TIDMREC
RNS Number : 7582T
Record PLC
17 November 2023
17 November 2023
RECORD PLC
INTERIM RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2023
Record plc ("Record" or "the Company"), the specialist currency
and asset manager, today announces its unaudited results for the
six months ended 30 September 2023 ("H1-24").
Financial headlines:
-- Management fees increased by 3% to GBP19.6m (H1-23: GBP19.0m)
-- Performance fees of GBP1.5m down 46% versus H1-23 (H1-23: GBP2.8m)
-- Revenue decreased by 3% to GBP21.5m (H1-23: GBP22.1m)
-- Profit before tax decreased by 16% to GBP6.3m (H1-23: GBP7.5m)
-- Interim dividend increased by 5% to 2.15 pence per share (H1-23: 2.05 pence per share)
-- Decrease in operating profit margin to 29% (H1-23: 34%)
-- Basic EPS decreased by 24% to 2.48 pence (H1-23: 3.27 pence)
-- AUME in USD terms of $84.5bn (H1-23: $80.8bn, FY-23: $87.7bn)
-- Strong financial position with shareholders' equity of GBP28.5m (H1-23: GBP28.0m)
Key developments:
-- Currency Management - strong performance evidenced by
continued growth in underlying management fees, and performance
fees earned of GBP1.5 million
-- Asset Management - further progress made in diversification,
highlighted by the launch of two funds in the period, with a
further fund launch anticipated in the second half of FY-24
-- Record Digital - suite of Luxembourg funds under development
and continued exploration of new ideas in the digital asset
space
-- Leslie Hill, CEO, announces retirement with effect from end of financial year (FY-24)
-- Board announces appointment of Dr Jan Witte as CEO Elect with
effect from 1 January 2024
Commenting on the results, Leslie Hill, Chief Executive Officer
of Record plc, said:
"We continue to make steady progress along the three strands of
our business strategy, with important milestones reached in our
diversification and succession plans, including the announcement of
my retirement with effect from 31 March 2024 and the appointment of
Jan Witte as my successor.
"Our client proposition remains strong as does our pipeline of
tangible opportunities across our broad product suite. Our growth
in financial terms is not linear and delays in new product launches
alongside stubbornly high inflation have led to a decrease in our
operating margin for the period. However, looking ahead, we
anticipate further fund launches and growth across our range of
products which we expect to increase our profitability over the
medium term.
"The Group remains well positioned financially, with increased
cash generation and a strong balance sheet to support its future
growth plans. The Board remains confident in the delivery of market
expectations for the current financial year. I believe the business
remains capable of delivering on the targets set out in February,
albeit achieving them may take longer than originally
anticipated."
Analyst presentation
There will be a presentation for analysts at 9.30am today held
via a Zoom call. Please contact the team at Buchanan via
record@buchanan.uk.com for further details. A copy of the
presentation will be made available on the Group's website at
www.recordfg.com .
For further information, please contact:
Record plc +44 (0) 1753 852222
David Morrison - Chairman
Leslie Hill - Chief Executive Officer
Steve Cullen - Chief Financial Officer
Buchanan +44 (0) 20 7466 5000
Simon Compton record@buchanan.uk.com
Henry Wilson
George Beale
Chief Executive Officer's statement
The Group continues to make steady steps forward in the triple
objective of diversification, modernisation and succession
planning. Whilst we are marginally below the targets we had set
ourselves for the half year, this is due largely to timing
differences associated with fund launches taking longer than
expected. Nonetheless, none of the delays are due to changes in
client appetite or commitment, rather they have been caused by the
speed with which we have been able to set up and launch our
structures.
Diversification
We continued to successfully diversify the business across our
currency management, asset management and digital products and
service offerings over the period.
Record Currency Management Limited ("RCML")
At RCML we maintain good performance across our currency
strategies, evidenced by GBP1.5 million of performance fees earned
in the year to date and the continued high performance of our EMSF
Fund. For the latter, we are dedicating more resource in the coming
months in anticipation of adding assets given the excellent track
record and the upcoming three year anniversary of the Fund. We are
continuing to see new pension fund and asset management hedging
clients coming on board - this part of our business represents the
stable bedrock from which our other forthcoming projects can
launch.
