clients whilst continuing to build on
our existing offering. With the award of our BaFin licence in Germany and the
launch of our Luxembourg Fund range, we are now able to expand our activities
in Europe. This is starting to bear fruit and will begin to have a bigger
impact on our bottom line in the coming year. Led by our Global Head of Sales
Dr Jan Witte, we are working with partners such as AGL (the syndicated loan
manager in New York) and VTeam (the Supply Chain Finance business based in SE
Asia) to create blended products for our clients, such as the recently
launched Municipal Loan Fund in Germany. There are good opportunities for us
here and our team based in Zurich, Amsterdam and Düsseldorf is growing in
line with the growth in revenue.
Record Digital Asset Ventures ("RDAV")
Last April we launched RDAV with the express intent to invest in start-up and
early-stage companies across the globe that aim to disrupt the financial
services sector (including the digital asset economy) in a form we felt would
be relevant to Record. Spearheaded by our CTO Rebecca Venis, we started by
setting out an investment thesis: we look to invest in financial technology
differentiated through the creation of a new economy, and defensible through
network effects. We wish to apply a modest proportion of our excess capital,
putting it to work in venture capital investments which will enable us to: 1)
learn more about this area; 2) get a "seat at the table" with key people in
this evolving industry; and 3) make a return for our stakeholders and
investors.
The funds to which we have committed capital include Hack VC, Castle Island
and Fasanara VC, as well as investing directly into companies including Block
Scholes and Lake Parime, the latter of which was invested just after the
period end in October 2022. While these are still early days, we are very
encouraged by the results so far and the opportunities to partner with and
offer our services to this sector. More on this to come.
It is crucial to remember that all the elements above are part of a plan to
diversify Record and make us a meaningful asset management business, fit for
the next generation, and well balanced between opportunity, risk and return.
No single revenue line is ever intended to dominate, and we are always very
much aware of the Board's measured approach to risk appetite in everything we
do.
Financial performance and dividends
As stated above, we continue along the path we set ourselves in the full year
(FY-22) results back in June, which is to achieve revenue of approximately
£60 million by the year ending March 2025 (FY-25).
Compared to the same period last year, our revenue has increased by 35% to
£22.1 million and our operating profit of £7.5 million is 46% higher. The
return to performance fees seen in the second half of last year has continued
with £2.8 million for this six-month period (FY‑22: £0.5 million) and
going forward is one we hope to be less episodic than has historically been
the case, but as always subject to market conditions.
As expected, we have seen an increase in our cost base resulting from our
continued investment in the modernisation of our business, albeit this has
been exacerbated by the current high inflationary environment. Notwithstanding
this, it is still pleasing to report an increase in our operating margin from
31% for FY-22 to 34% for this six-month period, and we continue to focus on
ensuring the right balance between good cost control and in ensuring the
business is appropriately resourced to support its growth trajectory.
The Board remains confident in the strategy and the ability of the business to
deliver against its plan for growth. In line with the capital and distribution
policies, which target progressive and sustainable dividend growth, the Board
has decided to pay an increased interim dividend for HY-23 of 2.05 pence per
share (HY-22: 1.80 pence) on 30 December to shareholders on the register at 9
December 2022.
Leslie Hill
Chief Executive Officer
28 November 2022
Interim management review
Heightened volatility and inflationary pressure underscores the relevance of
our products, offering new opportunities for growth and diversification.
Market review
The six months to 30 September 2022 were characterised by a volatile
geopolitical environment in light of Russia's continued aggressions in Ukraine
and its impact on global energy security. Although supply chain stress showed
signs of improvement, policymakers quickly abandoned the "transitory"
narrative of inflation as energy prices drove up the cost of living in most
economies. Faced with the possibility of unanchored inflation expectations,
central banks had the unenviable task of tightening monetary conditions into
slowing growth, which drove global yields higher and equities lower. How well
countries fared during the period was a function of energy and geographical
insulation to the conflict in Ukraine. The US benefited in particular as
uninterrupted energy supply and a relatively closed economy allowed the
post-covid-19 recovery to continue more or less unabated. As a result, 275
basis points of cumulative rate hikes in combination with risk-off market
sentiment - not helped by China's zero-covid-19 policy, its real estate
downturn and rising tensions with Taiwan - saw the US dollar appreciate
against all developed market currencies, including the Swiss franc and
Japanese yen which also normally benefit in risk-off markets.
