TIDMREC
RNS Number : 0326C
Record PLC
13 June 2019
Record plc
13 June 2019
FINAL RESULTS ANNOUNCEMENT FOR THE YEARED 31 MARCH 2019
Record plc, the specialist currency manager, today announces its
audited results for the year ended 31 March 2019, reporting growth
in revenue, profit and earnings for the year.
Financial headlines:
-- Revenue growth of 5% to GBP25.0m (2018: GBP23.8m)
-- Growth in Profit Before Tax (PBT) of 9% to GBP8.0m (2018: GBP7.3m)
-- Operating profit margin increased to 32% (2018: 31%)
-- AUME(1) $57.3bn at 31 March 2019 (down 8% for the year)
-- AUME GBP44.0bn at 31 March 2019 (down 1% for the year)
-- Robust financial position with increased net assets of
GBP27.4m at 31 March 2019 (2018: GBP26.6m)
-- Basic EPS increased by 8% to 3.27p per share (2018: 3.03p)
-- Proposed final ordinary dividend of 1.15p per share; total
ordinary dividend of 2.30p per share (2018: 2.30p) for the year
-- Increase of 38% in special dividend for the year to 0.69p per share (2018: 0.50p)
Key developments:
-- Economic, political and market environments provide
opportunities to engage with current and potential clients across a
broad spectrum of products
-- Innovation continues through responding to client demand,
market opportunities and new technologies
-- Development of currency-based ESG factors and application to strategies
-- Expansion of Record's North American office through the
strengthening of the client and research teams based in New
York
-- Performance fees for the year of GBP2.3 million
-- Continued focus on controlling costs and increasing
productivity to protect operating margins
(1.) As a currency manager Record manages only the impact of
foreign exchange and not the underlying assets, therefore its
"assets under management" are notional rather than tangible. 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.
Commenting on the results, Neil Record, Chairman of Record plc,
said:
"We are pleased that our continued focus on product innovation
and enhancement, coupled with flexibility in response to client
demand, has resulted in growth in Group revenue, profit and
earnings for the year.
"The landscape continues to be one of uncertainty linked to
political issues around the world. The lack of clarity over the
eventual outcome of the UK's departure from the EU continues,
alongside an escalation of international trade disputes and
continued Eurozone tensions give rise to concerns over the outlook
for the global economy.
"This backdrop has proved useful in stimulating interest from
current and potential clients for high quality and bespoke currency
management solutions. Record is well placed to respond to such
demand, given our diverse suite of currency services and wide
spread of business development expertise in our core markets. We
have widened our reach through growing our presence and offices in
the UK, Switzerland and the US over recent years.
"Advances in technology are changing the way in which financial
markets operate. Such changes provide opportunities to ensure we
continue to provide the highest level of client service, whilst
improving productivity and efficiency. We cannot afford to neglect
these advancements and will continue to monitor all such
opportunities in terms of the real benefits offered, both for our
clients and for the business in maintaining its competitive
advantages.
"We continue to invest in our talented people without whom we
would not succeed in delivering the highest possible levels of
innovation and service to our clients, nor in growing value for our
shareholders over the longer term."
Analyst briefing
There will be a presentation for analysts at 9.30am on Thursday
13 June 2019 at Cenkos plc offices: 6-8 Tokenhouse Yard, London,
EC2R 7AS. 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
Neil Record - Chairman
James Wood-Collins - Chief
Executive Officer
Steve Cullen - Chief Financial
Officer +44 (0) 1753 852222
MHP Communications
Andrew Fleming
Ollie Hoare
Robert Collett-Creedy +44 (0) 20 3128 8100
Consolidated statement of comprehensive income
Year ended 31 March
2019 2018
Note GBP'000 GBP'000
----- --------- ---------
Revenue 4 24,973 23,834
Cost of sales (385) (311)
----- --------- ---------
Gross profit 24,588 23,523
Administrative expenses (16,704) (16,424)
Other income or expense (8) 173
----- --------- ---------
Operating profit 5 7,876 7,272
Finance income 135 66
Finance expense (22) (10)
----- --------- ---------
Profit before tax 7,989 7,328
Taxation 7 (1,559) (1,182)
----- --------- ---------
Profit after tax and total comprehensive
income for the year 6,430 6,146
Profit and total comprehensive
income for the year attributable
to
Owners of the parent 6,430 6,146
Non-controlling interests - -
Earnings per share for profit attributable
to the equity holders of the Group
during the year
Basic earnings per share 8 3.27p 3.03p
Diluted earnings per share 8 3.25p 2.98p
----- --------- ---------
Consolidated statement of financial position
As at 31 March
2019 2018
Note GBP'000 GBP'000
----- -------- --------
Non--current assets
Intangible assets 12 288 228
Property, plant and equipment 11 761 910
Investments 13 1,112 1,115
Deferred tax assets 14 - 86
----- -------- --------
Total non--current assets 2,161 2,339
----- -------- --------
Current assets
Trade and other receivables 15 7,562 6,775
Derivative financial assets 16 164 266
Money market instruments with maturities > 3 months 17 10,735 10,198
Cash and cash equivalents 17 12,966 12,498
----- -------- --------
Total current assets 31,427 29,737
----- -------- --------
Total assets 33,588 32,076
----- -------- --------
Current liabilities
Trade and other payables 18 (2,736) (2,630)
Corporation tax liabilities 18 (692) (399)
Financial liabilities 19 (2,621) (2,467)
Derivative financial liabilities 16 (109) (29)
Total current liabilities (6,158) (5,525)
Deferred tax liabilities 14 (29) -
----- -------- --------
Total net assets 27,401 26,551
----- -------- --------
Equity
Issued share capital 20 50 50
Share premium account 2,243 2,237
Capital redemption reserve 26 26
Retained earnings 25,022 24,238
----- -------- --------
Equity attributable to owners of the parent 27,341 26,551
----- -------- --------
Non-controlling interests 60 -
----- -------- --------
Total equity 27,401 26,551
----- -------- --------
Chairman's statement
"The environment in which Record operates challenges us to
continue to enhance existing products and services, and also to
innovate. Record has the people and resources to do so."
We have continued to see political and economic uncertainty
affecting the financial markets and by extension the asset
management industry and the currency markets in which we
operate.
Technology continues to disrupt the fundamental ways in which
financial markets operate. It brings challenges, in terms of
competition and pressure on margins, as well as opportunities in
terms of improvements to operational efficiency and price
transparency, and to the overall client experience. During the
year, we have continued to focus on and invest in our client
relationships, our ability to innovate, our technology and our
people.
My statement last year highlighted the change in mix of fees for
some products, which includes some enhanced Passive Hedging
mandates and some return-seeking (Multi-Strategy) mandates, from
management fee only to a reduced management fee plus a performance
fee element. During the year this has achieved outperformance in
terms of total fees earned when compared to what would have been
earned on a management fee only basis.
Notwithstanding net outflows of $4.5 billion, predominantly in
the second half of the year, Record generated strong results with
revenues of GBP25.0 million (2018: GBP23.8 million), operating
profit of GBP7.9 million (2018: GBP7.3 million) and earnings per
share of 3.27 pence (2018: 3.03 pence).
Further information on AUME flows and financial results can be
found in the operating review section.
Group strategy
We believe that by delivering market-leading and innovative
products and the highest levels of service to our clients, we will
generate positive returns and create shareholder value over the
long term.
Our strategy focuses on three core areas for delivery: our
client experience, innovation and talent development. Further
detail on the strategic objectives and how we have performed
against these can be found in Key Performance indicators
section.
Capital and dividend
Our capital policy aims to ensure retained capital broadly
equivalent to one year's worth of future estimated overheads
(excluding variable remuneration), in addition to capital assessed
as required for regulatory purposes, for working capital purposes
and for investing in new opportunities for the business.
Our dividend policy targets a level of dividend which is at
least covered by earnings and which allows for sustainable dividend
growth in line with the trend in profitability. It is also the
Board's intention, subject to financial performance and market
conditions at the time, to return excess earnings over ordinary
dividends for the financial year adjusted for changes in capital
requirements, to shareholders, normally in the form of special
dividends.
The Board is recommending a final ordinary dividend of 1.15
pence per share (2018: 1.15 pence), with the full year ordinary
dividend at 2.30 pence, which is equivalent to the full year
ordinary dividend in respect of the prior year (2018: 2.30 pence).
The interim dividend of 1.15 pence per share was paid on 22
December 2018, and the final ordinary dividend of 1.15 pence per
share will be paid on 31 July 2019 to shareholders on the register
at 28 June 2019, subject to shareholders' approval.
The Group has assessed its regulatory capital requirement
alongside its anticipated costs for the current financial year,
which has resulted in a marginal increase to capital required in
line with its policy. The net increase in capital required is
equivalent to 0.28 pence per share and consequently the Board is
announcing a special dividend of 0.69 pence per share to be paid
simultaneously with the final ordinary dividend. Total dividends
for the year are 2.99 pence per share (2018: 2.80 pence) compared
to earnings per share of 3.27 pence per share (2018: 3.03
pence).
The Board will continue to consider ordinary dividends and other
distributions to shareholders on a "total distribution" basis. The
total distribution for any year will be at least covered by
earnings, and will always be subject to the financial performance
of the business, the market conditions at the time and to any
further capital assessed as required under the policy described
above.
The Board
David Morrison, the Senior Independent Director, resigned from
the Board with effect from 30 September 2018 having served his full
nine-year term and hence no longer being deemed independent. On
behalf of my colleagues I would like to thank David for his
commitment and guidance to Record over his term, and to wish him
well for the future.
With effect from 1 October 2018, Jane Tufnell was appointed
Senior Independent Director and continues to chair the Nomination
Committee, and Tim Edwards was appointed as chair of the
Remuneration Committee. The Audit and Risk Committee continues to
be chaired by Rosemary Hilary.
Outlook
Financial markets, and by extension the foreign exchange
markets, will continue to be subject to ongoing disruption in such
various forms as political instability, trade tensions, regulatory
changes, technological disruption and more fundamentally changes in
the way our markets operate.
Whilst such an environment brings a high degree of challenge, it
also provides opportunities to those market participants having the
capability and flexibility to react, including the ability to
innovate and to invest in order to meet the specific demands of
clients and potential clients. We have already shown that we have
the people and resources to meet these challenges head on, and I
remain confident that we will continue to do so going forward.
On behalf of the Board, I would like to thank everyone at Record
for their hard work and commitment during the year, and I look
forward to the challenges and further opportunities in the year
ahead.
Neil Record
Chairman
12 June 2019
Chief Executive Officer's statement
"We are increasingly focused on being flexible and responsive to
client demand in developing new products and strategies"
In the year ended 31 March 2019, anticipated reductions in
management fees were more than offset by performance fees,
resulting in 5% growth in revenue. Some benefits of operating
leverage brought about a modest increase in operating margin to
32%.
Looking forward, Record's management is determined to impose
continued cost discipline, so that investment in new products and
services can be maintained without sacrificing profitability. We
are increasingly focused on being flexible and responsive to client
demand in developing these new products and strategies.
Market overview
The year to 31 March 2019 saw a moderation of economic activity
in developed markets economies with the exception of the US. With
this came diminished expectations for divergence in interest rate
cycles. Political risks re-emerged during the year with the UK
approaching its EU exit date, the US and China trade dispute, and
renewed hostilities between the Italian government and EU
officials. Emerging Market currencies came under pressure
temporarily, but the Turkish lira experienced more severe currency
depreciation during the summer.
Further information on foreign exchange markets over the period
is provided in the Market review section.
Investment performance
Record's Dynamic Hedging product increased hedge ratios in line
with US dollar strength, and helped protect clients against
currency losses. Over the year, Record's enhanced Passive Hedging
service outperformed its relevant benchmark for most clients,
though the magnitude of outperformance was lower than the long-term
average. Record's Multi-Strategy mandates combining Carry, Emerging
Market, Momentum, Value and now Range Trading strategies delivered
negative performance over the period.
Product performance data is provided in the Operating review
section.
Asset flows and financial performance
AUME decreased by 8% in US dollar terms over the financial year
to $57.3 billion, and decreased by 1% in sterling terms to GBP44.0
billion. Net outflows of $4.5 billion in the year were largely
driven by Passive Hedging outflows of $4.6 billion, with net
inflows in Currency for Return balanced by net outflows in Dynamic
Hedging. Detailed analysis of AUME is provided in the Operating
review section.
The 5% total decline in management fees of GBP1.2 million was
more than offset by performance fees of GBP2.3 million, resulting
in an increase in revenue of 5% to GBP25.0 million. The Group's
operating margin improved from 31% to 32%, and profit before tax
increased by 9% to GBP8.0 million. Basic earnings per share of 3.27
pence represented an 8% increase on the prior financial year. The
Financial review gives additional commentary.
Strategic progress
Our strategic progress can be grouped under three headings.
Quality client experience - our commitment to deliver
best-in-class client experience is manifested through building and
maintaining close "trusted adviser" relationships, and continually
enhancing the products and services we offer these clients to meet
their needs. Continual enhancement of products and services is
demonstrated through the increased adoption of enhanced Passive
Hedging amongst our clients, and by the addition of a fifth strand,
Range Trading, to our Multi-Strategy product. The extension of our
relationship with WisdomTree to include a framework for hedging
emerging market currencies is a further example of this.
Our ability to build and maintain client relationships is
critically dependent on the individuals whose responsibility this
is, and to this end we are pleased to have increased the employees
based in our New York office covering North America, with two
transfers from Windsor and one local hire.
Innovation - innovation is demonstrated both in enhancing
existing products and services, and in developing new ones. Given
the bespoke nature of all of Record's segregated mandates, the
distinction between enhancing existing services and developing new
ones is blurred. In addition to the continued adoption of enhanced
Passive Hedging and the addition of Range Trading, we have
developed and seeded a strategy which incorporates Environmental,
Social and Governance ("ESG") factors into the Multi-Strategy
currency portfolio.
Our approach of encouraging innovative ideas from colleagues may
lead to opportunities which are best exploited outside of Record's
full ownership and control. One example spanning the financial year
end is Record's investment in a 40% shareholding in Trade Record
Ltd, a newly-formed company established to offer pay-to-enter
competitions in which subscribers trade virtual money across asset
classes.
Talent development - we have continued to pay close attention to
attracting, recruiting, retaining and developing high potential
talent across our business. We have insourced much of our
recruitment activity, with the twin objectives of identifying
better candidates earlier, and reducing costs.
We will be changing how we implement our Group Profit Share
scheme for the year ended 31 March 2020 so as to better balance
rewarding individual contribution as well as firm-wide performance.
As a result, there may be more variability in the current and
future financial periods in the total cost of the Group Profit
Share scheme within the established range of 25% to 35% of
operating profits.
Outlook
Record's Board and management firmly believe that almost all
investors worldwide are affected by currency market movements, and
that the unparalleled liquidity of the foreign exchange market
means that capacity and liquidity constraints are remote.
Furthermore, our depth of experience and robust operating model
means we are very well positioned to design and implement solutions
to investors' specific needs, whether risk management,
return-seeking, or both.
This combination of investor relevance, market depth and
expertise should mean that Record is well positioned to generate
significant growth for shareholders. The Board and management
recognise that while long-established products and services are key
to Record's profitability today, we cannot rely on these alone to
take full advantage of our growth opportunities. This, as well as
fee pressure endemic to investment management, lies behind our
focus on continually enhancing our clients' experience and
innovating new products and strategies. Achieving both of these in
turn is dependent on attracting and retaining highly-capable
colleagues.
It also continues to be imperative that we manage the business
in a financially-disciplined fashion, both with regard to
expenditure and balance sheet discipline. We will continue to
invest in opportunities that respond to client demand, and to
challenge ourselves and our colleagues to identify and pursue these
opportunities, while also seeking productivity enhancements in
established products.
James Wood-Collins
Chief Executive Officer
12 June 2019
Key Performance Indicators
Measuring our performance against our strategy
The Board and Executive Committee use both financial and
non-financial key performance indicators ("KPIs") to monitor the
performance of the Group. A five year history of these KPIs is
shown below.