Record Asset Management GmbH ("RAM")
At RAM, we are excited by the upcoming launch of our first
Infrastructure Fund on which we serve as General Partner ("GP") for
a group of long established European clients. This Fund will begin
to generate long-term revenue as each individual infrastructure
project is funded, and is a very welcome evolution for us as a
business. The quality of these earnings will complement the fees we
already earn. We have also launched two other funds in the last six
months, a Protected Equity Fund which launched with USD 215 million
and the GP Stakes Fund with USD 5 million, both of which attract
higher fees than we can achieve in the world of currency management
and both of which are expected to grow materially over time.
Record Digital Asset Ventures Ltd ("RDAV")
At RDAV, we are launching our Luxembourg-based digital asset
fund structure in partnership with Dair Capital. The structure aims
to deliver an institutionally recognised operation, so clients can
take investment risk in this new asset class without unnecessary
operational risk. We plan to launch three funds, designed and
managed by Darren Dineen the CEO of Dair Capital who brings his
experience and track record to develop this business for
institutional investors in partnership with us. We are working very
closely with the fund ecosystem and aim to make his Five Seasons
fund the first regulated crypto-currency fund in Luxembourg,
attracting not only the Ultra High Net Worth clients Darren has
worked with in the past, but also some new institutional monies,
which Record hopes to help bring in.
Succession planning
As I pass the CEO baton on to Jan Witte, our 'home grown' new
CEO Elect, I am proud of the impressive team of professionals we
have recruited over the past four years and we continue to add to
this team. We will announce some new hires in the near future to
boost the "bench" and help us deliver the new products and services
we have been planning for over a year now.
Modernisation
We continue to pass milestones such as building new reporting
capabilities and moving more activities to cloud-based solutions,
and as we do we find new opportunities to improve our technology on
an ongoing basis. It is definitely a journey as opposed to a
destination, but one where we challenge ourselves to be selective
and results focussed, and to get value for our spend. This has been
and is at the core of keeping up with other offerings and most of
all listening to our clients and their requests.
Financial performance and dividends
We continue along our growth path albeit progress has, and will
continue to be, non-linear in financial terms. As stated above, the
pipeline remains strong across all business units, although
profitability has been somewhat tempered by timing issues with
delays in new product launches, plus continued high inflationary
pressure on costs. It is pleasing to note the more regular
contribution to revenue seen from performance fees although, as
always, this remains potentially episodic and always subject to
market conditions.
In terms of revenue, it is pleasing to note the continued growth
in underlying management fees of 3% in the period to GBP19.6
million (H1-23: GBP19.0 million). Performance fees of GBP1.5
million (H1-23: GBP2.8 million) continue to be a welcome addition
to total revenue, albeit more episodic and volatile in nature.
Going forward, we anticipate continued revenue growth from both our
traditional currency hedging business alongside that from the new
product launches in both RAM and RDAV.
In light of this, and in line with the company's progressive
dividend policy, the Board has decided to pay an increased interim
dividend for HY-24 of 2.15 pence per share (HY-23: 2.05 pence per
share) on 22 December 2023, to shareholders on the register at 1
December 2023.
Finally, after almost four years at the helm, having delivered a
robust succession plan and a diversified suite of products and
services, now feels the right time for me to plan to step down and
pass the reins to Jan and my fellow board members, who I know will
do an excellent job in taking the business forward.
Leslie Hill
Chief Executive Officer
16 November 2023
Interim management review
Operating review
Our aim is to grow our business through modernisation, investing
in new technology and in diversifying our products and services.
New technology enables us to provide more efficient, safe and
scalable products across our whole product suite, whilst
diversification enables us to offer differentiated and relevant
products to suit individual client demand.
The pipeline of tangible opportunities that we see for growing
our business remains strong across all product lines, albeit that
the development and delivery of new asset management products has
taken longer than initially anticipated. In collaboration with our
clients and specialist partners' we launched two new
Luxembourg-based funds in the period and anticipate the launch of
further funds before the end of the financial year.
The expansion of our business has led to increased costs,
exacerbated by higher than anticipated inflation over a longer
period. Whilst this has weighed on our operating profitability in
the short term, we remain confident that increased efficiency
through modernisation, alongside the launch of higher margin
products and a continued focus on controlling our cost base will
increase our operating margin over the medium term.