Throughout the period there were a range of interventionist policies enacted
by governments and central banks seeking to manage financial market
volatility. Steadfast easy policy from the Bank of Japan and a rising energy
import bill culminated in a de facto loss of the currency's safe‑haven
status; Japan's Ministry of Finance intervened to stem volatility in the
currency. In Europe, resolute military support for Ukraine saw gas flows from
Russia slow to less than a fifth of pre-invasion levels; fearing "financial
fragmentation" should the ECB tighten policy, the governing council introduced
its "Transmission Protection Instrument" to contain risk premia, though the
euro still ended the period below parity. In the UK, newly appointed Prime
Minister Truss' "mini-budget" led to a sell-off in long Gilt rates, putting
the UK pension system in jeopardy as a result of collateral calls on
liability‑driven investment strategies; the Bank of England, although on a
similar rate path to the US, was forced to abandon quantitative tightening and
instead backstopped the Gilt market with new purchases.
Elsewhere in developed markets the Canadian dollar fared better for its
similarities to the US in energy security, while the Australian dollar, after
initially benefiting from rising commodity prices, eventually succumbed to
concerns around global growth. The Swiss National Bank, in an unusual twist,
intervened to strengthen the franc in an attempt to mitigate inflation
pressures, helping the franc outperform on a relative basis. The same loose
rules that applied to developed markets also applied to emerging markets.
Latin America as a region was resilient on the back of early and decisive
hiking cycles as well as positive impacts from commodity prices. Assets in
Central Eastern European countries sold off as Russia sought to punish their
allegiances with Ukraine through energy supply, and as inflation rose to
double digits. Asian currencies were mixed with some showing resilience,
including the Indonesian rupiah and Indian rupee, while the low-yielders faced
pressure from rising developed market rates.
Operating review
Our focus remains on growing the business through diversification of both our
product range and specialist skill sets, whilst continuing to invest in our
technology. Our more traditional hedging products have proved to be robust
during a particularly volatile period, with net inflows of $8.9 billion and
which provide a strong and reliable source of revenue to support our growth.
Our targeted but flexible approach of working with clients and other
specialist providers to collaborate on new products in changing market
environments means we are able to offer differentiated and relevant products
to suit individual client demand. This offers new opportunities for more
scalable products with higher revenue margins than we've seen historically
and we continue to make good progress, more information on which is given
below.
Products
As stated in the Market review, the first half of the fiscal year saw elevated
market, and specifically currency, volatility as the threats of rising
inflation, energy prices and interest rates rose their heads against the
backdrop of the war in Ukraine. Pronounced trends have led to extended
valuations, notably USD strength and EUR, JPY and GBP weakness. Against this
backdrop, risk management has been at the forefront of investors' minds,
resulting in numerous conversations with institutional allocators and asset
managers alike, across both passive and active FX hedging strategies.
Extending the run from the previous fiscal year, Record's Dynamic Hedging
performed strongly, adding significant value for our USD base clients and
allowing embedded asset gains to run for those in other bases. While not as
exceptional, Currency Multi‑Strategy saw steady gains over the period.
Record's pioneering Emerging Markets Sustainable Finance Fund ("EMSF")
extended its strong outperformance of competitors and typical comparator
indices as all emerging markets asset classes suffered in the turbulent market
environment.
Of particular note, one of Record's bespoke derivatives overlays for a US
client delivered stellar returns, exploiting the demand-supply mismatch for UK
inflation protection.
Another key area of focus for the team has been on a number of significant
projects in the yield and sustainable yield space. First out of the blocks is
our European municipal loans fund which launched with seed capital at the end
of September. The expectation is for these products, ranging from sustainable
lending to infrastructure, to launch over the next twelve months, responding
to strong demand for yield from existing and prospective clients. The core
appeal of these strategies is the stable return streams derived from the
real-world economy, delivered to clients' exacting requirements in attractive
structures.
People
We continue to invest in our people. This means hiring talented people
throughout our business and providing opportunities for our talented
colleagues to increase their levels of responsibility, while providing support
in the form of coaching, learning and development. Our new remuneration
policy was approved by shareholders at our AGM in July and we are now
implementing the policy. We have made awards under the LTIP scheme to our
senior managers, to incentivise delivery of long-term performance and strategy
delivery and align interests with shareholders, and have made share option
awards to key staff. Whilst focus on good cost control remains paramount, a
one-off allowance of £3,000 was made to all staff below Board level in
October, following the period end, to help our employees with the recent
increases in the cost of living linked to higher inflation. Our investment
made in providing new serviced offices in London has proved extremely
successful in helping us to attract new talent to the business.
Technology
We continue to support flexible working across the business, including remote
working, office-based and hybrid working patterns enabled for all staff.
Remote access systems and security controls have continued to be enhanced as
we deliver greater flexibility and functionality to our staff whilst
maintaining the greatest levels of security and protection. The continuous
improvement and development of our technology stack is critical to improving
how we support clients and deliver our products and services effectively.
As part of our ongoing and continuous development, Record's Board has
maintained an elevated IT-related budget relative to our historic expenditure.
This spending is assigned across three core areas: software development to
improve functionality and capability; infrastructure to improve security and
resilience; and data management to provide greater insights and value around
our investment services.
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.