KPIs FY-19 FY-18 FY-17 FY-16 FY-15
Client numbers
at 31 March 65 60 59 58 55
--------- --------- --------- --------- ---------
AUME at 31 March $57.3bn $62.2bn $58.2bn $52.9bn $54.7bn
- US dollars
--------- --------- --------- --------- ---------
Revenue(2) GBP25.0 GBP23.8 GBP23.0 GBP21.4 GBP20.8
million million million million million
--------- --------- --------- --------- ---------
Operating profit
margin(2) 32% 31% 34% 32% 35%
--------- --------- --------- --------- ---------
Basic earnings
per share ("EPS") 3.27 p 3.03 p 2.91 p 2.55 p 2.66 p
--------- --------- --------- --------- ---------
Dividend per share 2.30 p 2.00 p
- Ordinary 2.30 p 0.50 0.91
- Special 0.69 p p p 1.65 p 1.65 p
--------- --------- --------- --------- ---------
Average number
of employees 85 81 73 69 68
--------- --------- --------- --------- ---------
Staff retention
(employees retained
throughout the
year) 84% 93% 85% 88% 89%
--------- --------- --------- --------- ---------
Employees with
equity interest
at 31 March 70% 72% 68% 69% 76%
--------- --------- --------- --------- ---------
Client longevity
Length of continuous <=1 year >1year >3 years >6 years >10 years
service as at 31 and <=3 and <=6 and <=10
March 2019 years years years
Percentage of clients 20 22 18 18 22
--------- --------- --------- ---------- ----------
How we performed this year
-- Client numbers grew by 5 reaching 65 at the end of the year;
-- AUME decreased by 8% in US dollar terms and by 1% in sterling terms;
-- Revenue for the year increased by 5% to GBP25.0 million
including performance fees of GBP2.3 million;
-- Operating profit margin increased to 32% for the year;
-- Basic earnings per share increased by 8% due to increased
revenues and continued cost control;
-- The Ordinary dividend per share is unchanged on last year.
The special dividend per share has increased by 38% resulting in a
7% increase in total dividends to 2.99 pence per share;
-- The average number of employees has increased by 5%
reflecting the additional resource requirements over the last two
years to support product research, innovation and enhancement;
-- Record has sustained high levels of staff retention which is
consistent with its success in creating a working environment which
promotes staff development and wellbeing ;and
-- The percentage of employees aligned with Record's business
through equity ownership remains high at 70%.
(2.) Revenue and operating profit margin for the comparative
periods FY-15 to FY-17 have been restated to reflect a
re-presentation of items previously included under other income, as
first disclosed in the results for the six months ended 30
September 2017. As a result, operating profit and profit before tax
are now the same as the operating profit and profit before tax
previously disclosed as "underlying". Operating profit margin is an
alternative performance measure calculated by dividing operating
profit by revenue.
Business review
Market review
Political and economic uncertainty have continued to affect the
financial markets and by extension the asset management industry
and the currency markets in which we operate.
The year to 31 March 2019 saw a tempering of economic activity
in developed markets economies, with the exception of the US, where
growth was robust yet anticipated by policymakers to also moderate.
With this came diminished expectations for divergence in monetary
policy cycles. Political risks re-emerged during the year with the
UK approaching its EU exit date, the US and China trade dispute,
and renewed hostilities between the Italian government and EU
officials. Emerging Market currencies came under pressure
temporarily, but the Turkish lira experienced more severe currency
depreciation during the summer. In spite of these events, developed
market currency volatility remained low, but occasional large
intra-day exchange rate moves continued as a theme, driven by
recent regulatory and technological changes. These regulatory
constraints also continued to drive dislocations between FX
forwards and the money markets (FX basis).
Monetary policy and interest rates
Interest rates in developed markets remained low in relation to
historic norms, and initial expectations of further differentiation
in policy cycles faded towards the end of the year. In the US, the
Federal Reserve pushed ahead with additional interest rate hikes,
but paused at a lower level relative to past cycles due to growing
risks to its economic outlook. The US dollar appreciated on a
trade-weighted basis, with gains concentrated in the first three
months of the year. The Bank of England hiked its policy rate
pre-emptively amid rising domestic cost pressures, but did so
against a backdrop of political uncertainty and without conviction
over whether it will remain an appropriate stance. Ongoing Brexit
negotiations continued to cast a shadow over sterling, and
political news became the primary driver of the currency, which
fell versus the US dollar but rose marginally against a
trade-weighted basket of currencies, as the likelihood of a no-deal
Brexit was thought to have diminished.
Concerns over slowing growth and inflation were not confined to
the US, and as a result, monetary policy in the lower interest rate
economies of the Eurozone, Japan, and Switzerland, remained
exceptionally easy. The European Central Bank ("ECB") maintained
its stance of ultra-accommodative policy, though confirmed the end
of its Quantitative Easing programme. In contrast to the prior
year, economic activity suffered from a number of set-backs and the
creation of an anti-establishment government in Italy re-introduced
an aspect of political risk to the currency. The euro depreciated
versus the US dollar as it became apparent that the ECB would not
raise rates in late 2019. The Bank of Japan kept policy rates
unchanged, but announced it would allow ten-year yields to move
more freely around the zero per cent target. The Japanese yen saw
heightened volatility towards the end of the year as global equity
markets prices corrected. The Swiss National Bank continued to
pursue exceptionally low interest rates but compared to previous
years, appeared to apply only light-touch interventions to the
currency. The franc showed mixed performance, having declined
against the US dollar but rose on a trade-weighted basis, primarily
reflecting strength versus the euro.
Emerging Markets ("EM")
Emerging market currencies came under pressure during the first
half of the financial year, both versus the US dollar and versus a
basket of developed market currencies. Initial weakness was closely
linked to the US dollar's upward momentum, which exerted pressure
on the balance sheets of EM countries and drove capital outflows
both as domestic agents repaid US dollar denominated debt, and as
foreign investors weighed up the opportunity of investing abroad
versus at home. Broadly, EM central banks were prepared with
adequate levels of FX reserves and reacted by raising real interest
rates commensurately in order to lean against currency
weakness.
The largest depreciation by far was in the Turkish lira, where
worsening of diplomatic relations with the US, coupled with an
unorthodox approach to monetary policy sparked a currency crisis
and double-digit inflation trend. With already diminished
liquidity, this led to a significant depreciation of the currency
and the emergence of a large basis between currency-implied
interest rates and policy rates. In an unexpected act of
independence, the Central Bank of Turkey in September increased its
policy rate by 6.25% in an attempt to control inflation and arrest
the currency's decline. The economy underwent a rapid and painful
adjustment and the currency had recouped most of its losses by the
end of the financial year.
FX basis developments
Over the past few years, the historical relationship between the
interest rates observed in the money markets and those implied by
the FX forward market has weakened, largely as a consequence of
banking regulation, imbalances in the demand for hedging, and money
market reforms. This dislocation is known as the FX basis. The FX
basis typically imposes extra costs on hedgers from Switzerland,
Japan, and the Eurozone, while adding a benefit to hedgers from the
US and other higher-yielding countries.
Over the year, the basis has been less dominated by general
trends and more by currency-specific factors, leading to variation
between currency pairs. After starting the financial year at
elevated levels, the US dollar basis was generally stable over the
first six months of the year, before year end pressures
precipitated expansion and volatility of the FX basis in the second
half of the year.
Volatility, liquidity and market structure
During the financial year volatility in the FX market remained
low relative to history, despite ostensible risks stemming from
Brexit negotiations, Italian politics, and the threat of an
escalating trade war between the US and China. Although FX
volatility remained low, large intra-day exchange rate moves looked
to have become more commonplace, for example, the Japanese yen
"flash crash" in January saw the yen appreciate by over three per
cent in the space of eight minutes. This phenomenon of suppressed
volatility but large and abrupt price changes is thought to have
been exacerbated by recent changes in both technology and
regulation, which in turn have affected the traditional market
making function's ability to act as a "circuit breaker" during
bouts of volatility. From a regulatory perspective, post-financial
crisis changes to capital requirements have made banks less keen to
underwrite market risk and provide a market during periods of
financial stress.
Increasingly prevalent as alternative providers of liquidity are
algorithmic-based and high-frequency traders. These market
participants are thought to hold comparatively low levels of
inventory and are often governed by tighter capital at risk limits.
In effect, during periods of high volatility, algorithmic traders
are also less willing to warehouse the risk of large positions and
can withdraw liquidity from the market. As a result, a trend has
emerged of ample liquidity and well-functioning markets during low
volatility environments, versus shallow liquidity and large
intra-day price movements during more volatile periods. With more
constrained market making, large and price-insensitive orders (e.g.
via stop losses) look more likely to create ripples in the market -
especially during illiquid hours and days. This, in part, may also
have contributed towards the prevalence of range trading in FX
markets during the financial year.
Brexit
Record has been planning its response to Brexit since the June
2016 referendum, with a working group meeting regularly to review
workstreams relating to clients, colleagues and regulatory
permissions.
So-called "passporting" permissions under the Markets in
Financial Instruments Directive ("MiFID") have historically been
one of the main routes by which we can act for clients in the
European Union outside the UK (the "EU27"). Maintaining these
permissions in the event of a "hard Brexit" with no transition
period or other equivalence arrangements has been uppermost amongst
the Brexit-related challenges to our business model and
operations.
As discussed in last year's Annual Report, we had prepared a
contingency plan to allow us to maintain passporting permissions
through the establishment of an authorised subsidiary in Ireland.
In the first calendar quarter of 2018, consensus emerged between
the UK and the EU on the intention to implement a transition
period, during which UK companies could continue to access EU27
markets as if the UK was still a member of the EU. As a result, we
paused the implementation of our contingency plan, although we
recognised the risk that the transition period might not
materialise, including through Parliament not endorsing the
Withdrawal Agreement.
To address this risk we have developed further plans, including
a client-by-client assessment of the regulatory basis on which we
currently provide services to EU27 clients, and communication with
each such client. As a result of this, as well as industry-wide
measures such as the Memoranda of Understanding agreed between the
Financial Conduct Authority and EU regulators announced on 1
February 2019, at the time of writing we are confident we will be
able to continue to provide services to all current EU27 clients
post-Brexit, even in the event of a "hard Brexit" with no
transition period or other equivalence arrangements. This will be
subject to further assessment in the light of any regulatory
changes.
In such a scenario, we would be constrained in marketing our
products and services to new clients in certain EU27 countries,
although even this constraint is moderated by enabling legislation
in many such countries which would allow authorised UK firms to
continue to market to professional clients. In this scenario we
would quickly re-assess the costs and benefits of establishing an
authorised subsidiary within the EU27 countries, to eliminate any
such remaining constraints.
Although the main focus of our Brexit preparations has been on
these regulatory permissions, we have also considered other effects
on clients, and further consequences including the potential impact
on colleagues. None of these other effects or consequences is
expected to present a material challenge to our business model or
operations.
At the time of writing the UK Prime Minister, Theresa May, will
shortly be replaced, the Withdrawal Agreement has not been endorsed
by Parliament, and the Article 50 notice period has been extended
to 31 October 2019. Despite this uncertainty, and as explained
above, we expect to be able to continue to serve all our current
EU27 clients thereafter, irrespective of whether and how the UK
leaves the European Union.
Regulation
Record's main regulatory focus during the financial year was on
embedding regulatory practices following the introduction of MiFID
II and reviewing relevant policies and procedures as part of our
business-as-usual process. The European Market Infrastructure
Regulation ("EMIR") is undergoing changes which may affect the
reporting and other services that we provide for some of our
clients on a delegated basis. We have been assessing the impact of
these changes and communicating with the affected clients ahead of
the changes becoming effective.
The upcoming Senior Managers and Certification Regime expansion
to our sector comes into force in December 2019 and we have been
tracking and working on our project to ensure we have the required
structures, policies and procedures in place to meet the new
requirements.
Operating review
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
Over the past five years, Record has developed an enhanced
Passive Hedging service. This aims to reduce the cost of hedging by
introducing new flexibility into the implementation of currency
hedges, without changing the hedge ratio. While the strategy 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. Over the year, Record's enhanced Passive Hedging
service outperformed its relevant benchmark for most clients,
although the magnitude of outperformance was lower than the
long-term average.
Return for year Return since
to 31 March 2019 inception(3)
--------------------------------
Value added by enhanced Passive 0.05% 0.12% p.a.
Hedging programme relative
to a fixed-tenor benchmark
------------------ --------------
(3.) Since inception in October 2014.
Dynamic Hedging
The performance of our Dynamic Hedging product depends on how
the foreign currencies change in value relative to the base
currency of a client. During the year, US investors saw losses from
currency on international assets when valuing positions in US
dollars, as the US dollar appreciated against all G10 currencies.
Record's Dynamic Hedging product increased hedge ratios in line
with US dollar strength, and helped protect clients against
currency losses.
Currency for Return
Record had a number of Currency for Return products in the year.
The Forward Rate Bias ("FRB", also known as Carry) strategies and
Emerging Market strategy are founded on market risk premia and as
such perform more strongly in "risk on" environments. By contrast,
Momentum, Value and the newly added Range Trading strategies are
more behavioural in nature, and as a result are less
risk--sensitive. All five strategies can be combined to create the
Record Currency Multi--Strategy product.
FRB strategy
The Forward Rate Bias Index Fund saw positive returns which were
primarily driven by the relative strength of the higher-yielding US
dollar versus the lower yielding euro. Record remains committed to
our belief that over time currency, and in particular the Carry
strategy, can be a persistent and uncorrelated source of returns
for investors, and that the Carry strategy will continue to
generate long--term returns.
Emerging Market strategy
Record's Emerging Market Currency Fund generated modestly
negative returns after a volatile twelve months as emerging market
currencies generally depreciated against the basket of developed
market currencies. Returns in the Fund were mainly attributable to
the depreciation of the Turkish lira, and Brazilian real, and
Central Eastern European currencies.
Currency Multi-Strategy
Record's principal Currency for Return product during the year
was Currency Multi-Strategy. This combines a number of diversified
return streams. Record's Multi-Strategy mandates combining Carry,
Emerging Market, Momentum, Value and now Range Trading strategies
delivered negative overall performance over the period,
notwithstanding the diversification of performance returns between
the individual strategies.
Return for
12 months to 31 March Volatility since
2019 Return since inception inception
Fund name Scaling % % p.a. % p.a.
-------- -------------------------- ----------------------- --------------------------
FTSE FRB10 Index Fund(4) 1.8 4.20 % 1.77% 6.88%
Emerging Market Currency
Fund(5) 1 (0.31%) 1.29% 6.34%
Currency Multi-Strategy
Fund(6) 4.5-5 (3.90%) (3.20%) 9.30%
-------- -------------------------- ----------------------- --------------------------
(4.) FTSE FRB10 Index Fund return data is since inception in
December 2010, GBP base.
(5.) Record Currency - Emerging Market Currency Fund return data
is since inception in December 2010, GBP base.
(6.) Record Currency Multi-Strategy Fund return data is since
inception in February 2018, GBP base.
Return for
12 months to 31 March 2019 Return since inception Volatility since inception
Index/composite returns % % p.a. % p.a.
---------------------------- ----------------------- ---------------------------
FTSE Currency FRB10 GBP Excess
return(7) 2.10% 2.22% 4.53%
Record Multi--Strategy
composite(8) (1.20%) 1.28% 2.73%
---------------------------- ----------------------- ---------------------------
(7.) FTSE Currency FRB10 GBP Excess return data is since
December 1987, GBP base.
(8.) Record Multi-Strategy composite 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 maximum size of the aggregate 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 expressed in US dollar terms decreased by 8% during the
year ended 31 March 2019, finishing at $57.3 billion (2018: $62.2
billion). When expressed in sterling, AUME decreased marginally to
GBP44.0 billion (2018: GBP44.3 billion).
AUME development ($bn)
Opening AUME Net client Markets FX effects Closing AUME
at 1 April inflows and scaling at 31 March
2018 adjustment 2019
62.2 -4.5 +2.3 -2.7 57.3
----------- -------- ------------- -------------
AUME movements
The Group has seen total net outflows of $4.5 billion during the
year arising from inflows from both new and existing clients of
$10.0 billion offset by outflows of $14.5 billion.
Passive Hedging AUME fell by 9% to $48.2 billion at the end of
the year (2018: $53.0 billion), including net outflows of $4.6
billion related to previously announced terminations of three
commercial relationships representing eight client legal entities.
Other movements impacting Passive Hedging AUME included market
factors (+$2.5 billion) and movements in exchange rates (-$2.7
billion), which broadly offset each other.
Dynamic Hedging AUME ended the year at $3.1 billion (2018: $4.3
billion), a decrease from last year of $1.2 billion. Net outflows
of $0.7 billion included inflows of $0.4 billion in the first
quarter and outflows of $1.1 billion in the final quarter. As
separately reported in March 2019, Record undertook a series of
tactical changes in order to realise gains on the market valuation
of open positions on certain Dynamically Hedged mandates, thereby
reducing the year end AUME position for Dynamic Hedging by
approximately $1.1 billion. The impact of some or all of the
reduction in AUME may prove to be temporary, although any increase
or decrease will be dependent on future movements in underlying
assets and FX markets. Market movements had an impact of --$0.5
billion.