Products
The beginning of the reporting period saw elevated market and
currency volatility as the US SVB banking crisis highlighted credit
stresses in the financial system on the back of the Fed's
tightening campaign, though swift policy response remedied market
turmoil. Meanwhile a majority of Developed Markets ("DM") central
banks entered into the latter phases of the monetary policy
tightening cycle, with market re-calibrations of peak rates
sensitive to incoming information on core inflationary pressures
and persistence of general labour market resilience, with the
aforementioned principal drivers of currency moves. The risk
environment remained relatively mixed throughout the period given
further economic fragilities in the Chinese economy and more
recently US government shutdown risks and energy prices. Pronounced
trends have led to extended valuations, notably USD strength and
JPY weakness.
Against this volatile market backdrop, we have seen continued
investor appetite for both risk management programmes as well as
those seeking to harness market movements to generate a return.
This appetite has been broad based across Record's currency
strategies, which has coincided with a renewed internal focus on
core products and their fit for specific markets.
Demand for passive hedging was observed across the traditional
base comprising European institutional investors, particularly in
Switzerland, as well as in the asset manager space. Record's
Hedging for Asset Managers product is being extended in scope,
incorporating significant enhancements to both reporting and
liquidity management, and attracting interest from large private
markets investment groups which is anticipated to drive asset
growth over the coming year.
Mixed investor sentiment about the future path of the US dollar
continues to drive interest in Dynamic Hedging as investors
recognise the opportunity to add value to portfolios while reducing
risk. Existing investors in the strategy have benefited from gains
in the programme despite somewhat range bound conditions for much
of the six-month period.
Record's flagship return-seeking products, Currency
Multi-Strategy and Emerging Markets Sustainable Finance ("EMSF"),
both delivered positive returns over the period. Currency
Multi-Strategy continues to attract investor interest in the search
for uncorrelated, unfunded returns to their portfolios, either as
newcomers to currency as an asset class or as seasoned allocators
to the space. Recent EMSF performance has consolidated its lead
over asset class benchmarks and, with a credible track record now
established, investors are starting to take note of the pioneering
approach and the industry-leading returns.
People
Our succession strategy continues to evolve with the
announcement of Dr Jan Witte's appointment to the board with effect
from 1 January 2024, and his subsequent appointment as CEO
following Leslie Hill's upcoming retirement on 31 March 2024. Jan
was appointed as CEO of the Group's UK-regulated subsidiary, Record
Currency Management Limited ("RCML"), earlier this year, alongside
his existing position as CEO of Record Asset Management GmbH
("RAM") in Germany. We continue to invest in our people. This means
hiring exceptional people throughout our business and providing
opportunities for our talented colleagues to increase their levels
of responsibility, while providing support in the form of internal
and external coaching, learning and personal development, such as
by studying for professional qualifications. This has led to a
number of promotions and internal transfers and also in us
welcoming some talented new colleagues. We also continue to
strengthen our partner relationships to continue to diversify our
product offering, our client base and our activities.
Whilst focus on good cost control remains paramount, a cost of
living allowance of GBP2,000 was agreed for the year to all staff
below Board level, to be paid in quarterly instalments during the
year, to help our employees with the continued high level of
inflation. Following a salary review process conducted more
recently in October, a 3% award was made across the company in
addition to share option awards to key staff to align them with our
longer-term business strategy.
Lastly, as part of our employee engagement strategy, we have
been using short pulse surveys on a range of topics including
management, communication, health and wellbeing, pay and benefits
and office location.
Technology
We continue to support flexible working across the business,
including remote working, office-based and hybrid working patterns
enabled for all staff. Remote access systems and security controls
have continued to be enhanced as we deliver greater flexibility and
functionality to our staff whilst maintaining the greatest levels
of security and protection.
The continuous improvement and development of our technology
stack is critical to improving how we support clients and deliver
our products and services effectively.
In line with our strategy for modernisation, and as part of our
ongoing and continuous development, Record's Board has maintained
an elevated IT-related budget relative to our historic expenditure.
This spending has been assigned across three core areas: software
development to improve functionality and capability; infrastructure
to improve security and resilience; and data management to provide
greater insights and value around our investment services.
Product investment performance
Currency Management
Hedging
Our hedging products are predominantly systematic in nature. The
effectiveness of each client mandate is assessed regularly and
adjustments are made when necessary in order to respond to changing
market conditions or to bring the risk profile of the hedging
mandate in line with the client's risk tolerance.