After a period of sustained low global interest rates from early 2020 to early
2022, the last six months have seen continued high interest rate volatility.
In response to global inflationary pressures, central banks have furthered
their progress in their interest rate hiking cycles in an effort to combat
price level increases. The market is continuing to price in further interest
rate hikes for the majority of currencies. As such, FX forward pricing has
been very volatile (as these are priced based off the respective interest
rates of currencies), which has resulted in an expanded opportunity set from
which the team can potentially add value. Therefore, performance for this half
of the year has been strong as the portfolio managers have positioned the
portfolio to take advantage of the current volatile environment. Generally,
the portfolios have been managed with excess durations to their benchmarks.
The table below shows the total value added relative to a fixed-tenor
benchmark for an enhanced Passive Hedging programme for a representative
account (base currency is Swiss francs).
Half-year return Return since inception
Value added relative to a fixed-tenor benchmark 0.11% 0.10% p.a
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 rose
systematically in response to currency movements. Consequently, hedging
returns in the programmes were positive, helping to protect against foreign
currency weakness.
Half-year return Return since inception
Value added by Dynamic Hedging programme 6.48% 0.95% 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. It further invests in an underlay of sustainable development bonds
issued by Multilateral Development Banks ("MDBs") and other Development
Finance Institutions ("DFIs") with a strong presence in low and middle-income
economies, alongside an active stakeholder engagement that promotes better
policies and practices among investees and trading counterparties.
The Fund returned -2.70% for the half year to 30 September 2022,
outperforming major market EM sovereign debt indices. Exposures across
emerging market currencies suffered in light of relentless dollar strength,
with notable return detractions from the currencies of some Central and
Eastern European economies, as the spill-over of the Russia-Ukraine war
diffused and raised particular concern around regional trade and energy
supply, adding pressure on growth and inflation. Latin America proved a mixed
bag, with some idiosyncratic risks and political surprises weighing on certain
currencies as signs of stagflation haunted select economies, but tactful
discretionary allocation allowed the Fund to add value throughout the period
as high carry opportunities in the region cushioned currency performance
versus global peers. Performance across Asia was mixed too - the latter half
of the period saw tighter global financial conditions, combined with a more
bearish outlook for the Chinese economy and areas of heightened geopolitical
tensions weighing on regional markets and investor sentiment. Frontier
performance was mixed, although a net negative contributor in the aggregate.
The diversified funding basket of developed market currencies added materially
to the Fund's strong outperformance throughout the period, providing
a countercyclical buffer as risk appetite dissipated.
The USD-denominated bonds in the portfolio experienced challenging conditions
throughout the half year, as the beginning of the period brought with it a
regime change with the first rate hike in what would become a progressively
more aggressive tightening cycle, adding 275bps in cumulative hikes throughout
the period, as policymakers wrestled with, and reiterated their commitment to
addressing, persistently high above-target inflation. A short-duration
strategy alongside a portfolio of highly rated issuers contributed to protect
the Fund from further losses.
Half-year return Return since inception
Record EMSF Fund USD Share Class (2.70%) (3.61%)
JP Morgan GBI EM Global Diversified(1) (12.95%) (23.46%)
1. Source: JP Morgan.
Currency Multi-Strategy
Record's Currency Multi-Strategy product combines a number of diversified
return streams, which include:
· Forward Rate Bias ("FRB", also known as "carry") and Emerging Market
("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, driven by the
outperformance in the EM, Momentum and Range-Trading modules. Short Asian EM
FX exposures boded well for the EM strand as higher USD rates kept pressure on
their capital accounts and given a relatively muted response on rates policy
whilst the long LatAm FX exposures benefited from favourable nominal and real
carry. Carry detracted from returns due to positioning changes driven by
central bank policy divergence despite a long US dollar exposure.
Value returned negatively on the back of long exposures in JPY and EUR, with
both currencies coming under marked pressures on the back of widening interest
rate differentials versus the US, whilst the bloc currency was further exposed
to the conflict and gas supply vulnerabilities. The Momentum strand returned
positively on the back of multi-month trends in the period, particularly
benefiting from the US dollar cycle. Range-Trading returned positively over
the six-month period, largely driven by gains from AUD, NZD, GBP and CHF
pairs. Developed Market Classification ("DMC") was also introduced during this
period to replace Range-Trading and Momentum modules, returning
positively since inception.
Half-year return Return since inception Volatility since inception
Record Multi-Strategy Composite(2) 1.71% 0.96% p.a. 3.04%
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 in addition to the level of
scaling and/or the volatility target.
It should be emphasised that in this case "scaling" refers to the multiple of
the aggregate notional value of forward contracts in the currency programme
which is limited by the willingness of counterparty banks to take exposure to
the client. The AUME of those mandates where scaling or a volatility target is
selected is represented in Record's AUME at the scaled value of the mandate,
as opposed to the mandate size.