The Currency for Return product saw AUME inflows of $0.9 billion
over the year, represented by inflows of $0.6 billion from a new
Australian client in the first quarter, and a $0.3 billion inflow
from an existing client into a bespoke product during the third
quarter. External factors had a net impact of +$0.2 billion.
Currency for Return AUME concluded the year at $2.7 billion (2018:
$1.6 billion).
Multi-product AUME remained stable during the year, starting and
ending the year at $3.0 billion.
Market performance
Record's AUME is affected by movements in market levels because
substantially all the Passive and Dynamic Hedging, and some of the
Multi-product mandates, are linked to equity, fixed income and
other market levels. Market performance increased AUME by $2.3
billion in the year ended 31 March 2019 (2018: +$1.3 billion).
Further detail on the composition of assets underlying our
Hedging and Multi-product mandates is provided below to help
illustrate more clearly the impact of equity and fixed income
market movements on these mandate sizes.
AUME composition by underlying asset class as at 31 March
2019
Equity % Fixed income % Other %
Passive Hedging 27% 44% 29%
Dynamic Hedging 95% -% 5%
Multi-product -% -% 100%
--------- --------------- --------
Forex
Approximately 87% 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 denominated AUME in US
dollars. Foreign exchange movements decreased AUME by $2.7 billion
over the year. This movement does not have an equivalent impact on
the sterling value of fee income.
At 31 March 2019, the split of AUME by base currency was 13% in
sterling, 57% in Swiss francs, 11% in US dollars, 16% in euros and
3% in other currencies.
AUME composition by base currency
Base currency 31 March 2019 31 March 2018
Sterling GBP 5.7bn GBP 6.6bn
US dollar USD 6.3bn USD 6.9bn
Swiss franc CHF 32.5bn CHF 34.7bn
Euro EUR 8.3bn EUR 7.1bn
Australian dollar AUD 1.0bn -
Canadian dollar CAD 0.6bn CAD 0.5bn
Singapore dollar SGD 0.1bn SGD 0.1bn
Swedish krona SEK 3.7bn SEK 2.6bn
-------------- --------------
Product mix
AUME composition by product
31 March 2019 31 March 2018
US $bn % US $bn %
--------- ------- ---------------
Passive Hedging 48.2 84% 53.0 85%
Dynamic Hedging 3.1 5% 4.3 7%
Currency for
Return 2.7 5% 1.6 3%
Multi-product 3.0 5% 3.0 5%
Cash 0.3 1% 0.3 -%
--------- ----- ------- ---------------
Total 57.3 100% 62.2 100%
--------- ----- ------- ---------------
Aggregate Hedging AUME represented 90% of the total AUME, down
slightly on the prior year (2018: 92%). Currency for Return AUME
increased as a proportion of total AUME with inflows of +$0.9
billion, representing 5% of total AUME at year end (2018: 3%).
Multi-product AUME remained unchanged on last year.
Client numbers
Client numbers saw a net increase of 5, ending the year at 65
(2018: 60). The net increase of five clients comprised 13 new
clients (representing 7 new commercial relationships) less eight
clients whose mandates were terminated, the latter representing
three commercial relationships.
Financial review
"Despite a challenging backdrop, it's pleasing to report growth
in Group revenues, profit and earnings for the year."
Overview
Total revenue for the year increased by 5% to GBP25.0 million
(2018: GBP23.8 million) and operating expenses, excluding variable
remuneration, increased by 2% to GBP13.3 million. Variable
remuneration rose to GBP3.4 million (2018: GBP3.1 million), with
the operating profit margin increasing marginally to 32% (2018:
31%) and profit before tax rising by 9% to GBP8.0 million (2018:
GBP7.3 million).
Profit and loss (GBPm) 2019 2018
Revenue 25.0 23.8
Cost of sales (0.4) (0.3)
------- -------
Gross profit 24.6 23.5
Personnel (excluding GPS) (8.2) (7.9)
Non--personnel cost (5.1) (5.4)
Other income or expense - 0.2
------- -------
Total expenditure (excluding GPS) (13.3) (13.1)
GPS (3.4) (3.1)
------- -------
Operating profit 7.9 7.3
------- -------
Operating profit margin 32% 31%
Net interest received 0.1 -
------- -------
Profit before tax 8.0 7.3
Tax (1.6) (1.2)
------- -------
Profit after tax 6.4 6.1
------- -------
Revenue
Record's revenue derives from the provision of currency
management services, fees for which can be charged through
management fee only or management plus performance fee structures,
which are available across Record's product range. Management fee
only mandates are charged based upon the AUME of the product, and
management plus performance fee structures include a lower
percentage fee applied to AUME, and a proportional share of the
specific product performance measured over a defined period.
Management fees are typically charged on a quarterly basis,
although Record may charge fees monthly for some of its larger
clients. Performance fees can be charged on quarterly, six-monthly
or annual performance periods on the basis agreed with the
particular client.
As shown under AUME development in the Operating review, average
levels of AUME, and hence management fees, decreased over the year
predominantly as a result of net outflows of $4.5 billion more than
offsetting underlying increases in mandates due to market growth
(+$2.3 billion). In addition, some enhanced Passive Hedging clients
chose to move from management fee only to a lower management fee
with a performance related fee during the year.
Notwithstanding this backdrop, Record's aggregate revenue for
the year increased by 5% to GBP25.0 million including performance
fees of GBP2.3 million (2018: GBPnil).
Revenue analysis (GBPm)
2019 2018
Management fees
Passive Hedging 11.6 12.6
Dynamic Hedging 4.6 5.1
Currency for Return 1.8 1.8
Multi-product 4.3 4.0
----- -----
Total management fees 22.3 23.5
Performance fees 2.3 -
Other currency services income 0.4 0.3
----- -----
Total revenue 25.0 23.8
----- -----
Management fees
Management fees earned during the year fell by 5% to GBP22.3
million (2018: GBP23.5 million).
Record's enhanced Passive Hedging programme has been developed
to take advantage of changes in the FX market structure so as to
minimise costs and to add value for clients. These mandates may be
charged at reduced management fee rates plus a performance-related
fee. As expected, there has been a consequent reduction in the
aggregate Passive Hedging management fees for the year, exacerbated
by the net outflows seen from Passive Hedging mandates
predominantly during the second half of the year. Passive Hedging
management fees decreased by 8% to GBP11.6 million for the year
(2018: GBP12.6 million).
As reported in the prior year, Record's remaining UK-based
Dynamic Hedging clients either converted their mandates to Passive
Hedging or terminated due to the negative returns and cash flows
caused by the persistent weakness in sterling following the result
of the EU referendum. Dynamic Hedging management fees fell by 10%
to GBP4.6 million (2018: GBP5.1 million), predominantly reflecting
the full year effect of the above changes.
Currency for Return management fees, which includes
Multi-strategy mandates, remained broadly consistent with the prior
period notwithstanding net inflows of $0.9 billion in the year.
This is due to one new client mandate starting during the period on
a reduced management fee plus performance fee basis, and one
existing client mandate moving to a more bespoke service on a
different and lower fee rate.
Average management fee rates for most product lines have
remained broadly constant throughout the year ended 31 March 2019.
Average management fee rates for Currency for Return mandates
decreased during the year for those reasons stated above, plus the
impact of increased scaling of portfolio sizes for mandates with
defined volatility targets where the fee rate is linked to the
target volatility.
Average Currency for Return fee rates on AUME can change as a
result of increasing or decreasing portfolio sizes for mandates
with defined volatility targets ("scaling"), where the fee rate is
linked to the target volatility. Certain Multi-Strategy portfolio
sizes have been increased as volatility in the underlying
strategies has fallen and as diversification between strategies has
become greater, reducing the volatility of the aggregate return to
the client. This effect may reverse in future periods. Fee rates
based on volatility targets have not changed during the period.
Further information on the scaling of Currency for Return
mandates is given in the operating review.
Performance fees
Aggregate performance fees of GBP2.3 million were earned during
the year (2018: nil).
Other currency services income
Other currency services income totalled GBP0.4 million (2018:
GBP0.3 million) and consists of fees from ancillary currency
management services including revenue from the licensing agreement
with WisdomTree.
Expenditure
Operating expenditure
The Group operating expenditure (excluding variable
remuneration) increased by 2% to GBP13.3 million for the year
(2018: GBP13.1 million), reflecting the continued focus on cost
discipline across the business.
Growth in personnel costs of 4% to GBP8.2 million (2018: GBP7.9
million) includes inflationary increases in salaries at the start
of the financial year, and reflects the growth in average employee
numbers to 85 (2018: 81).
Headline non-personnel costs decreased by 6% during the year to
GBP5.1 million (2018: GBP5.4 million), although remained broadly
consistent when considering the one-off costs of GBP0.2 million
incurred last year relating to the Tender Offer in July 2017.
Other income or expenses were negligible for the year (2018:
income GBP0.2 million) and represent gains or losses made on
derivative financial instruments employed by the Group's seed funds
or as a result of hedging activities, or other FX adjustments or
revaluations.
Group Profit Share ("GPS") Scheme
The Group operates a GPS Scheme i.e. variable remuneration, such
that a long--term average of 30% of underlying operating profit
before GPS is made available to be awarded to staff. The
Remuneration Committee has agreed that for the year ended 31 March
2019, the GPS Scheme is 30% of pre--GPS operating profit, which
represents GBP3.4 million, an increase of 10% over the previous
financial year (2018: GBP3.1 million) and in line with Group
financial performance.
Operating profit and margins
Group operating profit increased by 8% to GBP7.9 million (2018:
GBP7.3 million) and the Group operating margin increased marginally
to 32% (2018: 31%), driven by the 5% increase in total revenue and
the maintained focus on cost discipline across the business.
Cash flow
The Group consolidated statement of cash flows is shown in the
financial statements section.
The Group's year end cash and cash equivalents stood at
GBP13.0million (2018: GBP12.5 million). The cash generated from
operating activities before tax is shown in note 25 to the
financial statements and was GBP8.2 million (2018: GBP4.3 million).
During the year, taxation of GBP1.2 million was paid (2018: GBP1.6
million) and GBP5.5 million was paid in dividends (2018: GBP6.8
million). The prior year included a cash outflow of GBP10.0 million
representing the Group repurchase of 22.3 million shares via a
Tender Offer.
At the year end, the Group held money market instruments with
maturities between three and twelve months, worth GBP10.7 million
(2018: GBP10.2 million). These instruments are managed as cash by
the Group but are not classified as cash under IFRS rules (see note
17 of the financial statements for more details).
Dividends
An interim ordinary dividend of 1.15 pence per share (2018
interim: 1.15 pence) was paid to shareholders on 28 December 2018,
equivalent to GBP2.3 million.
As disclosed in the Chairman's statement, the Board is
recommending a final ordinary dividend of 1.15 pence per share,
equivalent to GBP2.3 million, taking the overall ordinary dividend
for the financial year to 2.30 pence per share. Simultaneously, the
Board is also paying a special dividend of 0.69 pence per share
(equivalent to GBP1.3 million), making the total dividends paid for
the year of GBP5.9 million equivalent to 91% of total earnings of
3.27 pence per share.
The total ordinary and special dividends paid in respect of the
prior year ended 31 March 2018, were 2.30 pence per share, and 0.50
pence per share respectively, equivalent to total dividends of
GBP5.6 million and representing 92% of total earnings of 3.03 pence
per share.
Financial stability and capital management
The Group's balance sheet is strong and liquid with total net
assets of GBP27.4 million at the end of the year, including current
assets managed as cash totalling GBP23.7 million. The business
remains cash generative, with net cash inflows from operating
activities after tax of GBP7.0 million for the year (see note 25 to
the financial statements).
The Board's capital policy is to retain minimum capital (being
equivalent to shareholders' funds) within the business broadly
equivalent to twelve months' worth of future estimated operating
expenses (excluding variable remuneration), plus capital assessed
as sufficient to meet regulatory capital requirements and working
capital purposes, and for investing in new opportunities for the
business. To this end, the Group maintains a financial model to
assist it in forecasting future capital requirements over a
three-year cycle under various scenarios and monitors the capital
and liquidity positions of the Group on an ongoing and frequent
basis. The Group has no debt.
Record Currency Management Limited ("RCML") is a BIPRU limited
licence firm authorised and regulated in the UK by the Financial
Conduct Authority ("FCA"), and is a wholly owned subsidiary of
Record plc. Both RCML and the Group submit semi--annual capital
adequacy returns to the FCA, and held significant surplus capital
resources relative to the regulatory financial resource requirement
throughout the year.
The Board has concluded that the Group is adequately capitalised
both to continue its operations effectively and to meet regulatory
requirements, due to the size and liquidity of balance sheet
resources maintained by the Group.
The Group held regulatory capital resources based on the audited
financial statements as at 31 March, as follows:
Regulatory capital resources (GBPm) 2019 2018
Core Tier 1 capital 27.3 26.6
Deductions: intangible assets (0.3) (0.2)
------ ------
Regulatory capital resources 27.0 26.4
------ ------
Further information regarding the Group's capital adequacy
information can be found in the Group's Pillar 3 disclosure, which
is available on the Group's website at www.recordcm.com.
Viability statement
In accordance with the UK Corporate Governance Code, the
Directors have performed a robust assessment of the viability of
the Group considering the business model, the Group's expected
financial position, Board strategy and risk appetite, the Group's
solvency and liquidity and its principal risks. Based on this
assessment, the Directors have a current and reasonable expectation
that the Group will continue to operate and meet its liabilities as
they fall due up to 31 March 2022.
The Directors review the financial forecasts and position of the
Group on an ongoing basis. The capital and dividend policy reflects
the stated objectives of maintaining a strong balance sheet whilst
allowing the Group the flexibility to adapt its products and
services to market conditions, or to take advantage of emerging
business opportunities. The Group's strategy and principal risks
are assessed and reviewed regularly by the Board, as well as by the
Executive Committee and operational sub-committees within the
Group.
In assessing the viability of the Group, the Directors have
considered the principal risks affecting the Group, which underpin
the basis for the stress testing of the business plan conducted as
part of the Group's Internal Capital Adequacy Assessment Process
(ICAAP). The ICAAP uses severe but plausible stress scenarios
assuming the crystallising of a number of these principal risks to
assess the options for mitigating the impact on the Group, and for
ensuring that the ongoing viability of the Group is sustained. Such
scenarios include items that may have a severe effect on the
revenue generation capability and resulting profitability of the
Group, for example:
-- market downturn - resulting in AUME decreasing, either
through outflows and/or a reduction in value due to the link to
other financial markets; and
-- operational risk event - causing AUME outflows and potentially reputational damage.
The scenarios assume mitigating actions including the potential
for non-critical cost reductions and reassessing the dividend
policy, although any mitigating actions would need to be reassessed
depending on the specific circumstances and expected duration of
the factors affecting the business model at the time. The
possibility that the impact and timing of factors potentially
affecting the viability of the Group could be more severe than
assumed plausible for the above testing should also be noted.
Market disruption, changes to regulation and sustained political
and economic uncertainty continue to provide challenges to the
Group and the environment in which it operates. Through continued
enhancement of its products and services and in maintaining its
approach to innovation, the Directors believe the Company to be
capable of meeting such challenges. However, the Directors consider
a three year horizon over which to assess the viability of the
Group to be appropriate under such circumstances, since any further
planning horizon provides a greater level of uncertainty to
financial projections.
As discussed in more detail in the Business review, the
Directors expect to be able to continue to serve all current EU27
clients irrespective of whether and how the UK eventually leaves
the European Union (Brexit). For this reason the Directors consider
the level of risk posed by Brexit to the continued operation and
viability of the business to be significantly lower than the
principal risks identified by the Board, and the scenarios modelled
through the ICAAP.
Upon review of the results of the stress testing, the Directors
concluded that the Group would have sufficient capital and liquid
resources to withstand the stressed scenarios and ensure its
ongoing viability, based on current information and the three year
viability horizon.