Passive Hedging
Record has developed an Enhanced Passive Hedging service, which
aims to reduce the cost of hedging by introducing additional
flexibility into the implementation of currency hedges without
changing the hedge ratio. While the investment process is partly
systematic, the episodic nature of many opportunities exploited by
the strategy means it requires a higher level of discretionary
oversight than has historically been associated with Passive
Hedging.
After a period of continuous effort from global central banks to
combat price increases by progressing in their interest rate hiking
cycles, the last six months have seen a peak in global inflationary
pressures. While the market anticipated the start of an interest
rate cutting cycle across major currencies, central bankers'
emphasis has remained on keeping the interest rates "higher for
longer". The longer end of the yield curve is consequently
experiencing a great degree of volatility. This has caused a
further tightening in the financial conditions and in the FX basis
over the course of the last six months expanding the opportunity
set from which the team can potentially add value. Therefore,
performance for the first half of the year has been strong as the
portfolio managers have positioned the portfolio to take advantage
of the current volatile environment. Generally, the portfolios have
been managed with excess durations to their benchmarks.
The table below shows the total value added relative to a
fixed-tenor benchmark for an Enhanced Passive Hedging program for a
representative account (base currency is Swiss francs).
Half-year return Return since inception
Value added relative to a fixed-tenor benchmark 0.05% 0.10% p.a.
----------------- -----------------------
Dynamic Hedging
US-based Dynamic Hedging clients experienced appreciation of the
US dollar against developed market currencies over the period. The
majority of dollar strength occurred throughout August and
September on the back of hawkish commentary from Fed chair Powell,
notably during the Jackson Symposium, and further supported by the
September FOMC meeting seeing an upwards adjustment in median dot
plot projections for 2024. Dollar strength was also partially
attributable to risk off sentiment, amidst China growth concerns,
and rising US treasury yields.
The Dynamic Hedging programmes responded as expected, with hedge
ratios rising systematically in response to dollar strength.
Consequently, hedging returns for US-based clients were positive,
helping to protect against foreign currency weakness. Conversely,
non-US clients experienced losses from hedging; however, these
losses were limited as hedge ratios fell in response to broad
dollar strength, allowing clients to gain from their embedded
currency positions.
Half-year return Return since inception
Value added by Dynamic Hedging programme 1.52% 0.76% p.a.
----------------- -----------------------
Currency for Return
Record's Currency for Return suite of products includes both
discretionary and systematic investment styles. The Record EM
Sustainable Finance Fund uses a more discretionary approach, whilst
the Currency Multi-Strategy product is a more systematic offering
combining five individual strategies.
Record EM Sustainable Finance Fund
The Record EM Sustainable Finance Fund, launched on 28 June
2021, is a result of the strategic partnership between Record and
UBS Wealth Management. The Fund aims to improve the flow of
development finance, enable local currency lending, enhance
financing projects in illiquid markets and support macroeconomic
stability by currency stabilisation. The strategy targets positive
sustainability outcomes across a multidimensional investment
process, whereby it trades liquid and illiquid EM currencies to
absorb currency risk. It further invests in an underlay of
sustainable development bonds issued by Multilateral Development
Banks ("MDBs") and other Development Finance Institutions ("DFIs")
with a strong presence in low and middle-income economies,
alongside an active stakeholder engagement that promotes better
policies and practices among investees and trading
counterparties.
The Fund returned 1.27% for the half year to 30 September 2023,
outperforming major EM sovereign debt and currency indices.
The positive return was driven by the outperformance in the
currency positions. This more than offset the negative returns in
the bond underlay driven by higher yields in the US which were
unsupportive of the dollar bond portfolio. Some outperformance on
duration versus reference indices was generated on the back of
yields climbing more at the back-end of the US treasury curve and
shorter duration exposure of the fund.
Long EM currency positions returned positively due to continued
rate tightening cycles via EM central banks and positive real rates
in view of achieved disinflationary momentum. Positions in
high-yielding Latin American and European currencies saw the lion's
share of gains. Chilean peso was a notable underperformer in the
period due to underwhelming Chinese data given its strong macro and
trade links. The funding of Developed Market currency short
positions also contributed positively in the period due to the
weakness of Japanese yen versus the US dollar.