AUME development
AUME decreased over the period by 2.8% to $80.8 billion in US dollar terms,
and increased in sterling terms by 14.6% to £72.3 billion. Total net
inflows for the period were $8.6 billion, of which $5.6 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 2022
$bn
AUME at 1 April 2022 83.1
Net client flows 8.6
Equity and other market impact (4.8)
Foreign exchange impact and mandate volatility scaling (6.1)
AUME at 30 September 2022 80.8
Product mix
The product mix has remained broadly constant when compared to the year end.
AUME composition by product
30 Sep 22 30 Sep 21 31 Mar 22
$bn % $bn % $bn %
Passive Hedging 62.2 77 63.0 76 62.8 76
Dynamic Hedging 10.0 12 10.3 12 10.6 13
Currency for Return 4.3 6 5.4 6 5.0 6
Multi-product 4.2 5 5.2 6 4.5 5
Cash and other 0.1 - 0.2 - 0.2 -
Total 80.8 100 84.1 100 83.1 100
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 2022
Fixed
Equity income Other
% % %
Passive Hedging 21 29 50
Dynamic Hedging 90 - 10
Multi-product - - 100
Forex
Approximately 80% 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 $6.1 billion in the period and changes to mandate underlying asset
values decreased AUME by $4.8 billion.
Financial review
The financial benefits arising from the change in strategy at the start of
FY-21 are now significantly more evident compared to the same period last
year. Material increases in revenue linked to aggregate AUME net inflows of
$11 billion over the last six quarters, plus the impact of the return of
performance fees, have outweighed the rise in costs linked to the continued
investment in technology and resources, plus increases due to inflationary
pressures. Consequently, the Group is reporting material increases in revenue
and operating profit for the first half year (H1-23) when compared to both the
first and second halves of FY-22.
Overview
Total revenue for the period increased by 35% to £22.1 million, including
£2.8 million of performance fees. The increase in operating profit to £7.5
million represents an increase of 46% over the prior year equivalent (H1-22:
£5.2 million) and 32% over the second half of last year (H2-22: £5.6
million).
Operating expenses, excluding variable remuneration, increased by 36% to
£10.8 million (H1-22: £7.9 million) representing an increase of 7% over the
second half of last year (H2-22: £10.1 million). Variable remuneration
increased by 36% to £3.8 million (H1-22: £2.8 million). The Group's
operating profit margin increased to 34% (H1-22: 32% and FY-22: 31%) with
profit before tax for the half year increasing by 46% to £7.5 million (H1-22:
£5.2 million and H2-22: £5.7 million).
Revenue
Total revenue of £22.1 million represents a 35% increase from H1-22 (£16.3
million) and by 17% compared to the second half of last year (H2-22: £18.8
million), broadly reflecting both the full impact of higher AUME at the start
of the period plus the net inflows over the period more than offsetting the
impact of decreases in AUME related to market movements over the period.
Performance fees of £2.8 million were earned in the period compared to £0.5
million for FY-22, reflecting increased opportunities seen in our Passive
Hedging mandates including tenor management, to take advantage of lower costs
for our clients linked to continuing interest rate differentials.
Passive Hedging management fees of £6.3 million were £0.5 million higher
than the equivalent period last year (H1-22: £5.8 million) and £0.3 million
higher compared to the second half of last year (H2-22: £6.0 million), linked
to the net inflows seen over the final quarter of FY-22 ($1.3 billion) and net
inflows of $7.2 billion partially offset by negative market movements of
$2.5 billion in the period.
Dynamic Hedging management fees increased by 21% to £5.8 million compared to
the same period last year and by £0.6 million versus H2-22 (£5.2 million),
predominantly driven by the full impact of net inflows of $1.4 billion in
FY-22.
Currency for Return management fees of £3.6 million increased by 71% (£1.5
million) compared to H1-22 (H1-22: £2.1 million) and were £0.1 million
higher than H2-22, predominantly due to the full impact of inflows of $1.2
billion in FY-22 into the EM Sustainable Finance Fund which attracts a higher
marginal fee rate.
Management fees of £3.3 million from the Multi-product category are £0.1
million lower than the same period last year (H1-22: £3.4 million) and
broadly in line with the second half of last year (H2-22: £3.4 million).
Currency services income of £0.3 million is £0.1 million higher than the
same period last year (H1-22: £0.2 million) and in line with the second half
of FY-22.
Revenue analysis (£m)
Six months Six months Year
ended ended ended
30 Sep 22 30 Sep 21 31 Mar 22
Management fees
Passive Hedging 6.3 5.8 11.8
Dynamic Hedging 5.8 4.8 10.0
Currency for Return 3.6 2.1 5.5
Multi-product 3.3 3.4 6.8
Total management fees 19.0 16.1 34.1
Performance fees 2.8 - 0.5
Other investment services income 0.3 0.2 0.5
Total revenue 22.1 16.3 35.1
Other investment services income consists of fees from ancillary investment
management services.