Consolidated statement of comprehensive income
Year ended 31 March
2019 2018
Note GBP'000 GBP'000
----- --------- ---------
Revenue 4 24,973 23,834
Cost of sales (385) (311)
----- --------- ---------
Gross profit 24,588 23,523
Administrative expenses (16,704) (16,424)
Other income or expense (8) 173
----- --------- ---------
Operating profit 5 7,876 7,272
Finance income 135 66
Finance expense (22) (10)
----- --------- ---------
Profit before tax 7,989 7,328
Taxation 7 (1,559) (1,182)
----- --------- ---------
Profit after tax and total comprehensive
income for the year 6,430 6,146
Profit and total comprehensive
income for the year attributable
to
Owners of the parent 6,430 6,146
Non-controlling interests - -
Earnings per share for profit attributable
to the equity holders of the Group
during the year
Basic earnings per share 8 3.27p 3.03p
Diluted earnings per share 8 3.25p 2.98p
----- --------- ---------
Consolidated statement of financial position
As at 31 March
2019 2018
Note GBP'000 GBP'000
----- -------- --------
Non--current assets
Intangible assets 12 288 228
Property, plant and equipment 11 761 910
Investments 13 1,112 1,115
Deferred tax assets 14 - 86
----- -------- --------
Total non--current assets 2,161 2,339
----- -------- --------
Current assets
Trade and other receivables 15 7,562 6,775
Derivative financial assets 16 164 266
Money market instruments with maturities > 3 months 17 10,735 10,198
Cash and cash equivalents 17 12,966 12,498
----- -------- --------
Total current assets 31,427 29,737
----- -------- --------
Total assets 33,588 32,076
----- -------- --------
Current liabilities
Trade and other payables 18 (2,736) (2,630)
Corporation tax liabilities 18 (692) (399)
Financial liabilities 19 (2,621) (2,467)
Derivative financial liabilities 16 (109) (29)
Total current liabilities (6,158) (5,525)
Deferred tax liabilities 14 (29) -
----- -------- --------
Total net assets 27,401 26,551
----- -------- --------
Equity
Issued share capital 20 50 50
Share premium account 2,243 2,237
Capital redemption reserve 26 26
Retained earnings 25,022 24,238
----- -------- --------
Equity attributable to owners of the parent 27,341 26,551
----- -------- --------
Non-controlling interests 60 -
----- -------- --------
Total equity 27,401 26,551
----- -------- --------
Consolidated statement of changes in equity
Year ended 31 March 2019
Called up Share Capital Retained Total Non-controlling Total equity
share premium redemption earnings equity interests
capital account reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ ------------ ------------ ------------ ---------------- -------------
As at 1 April
2018 50 2,237 26 24,238 26,551 - 26,551
Profit and
total
comprehensive
income for
the year - - - 6,430 6,430 - 6,430
Dividends paid - - - (5,517) (5,517) - (5,517)
Issue of
shares in
subsidiary - - - - - 60 60
Own shares
acquired by
EBT - - - (893) (893) - (893)
Release of
shares held
by EBT - 6 - 677 683 - 683
Share-based
payment
reserve
movement - - - 87 87 - 87
------------ ------------ ------------ ------------ ------------ ---------------- -------------
Transactions
with
shareholders - 6 - (5,646) (5,640) 60 (5,580)
As at 31 March
2019 50 2,243 26 25,022 27,341 60 27,401
------------ ------------ ------------
Year ended 31 March 2018
Called up share Share premium Capital redemption Retained earnings Total equity
capital account reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2017 55 1,971 20 34,785 36,831
Profit and total
comprehensive
income for the
year - - - 6,146 6,146
Dividends paid - - - (6,810) (6,810)
Share buy-back and
cancellation (5) - 6 (10,000) (9,999)
Own shares acquired
by EBT - - - (952) (952)
Release of shares
held by EBT - 266 - 1,241 1,507
Share-based payment
reserve movement - - - (172) (172)
------------------- ------------------- ------------------- ------------------ -------------
Transactions with
shareholders (5) 266 6 (16,693) (16,426)
As at 31 March 2018 50 2,237 26 24,238 26,551
------------------- ------------------- ------------------- ------------------ -------------
Consolidated statement of cash flows
Year ended 31 March
2019 2018
Note GBP'000 GBP'000
----- -------- ---------
Net cash inflow from operating activities 25 7,026 2,746
Cash flow from investing activities
Purchase of intangible software (134) (82)
Purchase of property, plant and
equipment (72) (236)
(Purchase)/sale of money market
instruments with maturity > 3 months (537) 7,904
Interest received 110 77
----- -------- ---------
Net cash (outflow)/inflow from investing
activities (633) 7,663
Cash flow from financing activities
Subscription for shares in subsidiary 40 -
Purchase of own shares (653) (10,367)
Dividends paid to equity shareholders 9 (5,517) (6,810)
----- -------- ---------
Cash outflow from financing activities (6,130) (17,177)
----- -------- ---------
Net increase/(decrease) in cash
and cash equivalents in the year 263 (6,768)
Effect of exchange rate changes 205 146
Cash and cash equivalents at the
beginning of the year 12,498 19,120
Cash and cash equivalents at the
end of the year 12,966 12,498
Closing cash and cash equivalents
consist of:
Cash 2,150 4,411
Cash equivalents 10,816 8,087
----- -------- ---------
Cash and cash equivalents 17 12,966 12,498
----- -------- ---------
Company statement of financial position
As at 31 March
2019 2018
Note GBP'000 GBP'000
----- -------- --------
Non--current assets
Investments 13 5,567 5,288
----- -------- --------
Total non--current assets 5,567 5,288
----- -------- --------
Current assets
Cash and cash equivalents 17 3 2
----- -------- --------
Total current assets 3 2
----- -------- --------
Total assets 5,570 5,290
----- -------- --------
Current liabilities
Trade and other payables 18 (55) (1,093)
Corporation tax liabilities 18 (14) -
----- -------- --------
Total current liabilities (69) (1,093)
----- -------- --------
Total net assets 5,501 4,197
----- -------- --------
Equity
Issued share capital 20 50 50
Share premium account 1,809 1,809
Capital redemption reserve 26 26
Retained earnings 3,616 2,312
----- -------- --------
Total equity 5,501 4,197
----- -------- --------
Company statement of changes in equity
Year ended 31 March 2019
Called Share premium Capital Retained Total shareholders'
up share account redemption earnings equity
capital reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- -------------- ------------ ---------- --------------------
As at 1 April
2018 50 1,809 26 2,312 4,197
Profit and
total comprehensive
income for
the year - - - 6,681 6,681
Dividends paid - - - (5,517) (5,517)
Share option
reserve movement - - - 140 140
---------- -------------- ------------ ---------- --------------------
Transactions
with shareholders - - - (5,377) (5,377)
As at 31 March
2019 50 1,809 26 3,616 5,501
---------- -------------- ------------ ---------- --------------------
Year ended 31 March 2018
Called Share Capital Retained Total shareholders'
up share premium redemption earnings equity
capital account reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- ------------ ---------- --------------------
As at 1 April
2017 55 1,809 20 2,237 4,121
Profit and total
comprehensive
income for the
year - - - 16,688 16,688
Share buy back (5) - 6 (10,000) (9,999)
Dividends paid - - - (6,810) (6,810)
Share option
reserve movement - - - 197 197
---------- --------- ------------ ---------- --------------------
Transactions
with shareholders (5) - 6 (16,613) (16,612)
As at 31 March
2018 50 1,809 26 2,312 4,197
---------- --------- ------------ ---------- --------------------
Company statement of cash flows
Year ended 31 March
2019 2018
Note GBP'000 GBP'000
----- -------- ---------
Net cash inflow from operating activities 25 (1,043) 1,015
Cash flow from investing activities
Dividends received 6,600 16,810
Investment in subsidiaries (40) (16)
Investment in seed funds - (1,000)
Interest received 1 1
----- -------- ---------
Net cash inflow from investing activities 6,561 15,795
Cash flow from financing activities
Purchase of own shares - (10,000)
Dividends paid to equity shareholders 9 (5,517) (6,810)
----- -------- ---------
Cash outflow from financing activities (5,517) (16,810)
----- -------- ---------
Net increase in cash and cash equivalents in the year 1 -
Cash and cash equivalents at the beginning of the year 2 2
----- -------- ---------
Cash and cash equivalents at the end of the year 3 2
----- -------- ---------
Closing cash and cash equivalents consist of:
Cash 3 2
Cash equivalents - -
----- -------- ---------
Cash and cash equivalents 17 3 2
----- -------- ---------
Notes to the financial statements
For the year ended 31 March 2019
These financial statements exclude disclosures that are both
immaterial and judged to be unnecessary to understand our results
and financial position.
1. Accounting policies
In order to provide more clarity to the notes to the financial
statements, accounting policy descriptions appear at the beginning
of the note to which they relate, and are shown in italic text.
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out in the notes
below. These policies have been consistently applied to all periods
presented unless otherwise stated.
a. Accounting convention
Basis of preparation
The Group and Company have prepared their financial statements
under International Financial Reporting Standards ("IFRSs") as
adopted by the European Union. IFRSs comprise standards and
interpretations approved by the International Accounting Standards
Board ("IASB") and the International Financial Reporting
Interpretations Committee ("IFRIC") as adopted in the European
Union as at 31 March 2019. The financial statements have been
prepared on a historical cost basis, modified to include fair
valuation of derivative financial instruments.
The Directors are satisfied that the Company and the Group have
adequate resources with which to continue to operate for the
foreseeable future. For this reason the financial statements have
been prepared on a going concern basis.
The preparation of financial statements in accordance with the
recognition and measurement principles set out in IFRSs requires
management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets
and liabilities, income and expenses. The bases for management
judgements, estimates and assumptions are discussed further in note
2.
Impact of new accounting standards
IFRS 9 - Financial Instruments
IFRS 9 has been adopted by the Group and Company from the
mandatory adoption date of 1 April 2018. IFRS 9 replaces the
classification and measurement models for financial instruments in
IAS 39 "Financial Instruments: recognition and measurement" with
three classification categories: amortised cost, fair value through
profit or loss and fair value through other comprehensive
income.
The Group holds instruments such as investments in seed funds,
derivative financial instruments and financial liabilities in
respect of external investors' holdings in consolidated funds.
These were formerly held at fair value through profit or loss
(FVTPL). Under the new standard, these instruments will continue to
be held at FVTPL.
Trade and other receivables and payables principally comprise
short-term settlement accounts and accruals, which are not held for
trading nor do they meet the definition of items that could be
carried at fair value. Such instruments therefore remain at
amortised cost.
Regarding impairment, most of Record's revenue comes from
management fees due from clients for which we provide currency
management services. These are typically paid to the Group on a
quarterly basis.
It is very rare for Record to suffer any impairment in respect
of trade receivables as institutional debtors rarely default. The
Group has applied the simplified expected loss model to its trade
receivables, which do not have a history of credit risk or expected
future recoverability issues. Further details of the expected
credit loss calculation are given in note 15.
Cash, cash equivalents and money market instruments with
maturities > 3 months held with banks could be at risk should
the financial institutions holding it fail. We have neither
experienced nor expect to experience credit losses arising from
these counterparties.
Management consider that the adoption of IFRS has not had a
material impact on the financial statements.
IFRS 15 - Revenue from Contracts with Customers
IFRS 15 replaces IAS 18 Revenue and provides a new five-step
revenue recognition model for determining recognition and
measurement of revenue from contracts with customers.
The adoption of this standard has had no significant impact on
the timing of revenue recognition of the Group and therefore no
restatement of prior periods was required. The Group did not use
any of the practical expedients permitted under IFRS 15.
The Group's accounting policy for revenue within the scope of
IFRS 15 has been updated to state that revenue is recognised as
performance obligations are satisfied.
The standard introduces a number of new disclosure requirements
which are provided in Note 4 of these financial statements. These
include disclosures around:
-- The nature of the performance obligations within contracts with customers.
-- Disaggregated revenue and its relationship with revenue
reported for each reportable segment.
-- Contract asset and liabilities.
There are no judgements that significantly affect the
determination of the amount and timing of revenue from contracts
with customers.
Revenue from contracts with customers for the year ended 31
March 2018 consisted of GBP23.5 million which was previously
presented as fee income, and GBP0.3 million that was previously
presented as other currency services income.
There has been no other new or amended standards adopted in the
financial year beginning 1 April 2018 which had a material impact
on the Group or Company.
The following standards and interpretations relevant to the
Group's operations were issued by the IASB but are not yet
mandatory:
IFRS 16 - Leases
IFRS 16 "Leases" is effective for annual periods beginning on or
after 1 January 2019 and replaces IAS 17 Leases and related
interpretations. This introduces a comprehensive model for the
identification of lease arrangements and accounting treatment for
both lessors and lessees, which distinguishes leases and service
contracts on the basis of whether an identified asset is controlled
by a customer. IFRS 16 requires operating leases, where the Group
is the lessee, to be included on the Group's statement of financial
position, recognising a right-of-use (ROU) asset and a related
lease liability representing the present value obligation to make
lease payments. The ROU asset will be assessed for impairment
annually (incorporating any onerous lease assessments) and
depreciated on a straight-line basis, adjusted for any
remeasurements of the lease liability. The lease liability will
subsequently be adjusted for lease payments and interest, as well
as the impact of any lease modifications. IFRS 16 also requires
extensive disclosures detailing the impact of leases on the Group's
financial position and results.
The adoption of IFRS 16 will result in a significant gross-up of
the Group's reported assets and liabilities on the statement of
financial position. The operating lease expense which is currently
recognised within occupancy costs in the Group's income statement
(Note 24) will no longer be incurred and instead depreciation
expense (of the ROU asset) and interest expense (unwind of the
discounted lease liability) will be recognised. This will also
result in a different total annual expense profile under the new
standard (with the expense being front-loaded in the earlier years
of the lease term as the discount unwind on the lease liability
reduces over time).
The adoption of IFRS 16 into the Group's opening statement of
financial position on 1 April 2019 results in a gross-up of GBP1.7
million for ROU lease assets and associated deferred tax assets and
GBP1.8 million in relation to lease liabilities, with GBP0.1
million deducted from brought-forward reserves on the transition
date 1 April 2019. The initial reserves impact will be offset over
time by a lower annual Group income statement charge, as the total
charge over the life of each lease is the same as under the current
IAS 17 requirements.
b. Basis of consolidation
The consolidated financial information contained within the
financial statements incorporates financial statements of the
Company and its subsidiaries drawn up to 31 March 2019.
Subsidiaries are entities controlled by the Company and are
included from the date that control commences until the date that
control ceases. Control is achieved where the Company is exposed to
or has rights over variable returns from its involvement with the
entity and it has the power to affect returns.
An Employee Benefit Trust has been established for the purposes
of satisfying certain share-based awards. As the Group has "de
facto" control over this special purpose entity, the trust is fully
consolidated within the financial statements.
The Group has investments in four funds. These funds are held by
Record plc and represent seed capital investments by the Group.
Significant judgement
The Group uses judgement to determine whether investments in its
seed funds constitute controlling interests in accordance with IFRS
10 Consolidated Financial Statements. The Group considers all
relevant facts and circumstances in assessing whether it has
control over specific funds or other entities. This includes
consideration of the extent of the Group's exposure to variability
of returns as an investor and the Group's ability to direct the
relevant activities, through exercising its voting rights as an
investor, or as investment manager. We consider that the Group
exerts such control in cases where it (either in isolation or
together with its related parties) holds a majority of units in the
fund.
If the Group is in a position to be able to control a fund, then
the fund is consolidated within the Group financial statements.
Such funds are consolidated either on a line-by-line basis, or if
it meets the definition of a disposal group held for sale it is
classified and accounted for on that basis. In the case that the
Group does not control a fund for the complete reporting period,
then the fund is consolidated only for the part of the reporting
period for which the Group has control over the entity.
Where the Group controls an entity, but does not own all the
share capital of that entity, the interest of the other
shareholders' non-controlling interests is stated within equity at
the non-controlling interests' proportion of the fair value of the
recognised assets and liabilities. In the case of the funds
controlled by the Group, the interests of any external investors
are recognised as a financial liability as investments in the fund
are not considered to be equity instruments.
The financial statements of subsidiary undertakings, which are
prepared using uniform accounting policies, are coterminous with
those of the Company apart from those of the seeded funds which
have accounting reference dates of 30 September. The consolidated
financial statements incorporate the financial performance of the
seeded funds in the year ended 31 March 2019 and the financial
position of the seeded funds as at 31 March 2019.
The Company is taking advantage of the exemption under the
Companies Act 2006 s408(1) not to present its individual statement
of comprehensive income and related notes that form part of the
financial statements. The Group's total comprehensive income for
the year includes a profit of GBP6,681,076 attributable to the
Company (2018: GBP16,688,038).
All intra--Group transactions, balances, income, expenses and
dividends are eliminated on consolidation.
c. Foreign currencies
The financial statements are presented in sterling (GBP), which
is the functional currency of the parent company. Foreign currency
transactions are translated into the functional currency of the
parent company using prevailing exchange rates which are updated on
a monthly basis. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the re--measurement of
monetary items at year-end exchange rates are recognised in the
statement of comprehensive income under "other income or
expense".
d. Financial instruments
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of the
financial instrument. Financial assets are derecognised when the
contractual rights to the cash flows from the financial assets
expire, or when the financial asset and all substantial risks and
rewards are transferred. A financial liability is derecognised when
it is extinguished, discharged, cancelled or expires.
e. Impairment of assets
The Group assesses whether there is any indication that any of
its assets have been impaired at least annually. If such an
indication exists, the asset's recoverable amount is estimated and
compared to its carrying value.