Half-year return Return since inception
Record EMSF Fund USD Share Class 1.27% 5.98%
JP Morgan GBI EM Global Diversified(1) (0.83%) (13.43%)
----------------- -----------------------
1. Source: JP Morgan.
Currency Multi-Strategy
Record's Currency Multi-Strategy product combines a number of
diversified return streams, which include:
-- Forward Rate Bias ("FRB", also known as "carry") and Emerging
Market ("EM") strategies which are founded on market risk premia
and as such perform more strongly in "risk on" environments;
-- Value and Momentum strategies which are more behavioural in
nature, and as a result are less risk sensitive
-- Developed Market Classification ("DMC"), a quantitative
strategy using machine learning techniques to predict short term
currency moves, using high frequency data on carry, momentum,
volatility and US dollar cycle factors
Currency Multi-Strategy returned positively during the period,
driven by the outperformance in the EM, Carry and Momentum strands.
EM gains were driven by long positions in high-yielding Latin
American currencies in light of continued hawkish central bank
communications, attractive real rate accruals and a reduction in
political risk premia. Key short positions returned positively
given their sensitivity to the more challenging global risk
environment amidst China growth fragilities and higher US treasury
yields, both traditionally negative for EM FX. The Carry strand
outperformed on the back of continued central bank rate divergence,
with short JPY and long USD exposures the key contributors to
outperformance. The low carry (interest rate) JPY depreciated given
the relative accommodative Bank of Japan ("BoJ") stance whilst
attractive yields kept the USD supported during the period.
Momentum returned positively, driven largely by long GBP and CHF
positions. The former appreciated on the back of the upwards
adjustment in market rate expectations as the Bank of England has
faced further challenges in addressing persistent inflationary
pressures. CHF also saw strength given the continued Swiss National
Bank campaign to limit inflationary pressures vis-à-vis engineering
FX strength.
Value returned negatively on the back of long JPY and short USD
exposures. Despite moves by the BoJ to increase flexibility around
Yield Curve Control ("YCC") in July which has allowed for yields to
rise in a constrained manner, the continued relative easy bias of
the BoJ and limited communication on the end of their negative
interest rate policy in tandem with elevated US treasury yields
have all weighed on the JPY. The US dollar was supported by market
recalibration of rates around the Fed's "higher for longer"
messaging, bolstered by a resilient labour market and economic data
supporting a soft landing scenario.
Developed Market Classification ("DMC") performance was flat,
with mixed performance across the portfolio. The CHF, SEK and EUR
pairs provided positive returns, capturing short to medium term
trends during the period. The CAD and NOK pairs had slight positive
performance. Negative returns in other pairs came from a mostly net
short USD position, which picked up on some short-term USD
weakening but underperformed in August and September. Overall, the
model's Trend factor was most important in deciding positions
during this period, with the Volatility and Carry factors also
contributing.
Half-year return Return since inception Volatility since inception
Record Multi- Strategy Composite(2) 2.88% 1.04% p.a. 3.12% p.a.
----------------- ----------------------- ---------------------------
2. Record Multi-Strategy Composite return data is since
inception in July 2012, showing excess returns data gross of fees
in USD base and scaled to a 4% target volatility.
Scaling
The Currency for Return product group allows clients to select
the level of exposure they desire in their currency programmes in
addition to the level of scaling and/or the volatility target.
It should be emphasised that in this case "scaling" refers to
the multiple of the aggregate notional value of forward contracts
in the currency programme which is limited by the willingness of
counterparty banks to take exposure to the client. The AUME of
those mandates where scaling or a volatility target is selected is
represented in Record's AUME at the scaled value of the mandate, as
opposed to the mandate size.
Asset Management
Over the past 18 months, Record's EU-based subsidiaries, Record
Asset Management GmbH ("RAM") and RAM Strategies GmbH ("RAM
Strategies"), have spearheaded the establishment of a Luxembourg
collective investment fund platform. This initiative is now bearing
fruit with the first two funds launched in the period. The first
fund to go live (Record Diversified GP Stakes) specialises in
taking minority equity stakes in alternative asset managers. The
second fund (Record Protected Equities) combines an international
equity portfolio with downside tail-risk protection. A third fund,
which focuses on infrastructure assets, is currently in development
with an anticipated launch in the fourth quarter of the current
financial year.