Expenditure
Expenditure analysis (£m)
Six months Six months Year
ended ended ended
30 Sep 22 30 Sep 21 31 Mar 22
Personnel costs 6.3 5.0 10.8
Non-personnel costs 4.5 2.9 7.2
Administrative expenditure excluding Group Bonus scheme 10.8 7.9 18.0
Group Bonus 3.8 2.8 5.7
Total administrative expenditure 14.6 10.7 23.7
Other income and expenditure - 0.3 0.4
Total expenditure 14.6 11.0 24.1
Our strategy is focused on growth through modernisation and diversification
and we continue to invest in technology and systems to enhance our offerings
and operational efficiency, and to plan for succession.
Total administrative expenditure (excluding Group Bonus scheme) of £10.8
million for the period represents an increase of 36% (H1-22: £7.9 million)
compared with the equivalent prior year period, and an increase of 7% versus
the second half of last year (H2-22: £10.1 million).
Personnel costs of £6.3 million (excluding Bonus) increased by 26% versus the
same period in the prior year (H1-22: £5.0 million) and increased by 9%
compared to the second half of last year (H2-22: £5.8 million). The increases
reflect further investment made in acquiring a more diversified range of skill
sets required to manage new technology and products, plus internal promotions
and reorganisations in line with our succession plans. Costs have also been
impacted by a higher inflationary environment which we expect to continue into
the second half of the current financial year (H2-23).
In line with our investment in additional resources explained above, as
expected our non-personnel costs for the period have also increased. Total
non-personnel costs of £4.5 million for the period represent an increase of
55% over the same period last year (H1-22: £2.9 million) and by 5% versus the
second half of FY-22 (H2-22: £4.3 million). These reflect the increased
investment in the provision of external technical expertise and consultancy
linked to the modernisation of our systems and technology.
Group Bonus Scheme
The cost of the Bonus Scheme was £3.8 million for the period, increasing in
line with operating profit. The cost is calculated as 33% (H1-22: 35% and
FY-22: 34%) of operating profit, which is within the previously established
range of 25% to 35% of pre-Bonus operating profit.
Cash flow
The Group generated £6.8 million of cash from operating activities before tax
during the period (H1-22: £6.3 million). Taxation paid during the period
increased to £1.0 million compared to £0.3 million for the same period last
year.
During the period an investment of £1.7 million in impact bonds matured and
£1.3 million was reinvested before the period end.
The Group paid dividends totalling £5.2 million in the period (H1-22: £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 policies targeted at sustained
and progressive dividend growth, the Group will pay an interim dividend of
2.05 pence per share in respect of the six-month period, equating to a
distribution of approximately £4.0 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 is cash-generative with capital and dividend
policies aimed at ensuring continued balance sheet strength to support future
growth. Shareholders' funds were £28.0 million at 30 September 2022
(H1-22: £25.2 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 2022.
These risks are:
· strategic - principally concentration risk and competitive threats,
but also risk of failure to deliver strategy, regulatory trends and exogenous
threats (the greatest of which being the global inflationary environment);
· operational and systems - primarily trade configuration and
execution, as well as information security and cyber risks;
· investment risk - we naturally embrace the risk that our products
underperform, while market liquidity is a risk we continually review; and
· people - key person and succession, and talent acquisition and
retention.
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 UK-adopted 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 2022 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
https://recordfg.com/team-member-groups/record-plc-board/
Neil Record
Chairman
Steve Cullen
Chief Financial Officer
28 November 2022
Independent review report to Record plc
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 2022 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.
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 2022 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.
Basis for conclusion
We conducted our review in accordance with the International Standard on
Review Engagements (UK) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410").
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.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance
with ISRE (UK) 2410, however future events or conditions may cause the Group
to cease to continue as a going concern.
Responsibilities of 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.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to
liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our conclusions
relating to going concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of 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, UK
28 November 2022
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 2022
Unaudited Unaudited
Six months Six months Audited
ended ended Year
30 Sep 22 30 Sep 21 ended
£'000 £'000 31 Mar 22
Note £'000 £'000 £'000
Revenue 3 22,059 16,333 35,152
Cost of sales (3) (206) (219)
Gross profit 22,056 16,127 34,933
Administrative expenses (14,561) (10,713) (23,726)
Other income or expense 21 (264) (372)
Operating profit 7,516 5,150 10,835
Finance income 61 21 44
Finance expense (33) (17) (23)
Profit before tax 7,544 5,154 10,856
Taxation (1,334) (1,156) (2,225)
Profit after tax 6,210 3,998 8,631
Total comprehensive income for the period 6,210 3,998 8,631
Profit and total comprehensive income for the period attributable to
Owners of the parent 6,210 3,998 8,631
6,210 3,998 8,631
Earnings per share for the period (expressed in pence per share)
Basic earnings per share 4 3.27p 2.08p 4.52p
Diluted earnings per share 4 3.16p 2.01p 4.37p
The notes are an integral part of these consolidated financial statements.