An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. Impairment
losses are recognised in profit or loss.
f. Provisions and contingent liabilities
Provisions are recognised when present obligations as a result
of a past event will probably lead to an outflow of economic
resources from the Group and amounts can be estimated reliably.
Timing or amount of the outflow may still be uncertain. A present
obligation arises from the presence of a legal or constructive
commitment that has resulted from past events.
Provisions are measured at the estimated expenditure required to
settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and
uncertainties associated with the present obligation. Provisions
are discounted to their present values, where the time value of
money is material. Any reimbursement that the Group can be
virtually certain to collect from a third party with respect to the
obligation is recognised as a separate asset. However, this asset
may not exceed the amount of the related provision.
All provisions are reviewed at each reporting date and adjusted
to reflect the current best estimate. In those cases where the
possible outflow of economic resources as a result of present
obligations is considered improbable or remote, no liability is
recognised.
g. Equity
Share capital represents the nominal (par) value of shares that
have been issued. Share premium includes any premium received on
issue of share capital. Retained earnings includes all current and
prior period retained profits and share-based employee
remuneration. All transactions with owners of the parent are
recorded separately within equity.
2. Critical accounting estimates and judgements
In order to prepare the financial statements in accordance with
IFRS, management make certain critical accounting estimates.
Management are also required to exercise judgement in the process
of applying the Group's accounting policies and in determining the
reported amount of certain assets and liabilities.
The estimates and associated assumptions are based on historical
experience and various other factors including expectations of
future events that are believed to be reasonable under the
circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. As a consequence actual
results may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in
the period of the revision and future periods if the revision
affects both current and future periods.
Areas of significant judgement - consolidation of seed funds
Note 1.b. describes the basis which the Group uses to determine
whether it controls seed funds, further detail on consolidation of
seed funds is provided in note 13.
Sources of estimation uncertainty
Management recognise that the use of estimates is important in
calculating both the fair value of share options offered by the
Group to its employees (see Note 21) and deferred tax (see note
14), however the sources of estimation uncertainty do not present a
significant risk of material adjustment to the carrying amounts of
assets or liabilities within the next financial year in either
case.
3. Segmental analysis
The Directors, who together are the entity's Chief Operating
Decision Maker, consider that its services comprise one operating
segment (being the provision of currency management services) and
that it operates in a market that is not bound by geographical
constraints. The Group provides Directors with revenue information
disaggregated by product, whilst operating costs, assets and
liabilities are presented on an aggregated basis. This reflects the
unified basis on which the products are marketed, delivered and
supported. Revenue analysed by product is provided in note 4.
4. Revenue
Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the provision of currency management services.
Our revenues typically arise from charging management fees or
performance fees and both are accounted 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 (excluding standard duty of care
requirements). 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 cannot be clawed back. 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 currency services income includes fees from signal hedging
and fiduciary execution.
2019 2018
GBP'000 GBP'000
-------- --------
Management fees
Passive Hedging 11,610 12,569
Dynamic Hedging 4,598 5,111
Currency for Return 1,775 1,803
Multi-Product 4,325 4,014
Total management fee income 22,308 23,497
Performance fee income 2,333 -
Other currency services income 332 337
Total revenue from contracts with customers 24,973 23,834
b. Contract receivables
The payment terms for invoiced revenue vary but are typically 30
days from receipt of invoice. Accrued income is recognised to
account for income earned but not yet invoiced.
The Group has recognised the following receivables, assets and
liabilities in relation to contracts with customers.
2019 2018
GBP'000 GBP'000
-------- --------
Amount receivable from contracts with customers 4,654 5,279
Accrued income from contracts with customers 1,888 582
Total contract receivables and assets 6,542 5,861
There are no contract liabilities arising in relation to
contracts with customers.
c. Geographical analysis
The geographical analysis of revenue is based on the destination
i.e. the location of the client to whom the services are provided.
All turnover originated in the UK.
2019 2018
GBP'000 GBP'000
-------- --------
Management and performance fee income
UK 2,239 2,951
US 6,439 6,610
Switzerland 11,401 10,434
Other 4,894 3,839
-------- --------
Total revenue 24,973 23,834
-------- --------
d. Major clients
During the year ended 31 March 2019, three clients individually
accounted for more than 10% of the Group's revenue. The three
largest clients generated revenues of GBP4.4 million, GBP3.9
million and GBP3.6 million in the year (2018: three largest clients
generated revenues of GBP4.0 million, GBP3.4 million and GBP2.9
million in the year).
5. Operating profit
Operating profit for the year is stated after
charging/(crediting):
2019 2018
GBP'000 GBP'000
-------- --------
Staff costs 11,574 11,062
-------- --------
Depreciation of property, plant and equipment 221 206
-------- --------
Amortisation of intangibles 74 99
-------- --------
Auditor fees
-------- --------
Fees payable to the Group's auditor for
the audit of the Company's annual accounts 49 45
-------- --------
Fees payable to the Group's auditor for
the audit of subsidiary undertakings 42 39
-------- --------
Fees payable to the Group's auditor for
the audit of consolidated funds 40 32
-------- --------
Auditor fees total 131 116
-------- --------
Fees payable to the Group's auditor and
its associates for other services:
-------- --------
Audit-related assurance services required
by law or regulation 27 26
-------- --------
Other non-audit services 61 55
-------- --------
Operating lease rentals: land and buildings 604 596
-------- --------
Loss/(gain) on forward FX contracts held
to hedge cash flow 242 (424)
-------- --------
Gain on derivative financial instruments
held by seed funds - (53)
-------- --------
Exchange (gain)/loss on revaluation of external
holding in seed funds (67) 406
-------- --------
Other exchange (gains)/losses (178) 265
-------- --------
6. Staff costs
The average number of employees, including Directors, employed
by the Group during the year was:
2019 2018
Corporate 9 8
Client relationships 16 15
Investment research 15 15
Operations 26 26
Risk management 5 5
Support 14 12
Annual average 85 81
The aggregate costs of the above employees, including Directors,
were as follows:
2019 2018
GBP'000 GBP'000
-------- --------
Wages and salaries 8,900 8,280
Social security costs 1,239 1,184
Pension costs 468 432
Other employment benefit costs 967 1,166
-------- --------
Aggregate staff costs 11,574 11,062
-------- --------
Other employment benefit costs include share--based payments,
share option costs, and costs relating to the Record plc Share
Incentive Plan.
7. Taxation - Group
Current tax is the tax currently payable based on taxable profit
for the year. Current income tax assets and/or liabilities comprise
those obligations to, or claims from, fiscal authorities relating
to the current or prior reporting periods, that are unpaid at the
reporting date. Current tax is payable on taxable profit, which
differs from profit or loss in the financial statements.
Calculation of current tax is based on tax rates and tax laws that
have been enacted or substantively enacted by the end of the
reporting period.
The total charge for the year can be reconciled to the
accounting profit as follows:
2019 2018
GBP'000 GBP'000
-------- --------
Profit before taxation 7,989 7,328
-------- --------
Taxation at the standard rate of tax in the UK of 19% (2018: 19%) 1,518 1,392
Tax effects of:
Other disallowable expenses and non--taxable income 16 51
Capital allowances for the year higher than depreciation (20) (20)
Higher tax rates on subsidiary undertakings 10 5
Adjustments recognised in current year in relation to the current tax of prior years 2 (10)
Adjustments recognised in current year in relation to Research and Development claims in respect
of prior years (93) (240)
Other temporary differences 126 4
-------- --------
Total tax expense 1,559 1,182
-------- --------
The tax expense comprises:
Current tax expense 1,445 1,166
Deferred tax expense 114 16
-------- --------
Total tax expense 1,559 1,182
-------- --------
The standard rate of UK corporation tax for the year is 19%
(2018: 19%). A full corporation tax computation is prepared at the
year end. The actual charge as a percentage of the profit before
tax may differ from the underlying tax rate. Differences typically
arise as a result of capital allowances differing from depreciation
charged, and certain types of expenditure not being deductible for
tax purposes. Other differences may also arise.
The tax charge for the year ended 31 March 2019 was 19.5% of
profit before tax (2018: 16.1%).
8. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the financial year attributable to equity holders of the parent
by the weighted average number of ordinary shares in issue during
the year.
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 year
attributable to equity holders of the parent used in the basic and
diluted earnings per share calculations.
2019 2018
Weighted average number of shares used
in calculation of basic earnings per share 196,655,224 202,613,441
Effect of potential dilutive ordinary shares
- share options 1,462,554 3,855,924
------------ ------------
Weighted average number of shares used
in calculation of diluted earnings per
share 198,117,778 206,469,365
------------ ------------
pence pence
Basic earnings per share 3.27 3.03
Diluted earnings per share 3.25 2.98
------ ------
The potential dilutive shares relate to the share options
granted in respect of the Group's Share Scheme (see note 21). There
were share options in place at the beginning of the year over
14,343,147 shares. During the year 678,500 share options were
exercised, and a further 2,307,944 share options lapsed or were
forfeited. The Group granted 935,000 share options with a
potentially dilutive effect during the year. Of the 12,291,703
share options in place at the end of the period, 1,486,765 have a
dilutive impact at the year end.
9. Dividends
Interim and special dividends are recognised when paid and final
dividends when approved by shareholders.
The dividends paid by the Group during the year ended 31 March
2019 totalled GBP5,516,896 (2.80 pence per share) which comprised a
final dividend in respect of the year ended 31 March 2018 of
GBP2,266,379 (1.15 pence per share), a special dividend in respect
of the year ended 31 March 2018 of GBP985,382 (0.50 pence per
share) and an interim dividend for the year ended 31 March 2019 of
GBP2,265,135 (1.15 pence per share).
The dividends paid by the Group during the year ended 31 March
2018 totalled GBP6,810,361 (3.235 pence per share) which comprised
a final dividend in respect of the year ended 31 March 2017 of
GBP2,564,080 (1.175 pence per share), a special dividend in respect
of the year ended 31 March 2017 of GBP1,985,798 (0.91 pence per
share) and an interim dividend for the year ended 31 March 2018 of
GBP2,260,483 (1.15 pence per share).
For the year ended 31 March 2019, a final ordinary dividend of
1.15 pence per share has been proposed and a special dividend of
0.69 pence per share has been declared.
10. Retirement benefit obligations
The Group operates defined contribution pension plans for the
benefit of employees. The Group makes contributions to
independently administered plans, such contributions being
recognised as an expense when they fall due. The assets of the
schemes are held separately from those of the Group in
independently administered funds.
The Group is not exposed to the particular risks associated with
the operation of Defined Benefit plans and has no legal or
constructive obligation to make any further payments to the plans
other than the contributions due.
The pension cost charge disclosed in note 6 to the accounts
represents contributions payable by the Group to the funds.
11. Property, plant and equipment - Group
All property, plant and equipment assets are stated at cost less
accumulated depreciation. Depreciation of property, plant and
equipment is provided to write off the cost, less residual value,
on a straight--line basis over the estimated useful life:
-- Leasehold improvements - period from lease commencement to
the earlier of the lease termination date and the next rent review
date
-- Computer equipment - 2 to 5 years
-- Fixtures and fittings - 4 to 6 years
Residual values, remaining useful economic lives and
depreciation methods are reviewed annually and adjusted if
appropriate. Gains or losses on disposal are included in profit or
loss.
The Group's property, plant and equipment comprise leasehold
improvements, computer equipment and fixtures and fittings. The
carrying amount can be analysed as follows:
Leasehold Computer Fixtures
improvements equipment and fittings Total
2019 GBP'000 GBP'000 GBP'000 GBP'000
------------- ---------- ------------- --------
Cost
At 1 April
2018 661 671 324 1,656
Additions 31 40 1 72
Disposals - - - -
------------- ---------- ------------- --------
At 31 March
2019 692 711 325 1,728
------------- ---------- ------------- --------
Depreciation
At 1 April
2018 150 425 171 746
Charge for
the year 121 59 41 221
Disposals - - - -
------------- ---------- ------------- --------
At 31 March
2019 271 484 212 967
------------- ---------- ------------- --------
Net book
amounts
At 31 March
2019 421 227 113 761
------------- ---------- ------------- --------
At 1 April
2018 511 246 153 910
------------- ---------- ------------- --------
Leasehold Computer Fixtures
improvements equipment and fittings Total
2018 GBP'000 GBP'000 GBP'000 GBP'000
------------- ---------- ------------- --------
Cost
At 1 April
2017 635 542 304 1,481
Additions 26 177 33 236
Disposals - (48) (13) (61)
------------- ---------- ------------- --------
At 31 March
2018 661 671 324 1,656
------------- ---------- ------------- --------
Depreciation
At 1 April
2017 36 423 141 600
Charge for
the year 114 50 42 206
Disposals - (48) (12) (60)
------------- ---------- ------------- --------
At 31 March
2018 150 425 171 746
------------- ---------- ------------- --------
Net book
amounts
At 31 March
2018 511 246 153 910
------------- ---------- ------------- --------
At 1 April
2017 599 119 163 881
------------- ---------- ------------- --------
The Group's tangible non--current assets are predominantly
located in the UK.
12. Intangible assets
Intangible assets are shown at historical cost less accumulated
amortisation and impairment losses. Amortisation is charged to
profit or loss on a straight--line basis over the estimated useful
lives of the intangible assets unless such lives are indefinite.
Amortisation is included within operating expenses in the statement
of comprehensive income. Intangible assets are amortised from the
date they are available for use. Useful lives are as follows:
-- Software - 2 to 5 years
Amortisation periods and methods are reviewed annually and
adjusted if appropriate.
The Group's intangible assets comprise both purchased software
and the capitalised cost of software development. The carrying
amounts can be analysed as follows:
Software Total
2019 GBP'000 GBP'000
--------- --------
Cost
At 1 April 2018 1,458 1,458
Additions 134 134
Disposals - -
--------- --------
At 31 March 2019 1,592 1,592
--------- --------
Amortisation
At 1 April 2018 1,230 1,230
Charge for the year 74 74
Disposals - -
--------- --------
At 31 March 2019 1,304 1,304
--------- --------
Net book amounts
At 31 March 2019 288 288
--------- --------
At 1 April 2018 228 228
--------- --------
Software Total
2018 GBP'000 GBP'000
--------- --------
Cost
At 1 April 2017 1,377 1,377
Additions 82 82
Disposals (1) (1)
--------- --------
At 31 March 2018 1,458 1,458
--------- --------
Amortisation
At 1 April 2017 1,132 1,132
Charge for the year 99 99
Disposals (1) (1)
--------- --------
At 31 March 2018 1,230 1,230
--------- --------
Net book amounts
At 31 March 2018 228 228
--------- --------
At 1 April 2017 245 245
--------- --------
The annual contractual commitment for the maintenance and
support of software is GBP183,976 (2018: GBP179,664). All
amortisation charges are included within administrative
expenses.
13. Investments
Company
Investments in subsidiaries are shown at cost less impairment
losses. The capitalised investment in respect of share--based
payments offered by subsidiaries is equal to the cumulative fair
value of the amounts payable to employees recognised as an expense
by the subsidiary.
2019 2018
GBP'000 GBP'000
-------- --------
Investment in subsidiaries (at cost)
Record Currency Management Limited 10 10
Record Group Services Limited 10 10
Record Portfolio Management Limited 10 10
Record Currency Management (US) Inc. - -
Record Currency Management (Switzerland) GmbH 16 16
Trade Record Ltd 40 -
Record Fund Management Limited - -
N P Record Trustees Limited - -
Total investment in subsidiaries (at cost) 86 46
Capitalised investment in respect of share--based payments
Record Group Services Limited 1,108 978
Record Currency Management (US) Inc. 85 77
Record Currency Management (Switzerland) GmbH 2 -
-------- --------
Total capitalised investment in respect of share--based payments 1,195 1,055
-------- --------
Total investment in subsidiaries 1,281 1,101
-------- --------
Particulars of subsidiary undertakings
Name Nature of business
Record Currency Management Currency management services
Limited (FCA, SEC and CFTC registered)
Record Group Services Limited Management services to other
Group undertakings
Record Currency Management US advisory and service company
(US) Inc. (SEC and CFTC registered)
Record Currency Management Swiss advisory and service
(Switzerland) GmbH company
Trade Record Ltd Prize competitions allowing
subscribers to trade virtual
money across asset classes
Record Portfolio Management Dormant
Limited
Record Fund Management Limited Dormant
N P Record Trustees Limited Dormant trust company
--------------------------------
The Group's interest in the equity capital of subsidiary
undertakings is 100% of the ordinary share capital in all cases
except for Trade Record Ltd ("Trade Record") in which the Group's
interest is 40% of the ordinary share capital. Record Currency
Management (US) Inc. is incorporated in Delaware (registered
office: Corporation Service Company, 251 Little Falls Drive,
Wilmington, DE 19808) and Record Currency Management (Switzerland)
GmbH is incorporated in Zürich (registered office: Münsterhof 14,
8001 Zürich). Trade Record is registered in England and Wales with
its registered office at 1 Poultry, London EC2R 8JR. All other
subsidiaries are registered in England and Wales with their
registered office at Morgan House, Madeira Walk, Windsor,
Berkshire, SL4 1EP, UK.