In creating these funds, Record has partnered with other
specialists of high calibre with expertise in the specific asset
classes. These new offerings ensure that our clients have access to
exciting, non-currency related investment strategies, as part of
our strategy to grow our business through diversification, with the
added benefit of fostering deeper client relationships.
RAM Strategies, with its background of distributing third-party
investment strategies, has taken the lead in marketing these new
funds throughout Europe. At period end, assets under management on
the Luxembourg fund platform were approximately USD 205
million.
The launch of these funds also marks the signing of RAM's
inaugural client. RAM obtained its BaFin license in 2022 and its
appointment marks a major milestone in its history, having now been
engaged to provide investment management services and share class
hedging services to the Funds.
Record Digital
Record Digital was set up as a separate group entity within the
Record Financial Group to track, learn and identify opportunities
for future diversification and growth in this sector to help ensure
the sustainability of the business going forward. We set aside
capital (initially GBP2 million), and our investments were selected
in view of two main objectives, cash-to-cash potential, and
business leverage. We have committed 73% of this capital to a mix
of small direct investments, and investment funds focused on
disruptive technologies, early stage, and digital asset companies.
These investments have helped us establish a network of talent,
subject-matter experts, and partners to work with, evaluate ideas
and explore new business opportunities together. We have been
actively incubating these ideas, making connections between this
world and our core competencies, testing out new products,
exploring new strategies and approaches to delivering financial
services. As we take these ideas forward, and move on from
incubation towards syndicating these ideas, we look to build
diversifying streams of revenue from new products and services, at
commercial fees, building on and aligned with our core
competencies.
We are currently building out a suite of Luxembourg funds which
are embedding the differentiating services, unique functionalities,
and capabilities of market leaders in the digital asset space. For
example, Block Scholes Limited ("Block Scholes") will be a service
provider to these funds providing data, analytics, and research to
the portfolio managers and risk management functions. Record first
invested in Block Scholes in February 2022, and has since become a
client and a partner to the business as well as our CTO, Rebecca
Venis, serving as a Non-Executive Director. As of October 2023,
Record led and successfully closed the most recent Block Scholes
funding round, securing $3.1 million alongside our co-investors,
including InvestCorp, Saison Capital, CoinSwitch and Dair Capital.
We are excited by the opportunities looking forward, as we
syndicate more of these incubated ideas, to build on our core
competencies and establish innovative and sustained diversifying
revenue lines for the business.
AUME development
AUME decreased over the period by 3.6% to $84.5 billion in US
dollar terms, and decreased in sterling terms by 2.6% to GBP69.2
billion. Total net outflows for the period were $1.0 billion,
compared to HY-23 net inflows of $8.6 billion, and FY-23 net
inflows of $9.1 billion.
The AUME movement over the six-month period is analysed as
follows:
AUME movement analysis in the six months to 30 September
2023
$bn
AUME at 1 April 2023 87.7
Net client flows (1.0)
Equity and other market impact (1.9)
Foreign exchange impact and mandate volatility scaling (0.3)
------
AUME at 30 September 2023 84.5
------
Product mix
The product mix has remained broadly consistent with that
reported at the year end.
AUME composition by product
30 Sep 23 30 Sep 22 31 Mar23
$bn % $bn % $bn %
Passive Hedging 60.5 72 62.2 77 63.8 73
Dynamic Hedging 14.5 17 10.0 12 14.7 17
Currency for Return 3.9 5 4.3 6 3.9 4
Multi-product 5.3 6 4.2 5 5.2 6
Cash and futures/ other 0.3 - 0.1 - 0.1 -
----------- ---- ----------- ---- ---------- ----
Total 84.5 100 80.8 100 87.7 100
----------- ---- ----------- ---- ---------- ----
Equity and other market performance
Record's AUME is affected by movements in equity and other
markets because Passive and Dynamic Hedging mandates, and some of
the Multi-product mandates, are linked to equity holdings or other
asset types such as bonds or real estate.
Additional details on the composition of assets underlying the
Hedging and Multi-product mandates are provided below to help
illustrate more clearly the impact of equity and fixed income
market movements on these mandate sizes.