Consolidated statement of financial position
As at 30 September 2022
Unaudited Unaudited Audited
As at As at As at
30 Sep 22 30 Sep 21 31 Mar 22
Note £'000 £'000 £'000
Non-current assets
Intangible assets 1,036 318 562
Right‑of‑use assets 1,155 440 1,421
Property, plant and equipment 380 510 401
Investments 6 3,606 3,178 3,447
Deferred tax assets 231 508 253
Total non-current assets 6,408 4,954 6,084
Current assets
Trade and other receivables 12,207 8,794 9,883
Derivative financial assets 8 11 - -
Money market instruments with maturities > 3 months 7 - 5,875 13,913
Cash and cash equivalents 7 17,714 11,408 3,345
Total current assets 29,932 26,077 27,141
Total assets 36,340 31,031 33,225
Current liabilities
Trade and other payables (5,512) (3,919) (4,721)
Corporation tax liabilities (1,252) (959) (924)
Provisions - (200) (75)
Lease liabilities (279) (372) (366)
Derivative financial liabilities 8 (381) (270) (124)
Total current liabilities (7,424) (5,720) (6,210)
Non-current liabilities
Deferred tax liabilities - (77) -
Provisions (122) - (125)
Lease liabilities (838) - (960)
Total non-current liabilities (960) (77) (1,085)
Total net assets 27,956 25,234 25,930
Equity
Issued share capital 9 50 50 50
Share premium account 1,809 1,809 1,809
Capital redemption reserve 26 26 26
Retained earnings 26,071 23,349 24,045
Equity attributable to owners of the parent 27,956 25,234 25,930
Total equity 27,956 25,234 25,930
Approved by the Board on 28 November 2022 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 2022
Called-up Share Capital
share premium redemption Retained Total
capital account reserve earnings equity
Unaudited Note £'000 £'000 £'000 £'000 £'000
As at 1 April 2021 50 2,418 26 24,305 26,799
Restatement of release of shares held by EBT 12 - (609) - 609 -
Restated balance as at 1 April 2021 50 1,809 26 24,914 26,799
Profit and total comprehensive income for the period - - - 3,998 3,998
Dividends paid 5 - - - (3,089) (3,089)
Own shares acquired by EBT - - - (3,828) (3,828)
Release of shares held by EBT - - - 1,251 1,251
Share-based payment reserve movement - - - 103 103
Transactions with shareholders - - - (5,563) (5,563)
As at 30 September 2021 50 1,809 26 23,349 25,234
Profit and total comprehensive income for the period - - - 4,633 4,633
Dividends paid 5 - - - (3,423) (3,423)
Own shares acquired by EBT - - - (1,979) (1,979)
Release of shares held by EBT - - - 1,827 1,827
Share-based payment reserve movement - - - (362) (362)
Transactions with shareholders - - - (3,937) (3,937)
As at 31 March 2022 50 1,809 26 24,045 25,930
Profit and total comprehensive income for the period - - - 6,210 6,210
Dividends paid 5 - - - (5,169) (5,169)
Own shares acquired by EBT - - - - -
Release of shares held by EBT - - - 456 456
Share-based payment reserve movement - - - 529 529
Transactions with shareholders - - - (4,184) (4,184)
As at 30 September 2022 50 1,809 26 26,071 27,956
The notes are an integral part of these consolidated financial statements.
Consolidated statement of cash flows
Six months ended 30 September 2022
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sep 22 30 Sep 21 31 Mar 22
Note £'000 £'000 £'000
Profit after tax 6,210 3,998 8,631
Adjustments for non-cash movements
Depreciation of right-of-use assets 230 245 489
Depreciation of property, plant and equipment 170 175 357
Amortisation of intangible assets 75 102 192
Loss on asset disposals 12 - -
Share-based payments 360 155 559
Decrease in other non-cash movements 98 806 877
Finance income (61) (21) (44)
Finance expense 33 17 23
Tax expense 1,334 1,156 2,225
Change in working capital
(Increase) in receivables (2,324) (788) (1,877)
Increase on payables 752 494 1,296
(Decrease) in provisions (78) - -
Net cash inflow from operating activities 6,811 6,339 12,728
Corporation tax paid (984) (303) (1,373)
Net cash inflow from operating activities 5,827 6,036 11,355
Purchase of intangible software (550) - (334)
Purchase of property, plant and equipment (160) (2) (75)
Purchase of investments (1,276) (782) (1,773)
Payment to seed fund holders - (1,808) -
Sale of investments 881 - -
Sale/(purchase) of money market instruments with maturity > 3 months 13,914 7,056 (983)
Redemption of bonds 859 724 1,462
Interest received 61 21 44
Net cash inflow/(outflow) from investing activities 13,729 5,209 (3,467)
Cash flow from financing activities
Lease repayments (174) (267) (540)
Lease interest payments (34) (11) (17)
Purchase of own shares - (3,355) (4,462)
Dividends paid to equity shareholders 5 (5,169) (3,089) (6,512)
Cash outflow from financing activities (5,377) (6,722) (11,531)
Net increase/(decrease) in cash and cash equivalents in the period 14,179 4,523 (3,643)
Effect of exchange rate changes 190 38 141
Cash and cash equivalents at the beginning of the period 3,345 6,847 6,847
Cash and cash equivalents at the end of the period 17,714 11,408 3,345
Closing cash and cash equivalents consists of:
Cash 7 17,714 4,576 3,345
Cash equivalents 7 - 6,832 -
Cash and cash equivalents 7 17,714 11,408 3,345
The notes are an integral part of these consolidated financial statements.