Investment in Trade Record
On 22 March 2019, Record plc subscribed GBP40,000 for 40% of the
ordinary share capital of Trade Record.
Investment in funds
In addition to the subsidiaries listed above, the Company holds
investments in several funds. These funds are seed investments,
which have various investment objectives and policies and are
subject to the terms and conditions of their offering
documentation. The principal activity of each is to invest capital
from investors in a portfolio of assets in order to provide a
return for those investors.
All four fund investments are presented within investments in
the Company statement of financial position, and all four fund
entities are sub-funds of the Record Umbrella Fund, an open-ended
umbrella unit trust authorised in Ireland.
Group
Entities are consolidated on a line-by-line basis where the
Group has determined that a controlling interest exists through an
investment holding in the entity, in accordance with IFRS 10
"Consolidated Financial Statements". Otherwise, investments in
entities are measured at fair value through profit or loss.
Investment in Trade Record
Record plc in conjunction with two of its Directors, controls 80
per cent of the ordinary share capital, giving the Company rights
over variable returns and the power to affect returns. Therefore
the Company has the ability to control Trade Record, which is
consequently recognised as a subsidiary.
In accordance with IFRS 10, the financial results of Trade
Record are consolidated on a line-by-line basis within the
financial statements of the Group.
Investment in funds
Of the four funds seeded by Record plc only three have been
consolidated into the Group's financial results.
The Group has controlled both the Record Currency - FTSE FRB10
Index Fund and the Record Currency - Strategy Development Fund
throughout the year ended 31 March 2019 and the comparative year.
Both funds were consolidated in full, on a line-by-line basis in
the Group's financial statements throughout these periods.
The Group was in control of the Record Currency - Emerging
Market Currency Fund until 21 March 2018, at which point the Group
no longer consolidated the fund on a line-by-line basis, but the
Group did consolidate the fund in full on a line-by-line basis
until that date. The fair value of the Group's holding in the
Record Currency - Emerging Market Currency Fund was recognised as
an investment from 22 March 2018 onwards.
In February 2018, the Company invested in the Record - Currency
Multi-Strategy Fund. The Group has controlled this fund since
inception and the fund is consolidated in full on a line-by-line
basis.
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Investment in funds
Record Currency - FTSE FRB10
Index Fund - - 1,162 1,116
Record Currency - Emerging Market
Currency Fund 1,112 1,115 1,112 1,115
Record Currency - Strategy Development
Fund - - 1,046 952
Record - Currency Multi-Strategy
Fund - - 966 1,004
-------- -------- -------- --------
Total investment in funds 1,112 1,115 4,286 4,187
-------- -------- -------- --------
14. Deferred taxation - Group
Deferred tax is the future tax consequences of temporary
differences between the carrying amounts and tax bases of assets
and liabilities shown on the statement of financial position. The
amount of deferred tax provided is based on the expected manner of
recovery or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. The carrying amount of the
deferred tax assets are reviewed at each statement of financial
position date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the asset to be recovered.
A deferred tax liability is generally recognised for all taxable
temporary differences.
Deferred tax assets or liabilities arising on goodwill are not
recognised but are however recognised on separately identifiable
intangible assets. Deferred tax arising on the initial recognition
of an asset or liability, other than a business combination, that
at the time of the transaction affects neither the accounting nor
taxable profit or loss, is not recognised.
2019 2018
GBP'000 GBP'000
-------- --------
Charge to income statement in year (115) (16)
Asset brought forward 86 102
-------- --------
(Liability)/asset carried forward (29) 86
-------- --------
The deferred tax (liability)/asset consists of the tax effect of
temporary differences in respect of:
2019 2018
GBP'000 GBP'000
-------- --------
Deferred tax allowance on unvested share
options 6 98
Shortfall of taxation allowances over
depreciation on fixed assets (35) (12)
-------- --------
Total (29) 86
-------- --------
At the year end there were share options not exercised with an
intrinsic value for tax purposes of GBP44,534 (2018: GBP945,864).
On exercise the Group will be entitled to a corporation tax
deduction in respect of the difference between the exercise price
and the strike price. There is no unprovided deferred taxation.
15. Trade and other receivables
Trade and other receivables are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method, less loss allowances. The amortised cost
of trade and other receivables is stated at original invoice value,
as the interest that would be recognised from discounting future
cash receipts over the short credit period is not considered to be
material.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses (ECLs) for trade receivables at an amount
equal to lifetime ECLs. The ECLs on trade receivables are
calculated based on actual historic credit loss experience over the
preceding 10 years on the total balance of non-credit impaired
trade receivables. Accrued income relates to management and
performance fees earned but not yet invoiced.
An analysis of the Group's receivables is provided below:
2019 2018
GBP'000 GBP'000
-------- --------
Trade receivables 4,654 5,279
Accrued income 1,888 582
Other receivables 108 56
Prepayments 912 858
-------- --------
Total 7,562 6,775
-------- --------
All amounts are short term. The Directors consider that the
carrying amount of trade and other receivables approximates to
their fair value. The Group has not renegotiated the terms of any
receivables in the year ended 31 March 2019. The Group's trade
receivables are generally short-term and do not contain significant
financing components. Therefore, the Group has applied a simplified
approach by using a provision matrix to calculate lifetime expected
credit losses based on actual credit loss experience. The Group has
calculated lifetime expected credit losses to be GBPnil, which is
consistent with the last 10 years history of credit risk and
reflects expected future recoverability issues.
16. Derivative financial assets and liabilities
Derivative financial instruments are initially recognised at
cost on the date on which the contract is first entered into unless
the fair value at acquisition is different to cost, in which case
fair value is recognised. Subsequently they are measured at fair
value with gains and losses recognised in profit or loss.
Transaction costs are immediately recognised in profit or loss. The
fair values of derivative financial instruments are determined by
reference to active market transactions.
The Group holds derivative financial instruments for two
purposes. The Group uses forward foreign exchange contracts to
reduce the risk associated with assets denominated in foreign
currencies, and additionally uses both foreign exchange options and
forward foreign exchange contracts in order to achieve a return
within the seed funds. The instruments are recognised at fair
value. The fair value of the contracts is calculated using the
market rates prevailing at the period end date. The net gain or
loss on instruments is included within revenue.
2019 2018
Derivative financial assets GBP'000 GBP'000
-------- --------
Forward foreign exchange contracts held
to hedge non-sterling based assets 106 199
Forward foreign exchange contracts held
for trading 58 67
Total 164 266
2019 2018
Derivative financial liabilities GBP'000 GBP'000
-------- --------
Forward foreign exchange contracts held
for trading (109) (29)
-------- --------
Total (109) (29)
-------- --------
Derivative financial instruments held to hedge non-sterling
based assets
At 31 March 2019 there were outstanding contracts with a
principal value of GBP5,940,246 (31 March 2018: GBP9,951,185) for
the sale of foreign currencies in the normal course of business.
The fair value of the contracts is calculated using the market
forward contract rates prevailing at 31 March 2019. The Group does
not apply hedge accounting.
The net gain or loss on forward foreign exchange contracts held
to hedge non-sterling based assets is as follows:
2019 2018
GBP'000 GBP'000
-------- --------
Net (loss)/gain on forward foreign exchange
contracts at fair value through profit
or loss (242) 424
-------- --------
Derivative financial instruments held for trading
The Record Currency - FTSE FRB10 Index Fund, the Record Currency
- Emerging Market Currency Fund and the Record - Currency
Multi-Strategy Fund, use forward foreign exchange contracts in
order to achieve a return. The Record Currency - Strategy
Development Fund may use a variety of instruments including forward
foreign exchange contracts, options and futures in order to achieve
a return.
All derivative financial instruments held by the Record Currency
- Strategy Development Fund, the Record Currency - FTSE FRB10 Index
Fund and the Record - Currency Multi-Strategy Fund were classified
as held for trading throughout the period. The derivative financial
instruments held by the Record Currency - Emerging Market Currency
Fund were classified as held for trading from inception until 21
March 2018 when the fund was deconsolidated from the Group
financial statements.
At 31 March 2019 there were outstanding contracts with a
principal value of GBP24,323,080 (31 March 2018:
GBP15,012,327).
The net gain or loss on derivative financial instruments held
for trading for the year was as follows:
2019 2018
GBP'000 GBP'000
--------- --------
Net gain on forward foreign exchange contracts
and foreign exchange options at fair value
through profit or loss - 53
--------- --------
17. Cash management
The Group's cash management strategy employs a variety of
treasury management instruments including cash, money market
deposits and treasury bills. Whilst the Group manages and considers
all of these instruments as cash, which are subject to its own
internal cash management process, not all of these instruments are
classified as cash or cash equivalents under IFRS.
IFRS defines cash and cash equivalents as cash in hand, on
demand and collateral deposits held with banks, and other
short--term highly liquid investments that are readily convertible
to a known amount of cash and are subject to an insignificant risk
of changes in value. Moreover, instruments can only generally be
classified as cash and cash equivalents where they are held for the
purpose of meeting short--term cash commitments rather than for
investment or other purposes.
In the Group's judgement, bank deposits and treasury bills with
maturities in excess of 3 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 >3
months.
Assets managed as cash Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Bank deposits with maturities
> 3 months 10,735 9,698 - -
Treasury bills with maturities - 500 - -
> 3 months
-------- -------- -------- --------
Money market instruments with
maturities > 3 months 10,735 10,198 - -
-------- -------- -------- --------
Cash 2,150 4,411 3 2
Bank deposits with maturities
<= 3 months 10,816 8,087 - -
-------- -------- -------- --------
Cash and cash equivalents 12,966 12,498 3 2
-------- -------- -------- --------
Total assets managed as cash 23,701 22,696 3 2
-------- -------- -------- --------
Cash and cash equivalents Group Company
------------------ ------------------
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Cash and cash equivalents -
sterling 10,624 3,827 3 2
Cash and cash equivalents -
USD 2,180 2,680 - -
Cash and cash equivalents -
CHF 73 4,610 - -
Cash and cash equivalents -
other currencies 89 1,381 - -
-------- -------- -------- --------
Total cash and cash equivalents 12,966 12,498 3 2
-------- -------- -------- --------
The Group cash and cash equivalents balance incorporates the
cash and cash equivalents held by any fund deemed to be under
control of Record plc (refer to notes 1 and 13 for explanation of
accounting treatment). As at 31 March 2019, the cash and cash
equivalents held by the seed funds over which the Group had control
totalled GBP5,107,670 (31 March 2018: GBP4,969,231) and the money
market instruments with maturities > 3 months held by these
funds were GBP675,577 (31 March 2018: GBP500,000). As at 31 March
2019, the cash and cash equivalents held by Trade Record over which
the Group had control was GBP80,000 (31 March 2018: GBPnil). At 31
March 2019, Trade Record did not hold any money market instruments
with maturities > 3 months (2018: GBPnil).
18. Current liabilities
Trade and other payables are stated at their original invoice
value, as the interest that would be recognised from discounting
future cash payments over the short payment period is not
considered to be material.
Trade and other payables
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Trade payables 294 325 - -
Amounts owed to Group undertaking - - 55 1,093
Other payables 4 4 - -
Other tax and social security 257 234 - -
Accruals 2,181 2,067 - -
-------- -------- -------- --------
Total 2,736 2,630 55 1,093
-------- -------- -------- --------
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
Current tax liabilities
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Corporation tax 692 399 14 -
-------- -------- -------- --------
19. Financial liabilities
Record plc has made investments in a number of funds where it is
in a position to be able to control those funds by virtue of the
size of its holding. When Record plc is not the only investor in
such funds and the external investment instrument does not meet the
definition of an equity instrument under IAS 32 then the instrument
is classified as a financial liability. The financial liabilities
are measured at cost plus movement in value of the third party
investment in the fund.
Record has seeded four funds which have been active during the
year ended 31 March 2019.
The Record Currency - FTSE FRB10 Index Fund was considered to be
under control of the Group as the combined holding of Record plc
and its Directors constituted a majority interest throughout
current and prior years. Similarly, the Record Currency - Strategy
Development Fund is considered to be under control of the Group as
Record plc has had a 100% holding throughout both years.
The Record Currency - Emerging Market Currency Fund was under
the control of the Group until 21 March 2018, when the redemption
of units by two Record plc Directors meant that Record could no
longer control the fund as the combined holding of Record plc and
its Directors no longer constituted a majority interest from that
point onwards. This fund has therefore been consolidated into the
Group's financial statements until 21 March 2018.
In February 2018, the Company invested in the Record - Currency
Multi-Strategy Fund. The Group has controlled this fund since
inception and the fund is consolidated in full on a line-by-line
basis as the combined holding of Record plc and its Directors has
constituted a majority interest since inception.
The mark to market value of units held by investors in these
funds other than Record plc are shown as financial liabilities in
the Group financial statements, in accordance with IFRS.
Mark to market value of external holding in seeded funds
consolidated into the accounts of the Record Group
2019 2018
GBP'000 GBP'000
-------- --------
Record Currency - FTSE FRB10 Index
Fund 479 459
Record - Currency Multi-Strategy
Fund 2,142 2,008
Record Currency - Strategy Development - -
Fund
-------- --------
Total financial liabilities 2,621 2,467
-------- --------
The financial liabilities relate only to the fair value of the
external investors' holding in the seed funds, and are in no sense
debt.
20. Issued share capital
The share capital of Record plc consists only of fully paid
ordinary shares with a par value of 0.025p each. All shares are
equally eligible to receive dividends and the repayment of capital
and represent one vote at the shareholders' meeting.
2019 2018
GBP'000 Number GBP'000 Number
-------- -------- ------------
Authorised
Ordinary shares of 0.025p
each 100 400,000,000 100 400,000,000
-------- ------------ -------- ------------
Called up, allotted and
fully paid
Ordinary shares of 0.025p
each 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.
Number
Record plc shares held by EBT as at 31 March
2017 3,618,995
Adjustment for net sales by EBT (1,225,563)
------------
Record plc shares held by EBT as at 31 March
2018 2,393,432
Adjustment for net purchases by EBT 592,604
------------
Record plc shares held by EBT as at 31 March
2019 2,986,036
------------
The holding of the EBT comprises own shares that have not vested
unconditionally to employees of the Group. Own shares are recorded
at cost and are deducted from retained earnings.
Further information regarding the Record plc share--based
compensation plans and relevant transactions made during the year
is included in note 21.
21. Share-based payments
During the year ended 31 March 2019 the Group has managed the
following share--based compensation plans:
a) The Group Profit Share Scheme: share awards issued under the
Group Profit Share Scheme are classified as share--based payments
with cash alternatives under IFRS 2.
b) The Record plc Share Scheme: share options issued under the
Record plc Share Scheme are classified as equity--settled
share--based payments under IFRS 2.
c) The Record plc Share Incentive Plan: the Group operates the
Record plc Share Incentive Plan ("SIP") to encourage more
widespread ownership of Record plc shares by employees. The SIP is
a tax--approved scheme offering attractive tax savings for
employees retaining their shares in the scheme over the medium to
long term.
All obligations arising from the three schemes have been
fulfilled through purchasing shares in the market.
a. Group Profit Share Scheme
Share-based payments with cash alternatives
These transactions are compound financial instruments, which
include a debt element and a cash element. The fair value of the
debt component of the amounts payable to the employee is calculated
as the cash amount alternative offered to the employee at grant
date and the fair value of the equity component of the amounts
payable to the employee is calculated as the market value of the
share award at grant date less the cash forfeited in order to
receive the share award. The debt component is charged to profit or
loss over the period in which the award is earned and remeasured at
fair value at each reporting date. The equity component is charged
to profit or loss over the period in which the award is earned.
The Group Profit Share Scheme allocates a proportion of
operating profits to a profit share pool to be distributed between
all employees of the Group. The Remuneration Committee has the
discretion to vary the proportion allocated to the profit share
pool between 25% and 35% of operating profits. Directors and senior
employees receive one third of their profit share in cash, one
third in shares ("Earned Shares") and may elect to receive the
final third as cash only or to allocate some, or all, of the amount
for the purchase of Additional Shares. The charge to profit or loss
in respect of Earned Shares in the period was GBP804,422 (2018:
GBP682,758). Other employees receive two thirds of their profit
share in cash and may elect to receive the final third as cash only
or to allocate some, or all, of the amount for the purchase of
Additional Shares.