Notes to the consolidated financial statements for the six months ended 30
September 2022
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 UK-adopted
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 2022 were
prepared in accordance with UK-adopted 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 2022 have been applied in the preparation of the 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 2022 which have a material impact on the Group or any
company within the Group.
Impact of the global macro environment during the period
The Market and Operating review sections of this Interim Report provide
information as to the broader effects seen during the period from the
Russia/Ukraine conflict. The current global macroeconomic environment
continues to provide both challenge and opportunity for the Group: challenge
in the form of managing the risk of the increased cost of doing business
linked to a high inflationary environment (in the form of employee, energy and
supply-chain costs), and opportunity, for example in the form of increases
in interest rate differentials and clients seeking yield-enhancing strategies.
Our focus continues on making the most of such opportunities whilst
managing the balance between careful cost control whilst ensuring
the availability of sufficient and liquid resources to support the growth
trajectory of the Group.
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 potential macroeconomic volatility, rising inflation and
recession. Severe scenarios considered by the Board included the impact of
inflation rising to 20% and market movements leading to a reduction in asset
values by 20%.
The projections demonstrated that excess capital would remain in the Group
under the scenarios, and there is cash to run the business in the going
concern period. As a result of the above assessment, the Directors are
satisfied that the Company and the Group have adequate resources with which to
continue to operate for the foreseeable future. In arriving at this
conclusion, the Directors have considered in detail the impact of the war in
Ukraine and the current high inflationary environment on the Group, the market
it operates in and its stakeholders. For this reason the financial statements
have been prepared on the going concern basis.
Consolidation
The accounting policies adopted in these interim financial statements are
identical to those adopted in the Group's most recent annual financial
statements for the year ended 31 March 2022.
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 2022.
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 the 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).
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 2022.
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 22 30 Sep 21 31 Mar 22
Revenue by product type £'000 £'000 £'000
Management fees
Passive Hedging 6,328 5,802 11,768
Dynamic Hedging 5,780 4,783 10,020
Currency for Return 3,544 2,077 5,513
Multi-product 3,308 3,446 6,782
Total management fee income 18,960 16,108 34,083
Performance fee income 2,833 - 499
Other investment services income 266 225 570
Total revenue 22,059 16,333 35,152
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 22 30 Sep 21 31 Mar 22
Revenue by geographical region £'000 £'000 £'000
UK 1,237 1,158 2,775
Europe (excluding UK and Switzerland) 4,764 4,740 6,926
US 7,070 5,437 13,049
Switzerland 8,127 4,401 10,877
Other 861 597 1,525
Total revenue 22,059 16,333 35,152
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 22 30 Sep 21 31 Mar 22
£'000 £'000 £'000
Weighted average number of shares used in calculation 189,813,531 192,250,212 191,068,307
Effect of potential dilutive ordinary shares - share options 6,615,565 7,075,489 6,230,794
Weighted average number of shares used in calculation 196,429,096 199,325,701 197,299,101
Basic earnings per share 3.27p 2.08p 4.52p
Diluted earnings per share 3.16p 2.01p 4.37p
The potential dilutive shares relate to the share options, Joint Share
Ownership Plan ("JSOP") and Long Term Incentive Plan ("LTIP") awards granted
in respect of the Group's Share Scheme. At the beginning of the period there
were 13,513,045 Group Share Scheme share awards outstanding. During the
six-month period 2,985,000 share options and 2,890,000 LTIP awards were
granted. During the period 1,586,586 share options were exercised and 601,875
JSOP awards vested. No JSOP or LTIP awards lapsed in the period. 330,832 share
options lapsed in the period.
As at 30 September 2022, there were 12,673,127 share options in place,
1,305,625 JSOP and 2,890,000 LTIP awards.
5. Dividends
The dividends paid during the six months ended 30 September 2022 totalled
£5,169,285. The total dividend paid was 2.72 pence per share, being a final
ordinary dividend in respect of the year ended 31 March 2022 of 1.80 pence per
share and a special dividend of 0.92 pence per share. An interim dividend of
1.80 pence per share was paid in the six months ended 31 March 2022, thus the
full ordinary dividend in respect of the year ended 31 March 2022 was 3.60
pence per share.
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 interim dividend declared in respect of the six months ended 30 September
2022 is 2.05 pence per share.
6. Accounting for investments
All investments are measured at fair value through profit or loss.
Investments
As at As at As at
30 Sep 22 30 Sep 21 31 Mar 22
£'000 £'000 £'000
Impact bonds 1,614 2,234 2,177
Investment in funds 1,782 944 1,070
Other investments 210 - 200
Investments 3,606 3,178 3,447
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 22 30 Sep 21 31 Mar 22
Assets managed as cash £'000 £'000 £'000
Bank deposits with maturities > 3 months - 5,875 13,913
Money market instruments with maturities > 3 months - 5,875 13,913
Cash 8,214 4,576 3,345
Bank deposits with maturities <= 3 months 9,500 6,832 -
Cash and cash equivalents 17,714 11,408 3,345
Total assets managed as cash 17,714 17,283 17,258
8. Fair value measurement
The following table presents financial assets and liabilities measured at fair
value in the consolidated statement of financial position in accordance with
the fair value hierarchy based on the significance of inputs used in measuring
their fair value. The hierarchy has the following levels:
· Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities;
· Level 2: inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
· Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is
determined based on the lowest level of input to the fair value measurement.
The financial assets and liabilities measured at fair value in the statement
of financial position are grouped into the fair value hierarchy as follows:
Total Level 1 Level 2 Level 3
As at 30 September 2022 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Impact bonds 1,614 1,614 - -
Investment in funds 1,782 1,146 - 636
Other securities 210 - - 210
Foreign exchange contracts to hedge non-sterling assets 11 - 11 -
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts held to hedge non-sterling-based assets (297) - (297) -
Forward foreign exchange contracts used for hedging (84) - (84) -
Total 3,236 2,760 (370) 846
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 31 March 2022 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Impact bonds 2,177 2,177 - -
Investment in funds 1,070 944 - 126
Other investments 200 - - 200
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts held to hedge non-sterling assets (15) - (15) -
Other investments (110) - (110) -
Total 3,322 3,121 (125) 326
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 and JSOP is
established using a Black-Scholes model. LTIP options are valued using a
bi-nominal 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 22
30 Sep 21
31 Mar 22
£'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 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
Net change in holding of own shares by EBT in period 229,597
Record plc shares held by EBT as at 31 March 2022 9,632,031
Net change in holding of own shares by EBT in period (1,495,441)
Record plc shares held by EBT as at 30 September 2022 8,136,590
The EBT holds shares in Record plc which are used to meet the Group's
obligations to employees under the Group Bonus 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 and the EBT. There has been
no change in related parties from those disclosed in the Annual Report 2022.
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 22 30 Sep 21 31 Mar 22
£'000 £'000 £'000
Short-term employee benefits 5,061 3,825 8,457
Post-employment benefits 189 156 330
Share-based payments 1,632 926 2,467
6,882 4,907 11,254
Compensation to key management personnel has increased in line with the
profitability of the Group. It includes variable remuneration paid through the
Group Bonus Scheme as well as inflationary increases and promotions. More
detail of the Group's financial performance is provided in the Financial
review section.
The dividends paid to key management personnel in the six months ended 30
September 2022 totalled £2,278,904 (six months ended 30 September 2021:
£1,434,256; year ended 31 March 2022: £3,056,662).
11. Post reporting date events
No adjusting or significant non-adjusting events have occurred between the
reporting date and the date of approval.
12. Restatement of the share premium account and retained earnings
Gains prior to 31 March 2022 on the release of shares from the Employee
Benefit Trust have been reclassified from share premium to retained earnings
as there was no issue of new shares. The prior cumulative movements to 31
March 2021 of £609,000 have been reclassified to retained earnings. Movements
for the six months ended 30 September 2021 and 31 March 2022, of £590,000
and £230,000 respectively, have also been reclassified as retained earnings.
The restatement does not impact the current or previous years' profit or
loss.
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.recordfg.com
Dates for 2022 interim dividend
Ex‑dividend date 8 December 2022
Record date 9 December 2022
Interim dividend payment date 30 December 2022
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.
ends
1 Record manages only the impact of foreign exchange and not the underlying
assets on its currency and derivatives business, therefore its "assets under
management" ("AUM") are notional rather than real. To distinguish this from
the AUM of conventional asset managers, Record used the concept of Assets
Under Management Equivalents ("AUME").
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