Prior to 1 October 2017, if an individual elected to receive
Additional Shares, the Group simultaneously awarded a Matching
Share value amount using a multiple decided by the Remuneration
Committee. The multiple was dependent on the level of seniority of
the employee. The number of shares was determined by the post-tax
cash attributed to Earned Shares plus Additional Shares plus
Matching Shares divided by the aggregate market value achieved on
the purchase of all such shares in the market. The charge to profit
or loss in respect of Matching Shares for the year ended 31 March
2018 was GBP141,078.
From 1 October 2017, as a result of changes to the Group Profit
Share Scheme, Matching Shares are no longer awarded by the group
and therefore the charge to profit or loss in respect of Matching
Shares for the year ended 31 March 2019 was GBPnil.
Shares awarded under the Group Profit Share Scheme do not
include any vesting restrictions but rather restrictions over
subsequent sale and transfer. All shares which are the subject of
share awards vest immediately and are transferred to a nominee
allowing the employee, as beneficial owner to retain full rights in
respect of the shares purchased. However, these shares cannot be
sold, transferred or otherwise disposed of without the consent of
the Remuneration Committee except as follows:
-- Earned Shares - one third on each anniversary of the Profit Share Payment date; and
-- Matching Shares and Additional Shares received in respect of
elections made prior to 1 October 2017 - the third anniversary of
the Profit Share Payment date for Directors and senior employees
and the second anniversary of the Profit Share Payment date for all
other employees.
The Group Profit Share Scheme rules contain clawback provisions
allowing for the repayment of profit share payments under certain
circumstances including a material breach of contract, an error in
performance of duties or a restatement of accounts which leads to a
change in any prior award under the scheme.
Shares awarded under this scheme have been purchased in the
market.
b. The Record plc Share Scheme
Equity--settled share--based payments
The fair value of the amounts payable to employees under these
awards is recognised as an expense over the vesting period of the
award, with a corresponding increase in equity. All such awards
made by the Group involve the parent company granting rights to its
equity instruments to employees of its subsidiary. Consequently the
subsidiary measures the services received from its employees in
accordance with the above classification under IFRS 2 and
recognises a corresponding increase in equity as a contribution
from the parent. The parent has the obligation to settle the
transaction with the subsidiary's employees and therefore
recognises an increase in its investment in the subsidiary and a
corresponding increase in equity.
The fair value of options granted is measured at grant date
using an appropriate valuation model, taking into account the terms
and conditions upon which the instruments were granted and using
quoted share prices.
The Record plc Share Scheme allows deferred share awards to be
granted to employees and Directors in the Record Group. Part 1 of
the Record plc Share Scheme allows the grant of tax-unapproved
("Unapproved") options to employees and Directors and Part 2 allows
the grant of HMRC tax-approved ("Approved") options to employees
and Directors. Each participant may be granted Approved options
over shares with a total market value of up to GBP30,000 on the
date of grant. There is no such limit on the value of grant for
Unapproved options, which have historically been granted with a
market value exercise price in the same way as for the Approved
options.
Options over an aggregate of 935,000 shares were granted under
the Share Scheme during the year (2018: 3,975,000), of which
370,000 were made subject to Unapproved options and 565,000 to
Approved options (2018: 2,261,000 made subject to Unapproved
options and 1,714,000 to Approved options). All options were
granted with an exercise price per share equal to the share price
prevailing at the time of grant.
The 565,000 Approved options issued to employees on 29 March
2019 each become exercisable on the fourth anniversary of the date
of grant, subject to the employee being in employment with the
Group at the relevant vesting date and to the extent performance
conditions have been satisfied.
The 370,000 Unapproved options issued to employees on 29 March
2019 each become exercisable in four equal tranches on the first,
second, third and fourth anniversary of the date of grant, subject
to the employee being in employment with the Group at the relevant
vesting date and to the extent performance conditions have been
satisfied.
The fair value of the services provided by employees has been
calculated indirectly by reference to the fair value of the equity
instruments granted. Fair value amounts for the options granted in
the year ended 31 March 2019 were determined using a Black-Scholes
option-pricing method and the following assumptions:
Model input Weighted
average value
Share price 28.3p
Exercise price 28.3p
Expected volatility 36%
Option life 3.4 years
Risk-free interest rate (%) 1.03%
---------------
Expected volatility is based on historical volatility.
The Group share--based payment expense in respect of the Share
Scheme was GBP140,236 for the year ended 31 March 2019 (2018:
GBP197,740).
Outstanding share options
At 31 March 2019, the total number of ordinary shares of 0.025p
outstanding under Record plc share compensation schemes was
12,291,703 (2018: 14,343,147). These deferred share awards and
options are over issued shares, a proportion of which are hedged by
shares held in an EBT. Details of outstanding share options awarded
to employees are set out below:
At 31 Earliest Latest
Date At 1 April Lapsed March vesting vesting Exercise
of grant 2018 Granted Exercised / forfeited 2019 date date(9) price
18/11/13 466,667 - - (350,000) 116,667 18/11/16 18/11/18 GBP0.3000
26/11/14 1,440,000 - - (720,000) 720,000 26/11/17 26/11/19 GBP0.3586
24/03/15 228,000 - - (114,000) 114,000 24/03/19 24/03/19 GBP0.3450
24/03/15 744,500 - (372,250) (37,500) 334,750 24/03/16 24/03/19 GBP0.3450
01/12/15 1,800,000 - - (600,000) 1,200,000 01/12/18 01/12/20 GBP0.2888
27/01/16 918,750 - (306,250) (50,000) 562,500 27/01/17 27/01/20 GBP0.2450
27/01/16 685,209 - - (27,612) 657,597 27/01/20 27/01/20 GBP0.2450
27/01/16 327,500 - - (109,166) 218,334 27/01/19 27/01/21 GBP0.2450
27/01/16 72,500 - - (24,166) 48,334 27/01/19 27/01/21 GBP0.2450
30/11/16 288,574 - - - 288,574 30/11/20 30/11/20 GBP0.34072
30/11/16 1,117,500 - - (75,000) 1,042,500 30/11/17 30/11/20 GBP0.34072
30/11/16 2,200,000 - - - 2,200,000 30/11/19 30/11/21 GBP0.34072
31/01/17 78,947 - - - 78,947 31/01/21 31/01/21 GBP0.38000
26/01/18 1,662,000 - - (200,500) 1,461,500 26/01/22 26/01/23 GBP0.4350
26/01/18 328,000 - - - 328,000 26/01/19 26/01/23 GBP0.4350
26/01/18 52,000 - - - 52,000 26/01/21 26/01/24 GBP0.4350
26/01/18 1,933,000 - - - 1,933,000 26/01/21 26/01/24 GBP0.4350
29/03/19 - 565,000 - - 565,000 29/03/23 29/03/24 GBP0.2830
29/03/19 - 370,000 - - 370,000 29/03/20 29/03/24 GBP0.2830
Total
options 14,343,147 935,000 (678,500) (2,307,944) 12,291,703
Weighted
average
exercise
price
of options GBP0.35 GBP0.28 GBP0.30 GBP0.33 GBP0.35
----------- -------- ---------- ------------- ----------- --------- --------- -----------
(9) Under the terms of the deeds of grant, options are
exercisable for twelve months following the vesting date.
During the year 678,500 options were exercised. The weighted
average share price at date of exercise was GBP0.41. At 31 March
2019 a total of 1,276,167 options had vested and were
exercisable.
The Directors' interests in the combined share schemes are as
follows:
Ordinary shares held as at
31 March 31 March
2019 2018
-------------- -------------
Record plc Group Profit Share Scheme (interest in restricted share awards)
James Wood--Collins 318,832 375,408
Leslie Hill 802,837 1,008,518
Bob Noyen 318,832 324,614
Steve Cullen 264,286 361,076
-------------- -------------
Record plc Share Scheme (interest in unvested share options)
James Wood--Collins 2,426,667 3,286,667
Leslie Hill 1,406,667 1,800,000
Bob Noyen 1,406,667 1,800,000
Steve Cullen 1,131,667 1,405,000
-------------- -------------
Performance measures
Performance conditions attached to all options granted to Board
Directors differ to those granted for all other staff. All
Executive Director option awards are subject to a performance
condition and vest on each of the third, fourth and fifth
anniversaries of the date of grant subject to an earnings per share
("EPS") hurdle linked to the annualised EPS growth for the
respective three, four and five-year periods from grant. Vesting is
on a stepped basis, with 25% of each tranche vesting if EPS growth
over the relevant period is at least RPI plus 4% per annum,
increasing through 50%, 75% and with 100% vesting if EPS growth
exceeds RPI plus 13%, as shown in the table below. Options awarded
subject to EPS performance conditions are valued using a
Black-Scholes model.
Record's average EPS growth Percentage of shares subject to the award which vest
>RPI growth + 13% 100%
>RPI growth + 10%, =<RPI growth + 13% 75%
>RPI growth + 7%, =<RPI growth + 10% 50%
>RPI growth + 4%, =<RPI growth + 7% 25%
=<RPI growth + 4% 0%
-----------------------------------------------------
Approved options issued to all other staff during the year and
the prior year were not subject to a Group performance measure.
Approved options issued to all other staff prior to 1 April 2017
were subject to performance measures linked to the Group's Total
Shareholder Return ("TSR") and vested on the fourth anniversary of
the date of grant, subject to these measures. At vesting date, a
percentage of the total options granted could vest based upon
Record's TSR performance versus the median TSR performance as
measured against the FTSE 350 General Financial - Price Index.
Options awarded subject to TSR performance conditions were valued
using a Black-Scholes model. The performance target table is given
below:
Percentage by which Record's TSR is below the median TSR
performance of the index Percentage of shares subject to the award which vest
Equal to or above the median TSR performance 100%
Equal to or above 75% of the median TSR performance 75%
Equal to or above 50% of the median TSR performance 50%
Below 50% of the median TSR performance 0%
-----------------------------------------------------
Unapproved options issued to all other staff vest in four equal
tranches on the first, second, third and fourth anniversaries of
the date of grant, subject to the employee being employed with the
Group at the relevant vesting date and to the extent personal
performance conditions have been satisfied.
Clawback provisions
In addition to the performance measures above, both Approved and
Unapproved Options granted to Executive Directors under the Share
Scheme are subject to clawback provisions. These provisions allow
the Remuneration Committee to adjust the number of shares that may
be, or were, acquired to be decreased if the committee considers
that either a material breach of contract has arisen or in respect
of retrospective amendments required to calculations of the Group's
performance upon which vesting calculations were originally based.
The clawback provisions allow the Group to take various steps until
the clawback obligation is satisfied, including reduction of future
share option awards, transfer of shares back to the Group for nil
consideration, reduction of future payments under the Group Profit
Share Scheme or payment of sales proceeds back to the Group.
c. The Record plc Share Incentive Plan
The Group operates the Record plc Share Incentive Plan ("SIP")
to encourage more widespread ownership of Record plc shares by
employees. The SIP is a tax--approved scheme offering attractive
tax savings for employees retaining their shares in the scheme over
the medium to long term.
As an incentive to employees, the Group matches every two shares
bought by employees with a free matching share. During the year,
the Group awarded 66,672 free shares (2018: 40,909 free shares) to
employees. The expense charged in respect of the SIP was GBP22,200
in the year ended 31 March 2019 (2018: GBP18,833).
22. Financial risk management
The Group's current activities result in the following financial
risks and management responses to those risks in order to minimise
any resulting adverse effects on the Group's financial
performance.
Objectives, policies and processes for managing risk and the
methods used to measure the risk
Financial assets principally comprise trade receivables, accrued
income, other receivables, money market instruments, cash and cash
equivalents and derivative financial assets. Financial liabilities
comprise trade and other payables and derivative financial
liabilities. The main risks arising from financial instruments are
credit risk, liquidity risk, foreign currency risk and interest
rate risk, each of which is discussed in further detail below.
The Group monitors and mitigates financial risk on a
consolidated basis. The Group has implemented a framework to manage
the risks of its business and to ensure that the Directors have in
place risk management practices appropriate to a listed company.
The management of risk is directed by the Board and reviewed by the
Audit and Risk Committee.
The Company's material financial instruments are investments in
the seed funds, and balances due to/from Group undertakings.
Intercompany balances are classified as loans and receivables and
are repayable on demand. No interest is charged on these balances.
The Group has sufficient cash resources and hence management does
not believe that the Company has a material exposure to credit
risk. The Company's financial risk is managed as part of the Group
financial risk management process and therefore separate
disclosures for the Company have not been provided.
Credit risk
The Group has established a cash management team to manage Group
cash in accordance with an approved cash management policy. The
policy stipulates exposure limits by instruments, counterparty,
tenor and duration. Counterparty exposures are measured against
ratings published by credit--rating agencies and are monitored
daily. The maximum single exposure to any counterparty under the
policy is 20% of total assets managed as cash.
The primary objective of the cash management team is to
diversify and manage counterparty risk within the risk appetite of
the Group and the limits set by the policy. The secondary objective
is to maintain yield given the constraints under the policy whilst
ensuring sufficient liquidity to meet future cash flow commitments
as instructed by the finance team.
The Chief Financial Officer is responsible for reviewing the
Group's credit exposure and ensuring that any credit concerns are
raised to the Risk Management Committee and that action is taken to
mitigate these risks.
The Group's maximum exposure to credit risk is as follows:
2019 2018
Financial assets at 31 March GBP'000 GBP'000
-------- --------
Trade receivables 4,654 5,279
Accrued income 1,888 582
Other receivables 108 56
Derivative financial assets 164 266
Money market instruments with maturities
> 3 months 10,735 10,198
Cash and cash equivalents 12,966 12,498
-------- --------
Total financial assets 30,515 28,879
-------- --------
The debtors' age analysis is also evaluated on a regular basis
for potential doubtful debts. It is management's opinion that no
provision for doubtful debts is required. The table below is an
analysis of trade receivables and accrued income by due date:
Carrying Neither impaired 0--3 months More than
amount nor past past due 3 months
due past due
At 31 March
2019 GBP'000 GBP'000 GBP'000 GBP'000
--------- ----------------- ------------ ----------
Trade receivables 4,654 4,369 285 -
Accrued income 1,888 1,888 - -
--------- ----------------- ------------ ----------
Total 6,542 6,257 285 -
--------- ----------------- ------------ ----------
96% 4% 0%
--------- ----------------- ------------ ----------
Carrying Neither impaired 0--3 months More than
amount nor past past due 3 months
due past due
At 31 March
2018 GBP'000 GBP'000 GBP'000 GBP'000
--------- ----------------- ------------ ----------
Trade receivables 5,279 4,551 726 2
Accrued income 582 582 - -
--------- ----------------- ------------ ----------
Total 5,861 5,133 726 2
--------- ----------------- ------------ ----------
88% 12% 0%
--------- ----------------- ------------ ----------
The Group offers standard credit terms of 30 days from invoice
date. It is the Group's policy to assess debtors for recoverability
on an individual basis and to make a provision where it is
considered necessary. In assessing recoverability the Group takes
into account any indicators of impairment up to the reporting date.
The application of this policy generally results in debts that are
0--3 months overdue not being provided for unless individual
circumstances indicate that a debt is impaired.
Trade receivables are made up of 57 debtors' balances (2018:
52). The largest individual debtor corresponds to 19% of the total
balance (2018: 18%). Debtor days, based on the generally accepted
calculation of debtor days, is 68 days (2018: 81 days). This
reflects the quarterly billing cycle used by the Group for the vast
majority of its fees. As at 31 March 2019 4.4% of debt was overdue
(2018: 12.4%). No debtors' balances have been renegotiated during
the year or in the prior year.
Liquidity risk
The Group is exposed to liquidity risk, namely that it may be
unable to meet its payment obligations as they fall due. The Group
maintains sufficient cash and marketable securities to be able to
meet all such obligations. Management review cash flow forecasts on
a regular basis to determine whether the Group has sufficient cash
reserves to meet the future working capital requirements and to
take advantage of business opportunities. The average creditor
payment period is 21 days (2018: 22 days).
Contractual maturity analysis for financial liabilities:
Carrying Due or Due between Due between
amount due in 1 and 3 3 months
less than months and 1 year
1 month
At 31 March 2019 GBP'000 GBP'000 GBP'000 GBP'000
--------- ----------- ------------ ------------
Trade payables 294 294 - -
Accruals 2,181 40 1,041 1,100
Derivative financial
liabilities 109 33 76 -
--------- ----------- ------------ ------------
Total 2,584 367 1,117 1,100
--------- ----------- ------------ ------------
Carrying Due or Due between Due between
amount due in 1 and 3 3 months
less than months and 1 year
1 month
At 31 March 2018 GBP'000 GBP'000 GBP'000 GBP'000
--------- ----------- ------------ ------------
Trade payables 325 325 - -
Accruals 2,067 164 838 1,065
Derivative financial
liabilities 29 25 4 -
--------- ----------- ------------ ------------
Total 2,421 514 842 1,065
--------- ----------- ------------ ------------
Interest rate risk
Interest rate risk is the risk that the value of a financial
instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates. Interest rate
risk arises from interest-bearing financial assets and liabilities
held by the Group. Interest-bearing assets comprise money market
instruments and cash and cash equivalents which are considered to
be short--term liquid assets. It is the Group's policy to settle
trade payables within the credit terms allowed and the Group does
not therefore incur interest on overdue balances.
A sensitivity analysis has not been disclosed for the impact of
interest rate changes as any reasonable range of change in interest
rate would not directly have a material impact on profit or
equity.
Interest rate profiles
Fixed Floating No interest Total
rate rate rate
At 31 March 2019 GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- ------------ --------
Financial assets
Trade receivables - - 4,654 4,654
Accrued income - - 1,888 1,888
Other receivables - - 108 108
Derivative financial assets
at fair value through
profit or loss - - 164 164
Money market instruments
with maturities > 3 months 10,735 - - 10,735
Cash and cash equivalents 10,816 2,150 - 12,966
-------- --------- ------------ --------
Total financial assets 21,551 2,150 6,814 30,515
-------- --------- ------------ --------
Financial liabilities
Trade payables - - (294) (294)
Accruals - - (2,181) (2,181)
Derivative financial liabilities
at fair value through
profit or loss - - (109) (109)
Financial liabilities - - (2,621) (2,621)
-------- --------- ------------ --------
Total financial liabilities - - (5,205) (5,205)
-------- --------- ------------ --------
Fixed Floating No interest Total
rate rate rate
At 31 March 2018 GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- ------------ --------
Financial assets
Trade receivables - - 5,279 5,279
Accrued income - - 582 582
Other receivables - - 56 56
Derivative financial assets
at fair value through
profit or loss - - 266 266
Money market instruments
with maturities > 3 months 10,198 - - 10,198
Cash and cash equivalents 8,087 4,411 - 12,498
-------- --------- ------------ --------
Total financial assets 18,285 4,411 6,183 28,879
-------- --------- ------------ --------
Financial liabilities
Trade payables - - (325) (325)
Accruals - - (2,067) (2,067)
Derivative financial liabilities
at fair value through
profit or loss - - (29) (29)
Financial liabilities - - (2,467) (2,467)
-------- --------- ------------ --------
Total financial liabilities - - (4,888) (4,888)
-------- --------- ------------ --------
Foreign currency risk
Foreign currency risk refers to the risk that the value of a
financial commitment or recognised asset or liability will
fluctuate due to changes in foreign currency rates. The Group makes
use of forward foreign exchange contracts to manage the risk
relating to future transactions in accordance with the Group's risk
management policy.
The Group is exposed to foreign currency risk on sales and cash
holdings that are denominated in a currency other than sterling,
and also on assets and liabilities held by the Record Currency -
Strategy Development Fund. The principal currencies giving rise to
this risk are the US dollar, the Swiss franc, the euro and the
Canadian dollar.
During the year ended 31 March 2019, the Group invoiced the
following amounts in currencies other than sterling:
Local Value
currency in reporting
value currency
GBP'000 GBP'000
Swiss franc (CHF) 13,454 10,440
US dollar (USD) 9,428 7,247
Euro (EUR) 3,349 2,961
Canadian dollar (CAD) 660 383
Australian dollar (AUD) 390 215
Swedish krona (SEK) 1,161 99
Singapore dollar (SGD) 31 18
---------- --------------
21,363
---------- --------------
The value of revenues for the year ended 31 March 2019 that were
denominated in currencies other than sterling was GBP21.4 million
(31 March 2018: GBP20.1 million).
Record's policy is to reduce the risk associated with the
Group's sales denominated in foreign currencies by using forward
fixed rate currency sales contracts, taking into account any
forecast foreign currency cash flows.
The settlement of these forward foreign exchange contracts is
expected to occur within the following three months. Changes in the
fair values of forward foreign exchange contracts are recognised
directly in profit or loss.
The cash denominated in currencies other than sterling (refer to
note 17), is covered by the Group's hedging process, therefore the
Directors consider that the foreign currency risk on cash balances
is not material.
Foreign currency risk - sensitivity analysis
The Group has considered the sensitivity to exchange rate
movements by considering the impact on those revenues, costs,
assets and liabilities denominated in foreign currencies as
experienced in the given period.
Impact on profit
after tax Impact on total
for the year equity
ended 31 March as at 31 March
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
--------- -------- -------- --------
Sterling weakening by 10%
against the dollar 346 469 346 469
Sterling strengthening
by 10% against the dollar (346) (469) (346) (469)
--------- -------- -------- --------
Sterling weakening by 10%
against the Swiss franc 565 593 565 593
Sterling strengthening
by 10% against the Swiss
franc (565) (593) (565) (593)
--------- -------- -------- --------
Sterling/US dollar exchange rate
The impact of a change of 10% has been selected as this is
considered reasonable given the current level of exchange rates and
the volatility observed on a historical basis and market
expectations for future movement. When applied to the average
sterling/USD exchange rate of GBP/$1.31 this would result in
sterling weakening to GBP/$1.19 and sterling strengthening to
GBP/$1.46.
Sterling/Swiss franc exchange rate
The impact of a change of 10% has been selected as this is
considered reasonable given the current level of exchange rates and
the volatility observed on a historical basis and market
expectations for future movement. When applied to the average
sterling/CHF exchange rate of GBP/1.30 this would result in
sterling weakening to GBP/CHF1.18 and sterling strengthening to
GBP/CHF1.44.
Sensitivity analyses have not been disclosed for other
currencies as any reasonable range of change in exchange rate would
not have a material impact on profit or equity.
23. Fair value measurement
The following table presents financial assets and liabilities
measured at fair value in the consolidated statement of financial
position in accordance with the fair value hierarchy. This
hierarchy groups financial assets and liabilities into three levels
based on the significance of inputs used in measuring the fair
value of the financial assets and liabilities. The fair value
hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2: inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The level within which the financial asset or liability is
classified is determined based on the lowest level of input to the
fair value measurement. The financial assets and liabilities
measured at fair value in the statement of financial position are
grouped into the fair value hierarchy as follows:
2019 Level Level Level
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Financial assets at fair value
through profit or loss
Forward foreign exchange contracts
used for hedging 106 - 106 -
Forward foreign exchange contracts
used for seed funds 58 - 58 -
Financial liabilities at fair
value through profit or loss
Forward foreign exchange contracts
used for hedging (109) - (109) -
Forward foreign exchange contracts - - - -
used for seed funds
Total 55 - 55 -
2018 Level Level Level
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Financial assets at fair value
through profit or loss
Forward foreign exchange contracts
used for hedging 199 - 199 -
Forward foreign exchange contracts
used for seed funds 67 - 67 -
Financial liabilities at fair
value through profit or loss
Forward foreign exchange contracts
used for hedging (29) - (29) -
Forward foreign exchange contracts - - - -
used for seed funds
Total 237 - 237 -
There have been no transfers between levels in the reporting
period (2018: none).
Basis for classification of financial instruments classified as
level 2 within the fair value hierarchy
Both forward foreign exchange contracts and options are
classified as level 2. Both of these instruments are traded on an
active market. Options are valued using an industry standard model
with inputs based on observable market data whilst the fair value
of forward foreign exchange contracts may be established using
interpolation of observable market data rather than from a quoted
price.
Classes and fair value of financial instruments
It is the Directors' opinion that the carrying value of all
financial instruments approximates to their fair value.
Categories of financial instrument
Loans Financial Assets Liabilities
and receivables liabilities at fair at fair
measured value value
at amortised through through
cost profit profit
or loss or loss
At 31 March 2019 Note GBP'000 GBP'000 GBP'000 GBP'000
----- ----------------- -------------- --------- ------------
Trade and other receivables
(excludes prepayments) 15 6,650 - - -
Money market instruments
with maturities >
3 months 17 10,735 - - -
Cash and cash equivalents 17 12,966 - - -
Derivative financial
assets at fair value
through profit or
loss 16 - - 164 -
Trade payables 18 - (294) - -
Accruals 18 - (2,181) - -
Derivative financial
liabilities at fair
value through profit
or loss 16 - - - (109)
----- ----------------- -------------- --------- ------------
Total 30,351 (2,475) 164 (109)
----- ----------------- -------------- --------- ------------
Loans and Financial Assets Liabilities
receivables liabilities at fair at fair
measured value value
at amortised through through
cost profit profit
or loss or loss
At 31 March 2018 Note GBP'000 GBP'000 GBP'000 GBP'000
----- ------------- -------------- --------- ------------
Trade and other receivables
(excludes prepayments) 15 5,917 - - -
Money market instruments
with maturities >
3 months 17 10,198 - - -
Cash and cash equivalents 17 12,498 - - -
Derivative financial
assets at fair value
through profit or
loss 16 - - 266 -
Trade payables 18 - (325) - -
Accruals 18 - (2,067) - -
Derivative financial
liabilities at fair
value through profit
or loss 16 - - - (29)
----- ------------- -------------- --------- ------------
Total 28,613 (2,392) 266 (29)
----- ------------- -------------- --------- ------------
24. Operating lease commitments
Leases in which substantially all the risks and rewards are
retained by the lessor are classified as operating leases. Payments
made under these operating leases are recognised in profit or loss
on a straight--line basis over the term of the lease. Benefits
received as an incentive to sign a lease, whatever form they may
take, are credited to profit or loss on a straight--line basis over
the lease term.
On 7 September 2016, the Group signed a new lease on premises at
Second and Third Floors, Morgan House, Madeira Walk, Windsor, at an
annual commitment of GBP507,603, expiring 1 September 2022.
On 16 March 2016, the Group signed a lease on premises in New
York City, at an average annual commitment of $125,840. The lease
expired on 31 May 2019.
On 1 June 2017, the Group signed a five year lease on premises
in Zürich, at an annual commitment of CHF 49,680.
The Group has considered the risks and rewards of ownership of
the leased properties, and considers that they remain with the
lessors. Consequently, all property leases are recognised as
operating leases.
At 31 March 2019 the Group had commitments under
non--cancellable operating leases relating to land and buildings as
set out below:
2019 2018
GBP'000 GBP'000
-------- --------
Not later than one year 562 637
Later than one year and not later
than five years 1,310 1,866
Later than five years - -
-------- --------
Total 1,872 2,503
-------- --------
On 27 March 2019 the Group signed a contract with a 22 month
rental term on offices in New York City starting 1 May 2019.
Management does not consider that this contract fulfils the
definition of a lease. The contract has an average annual
commitment of $83,844.
25. Cash flow from operating activities
Group
This note should be read in conjunction with the cash flow
statements. It provides a reconciliation to show how operating
profit, which is based on accounting rules, translates to cash
flows.
2019 2018
GBP'000 GBP'000
-------- --------
Operating profit 7,876 7,272
Adjustments for non-cash movements:
Profit on disposal of property, plant
and equipment - 1
Depreciation of property, plant and
equipment 221 206
Amortisation of intangible assets 74 99
Net release of shares previously held
by EBT 443 845
Share-based payments 87 (93)
Decrease in cash on deconsolidation
of Record Currency - Emerging Market
Currency Fund (see note 13) - (4,062)
Other non-cash movements (172) (270)
-------- --------
8,529 3,998
Changes in working capital
(Increase)/decrease in receivables (772) 172
Increase/(decrease) in payables 106 (371)
Decrease/(increase) in other financial
assets 102 (204)
Increase in other financial liabilities 234 734
-------- --------
Cash inflow from operating activities 8,199 4,329
Interest paid (22) (10)
Corporation taxes paid (1,151) (1,573)
-------- --------
Net cash inflow from operating activities 7,026 2,746
-------- --------
Company
2019 2018
GBP'000 GBP'000
-------- --------
Operating profit/(loss) 99 (123)
Adjustment for:
(Gain)/loss on investments (26) 7
Other (73) 116
Changes in working capital
(Decrease)/increase in payables (1,038) 1,082
-------- --------
Cash(outflow)/inflow from operating activities (1,038) 1,082
Corporation taxes paid (5) (67)
-------- --------
Net cash (outflow)/inflow from operating activities (1,043) 1,015
-------- --------
26. Related parties transactions
Company
Details of transactions between the Company and other Group
undertakings, which are related parties of the Company, are shown
below:
Transactions with subsidiaries
The Company's subsidiary undertakings are listed in note 13,
which includes a description of the nature of their business.
2019 2018
GBP'000 GBP'000
-------- --------
Amounts due to subsidiaries (55) (1,093)
Net dividends received from subsidiaries 6,600 16,810
-------- --------
Amounts owed to and by related parties will be settled in cash.
No guarantees have been given or received. No provisions for
doubtful debts have been raised against amounts outstanding (2018:
GBPnil). No expense has been recognised during the year in respect
of bad or doubtful debts due from related parties.
Investment in Trade Record
On 22 March 2019, Record plc subscribed GBP40,000 for 40% of the
ordinary share capital of Trade Record.
Group
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 compensation
2019 2018
GBP'000 GBP'000
Short--term employee benefits 5,411 4,965
Post--employment benefits 204 185
Share--based payments 889 1,172
-------- --------
Total 6,504 6,322
-------- --------
The dividends paid to key management personnel in the year ended
31 March 2019 totalled GBP2,981,053 (2018: GBP3,651,092).
Directors' remuneration
2019 2018
GBP'000 GBP'000
Emoluments (excluding pension contribution) 2,421 2,357
Pension contribution (including payments
made in lieu of pension contributions) 165 166
Total 2,586 2,523
During the year, one Director of the Company (2018: one)
participated in the Group Personal Pension Plan, a defined
contribution scheme.
Transactions with Trade Record
On 22 March 2019, Record plc directors Leslie Hill and Bob Noyen
each subscribed GBP20,000 for 20% of the ordinary share capital of
Trade Record. The directors of Trade Record are Leslie Hill,
director of Record plc, and Rebecca Venis, an existing employee of
one of Record's subsidiary companies and who also owns 20% of the
ordinary share capital of Trade Record.
27. Capital management
The Group's objectives when managing capital are (i) to
safeguard the Group's ability to continue as a going concern, (ii)
to provide an adequate return to shareholders, and (iii) to meet
regulatory capital requirements set by the UK Financial Conduct
Authority.
The Group sets the amount of capital in proportion to risk. The
Group manages the capital structure and makes adjustments to it in
light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders, or
issue new shares. The Group had no debt in the current or prior
financial year and consequently does not calculate a
debt--to--adjusted capital ratio.
The Group's capital is managed within the categories set out
below:
2019 2018
GBPm GBPm
Regulatory capital 9.3 9.1
Other operating capital 13.7 13.3
----- -----
Operating capital 23.0 22.4
Seed capital 4.3 4.2
----- -----
Total capital 27.3 26.6
----- -----
Operating capital is intended to cover the regulatory capital
requirement plus capital required for day to day operational
purposes and other investment purposes. The Directors consider that
the other operating capital significantly exceeds the actual day to
day operational requirements.
Seed capital is the capital deployed to support the growth of
new funds. Seed capital is limited to 25% of the Group's total
capital.
For regulatory capital purposes Record plc is subject to
consolidated financial supervision by the Financial Conduct
Authority ("FCA"). Our regulatory capital requirements are in
accordance with FCA rules and consistent with the Capital
Requirements Directive. Our financial resources have exceeded our
financial resource requirements (regulatory capital requirements)
at all times during the year. Further information is provided in
the Business Review.
28. Ultimate controlling party
As at 31 March 2019 the Company had no ultimate controlling
party, nor at 31 March 2018.
29. Post reporting date events
No adjusting or significant non--adjusting events have occurred
between the reporting date and the date of authorisation.
30. Statutory Accounts
This statement was approved by the Board on 12 June 2019. The
financial information set out above does not constitute the
Company's statutory accounts.
The statutory accounts for the financial year ended 31 March
2018 have been delivered to the Registrar of Companies, and those
for the year ended in 31 March 2019 will be delivered in due
course. The auditor has reported on those accounts; the reports
were unqualified, did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying the report, and did not contain statements under section
498(2) or 498(3) of the Companies Act 2006 in respect of either set
of accounts.
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.
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 or visit www.rns.com.
END
FR SFLFAEFUSESM
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