Class of assets underlying mandates by product as at 30
September 2023
Equity Fixed income Other
% % %
Passive Hedging 23 32 45
Dynamic Hedging 85 - 15
Multi-product - - 100
------- ------------- ------
Forex
Approximately 75% of the Group's AUME is non-US dollar
denominated. Therefore, foreign exchange movements may have an
impact on AUME when expressing non-US dollar AUME in US dollars,
although this movement does not have an equivalent impact on the
sterling value of fee income. Exchange rate movements decreased
AUME by $0.3 billion in the period and changes to mandate
underlying asset values decreased AUME by $1.9 billion.
Financial review
Overview
We continue to make progress on the growth and diversification
of our business.
In this respect, it is pleasing to report continued growth in
underlying management fees plus progress made on the delivery of
new asset management products, as evidenced by the launch of two
new funds in the period. Investment in our technology and resources
accompanied by sustained inflationary pressure across our cost base
continues to weigh on our operating margin.
Looking forward, we anticipate a further fund launch for the
second half accompanied by a strong pipeline of opportunities
across both currency and asset management products in addition to
tangible progress in our digital asset project. Consequently, we
remain confident in delivering solid and continuous progress in
line with our strategic objectives of growth and
diversification.
Six months ended Six months ended Year ended
30 Sep 23 30 Sep 22 31 Mar 23
Revenue 21.5 22.1 44.7
Cost of Sales (0.1) - -
----------------- ----------------- -----------
Gross Profit 21.4 22.1 44.7
----------------- ----------------- -----------
Personnel costs (excluding bonus) (7.1) (6.3) (12.8)
Non-Personnel costs (5.3) (4.5) (9.5)
Other income or expense (0.3) - (0.3)
----------------- ----------------- -----------
Total expenditure (excluding bonus) (12.7) (10.8) (22.6)
----------------- ----------------- -----------
Group Bonus scheme (2.6) (3.8) (7.6)
----------------- ----------------- -----------
Operating profit 6.1 7.5 14.5
----------------- ----------------- -----------
Operating profit margin 29% 34% 32%
Net interest received 0.2 - 0.1
----------------- ----------------- -----------
Profit before tax 6.3 7.5 14.6
----------------- ----------------- -----------
Tax (1.6) (1.3) (3.3)
----------------- ----------------- -----------
Profit after tax 4.7 6.2 11.3
----------------- ----------------- -----------
Revenue
Headline revenue of GBP21.5 million, including performance fees,
represents a small decrease of 3% from H1-23 (GBP22.1 million) and
a 5% decrease compared to the second half of last year (H2-23:
GBP22.6 million). Excluding performance fees, which at GBP5.8
million were exceptional for FY-23, underlying management fees
increased by 3% versus H1-23 and by 2% against H2-23.
Revenue analysis (GBPm)
Six months ended Six months ended Year ended
30 Sep 23 30 Sep 22 31 Mar 23
Management fees
Passive Hedging 5.8 6.3 12.9
Dynamic Hedging 7.0 5.8 12.0
Currency for Return 3.1 3.6 6.8
Multi-product 3.7 3.3 6.6
----------------- ----------------- -----------
Total management fees 19.6 19.0 38.3
----------------- ----------------- -----------
Performance fees 1.5 2.8 5.8
Other income* 0.4 0.3 0.6
----------------- ----------------- -----------
Total revenue 21.5 22.1 44.7
----------------- ----------------- -----------
*Other income includes distribution fees and fees from ancillary
investment management services.
Following an exceptional year for Performance fees throughout
FY-23 (FY-23: GBP5.8 million), we continue to see opportunities for
earning performance fees in some of our Passive Hedging mandates
including tenor management, albeit at more normalised levels based
on current market conditions. Performance fees of GBP1.5 million
were earned in the period versus exceptional performance fees
linked to more volatile market movements of GBP2.8 million and
GBP3.0 million in the first and second half of FY-23
respectively.
Passive Hedging management fees of GBP5.8 million were GBP0.5
million lower than the equivalent period last year (H1-23: GBP6.3
million) and GBP0.8 million lower compared to the second half of
last year (H2-23: GBP6.6 million), linked mainly to the net
outflows of $1.3 billion seen over the period. As a percentage of
opening AUME, net outflows of $1.3 billion equate to a reduction of
approximately 2%.
Dynamic Hedging management fees increased by 21% to GBP7.0
million compared to the same period last year (H1-23: GBP5.8
million) and by GBP0.8 million versus H2-23 (GBP6.2 million),
predominantly driven by the full impact of net inflows since H1-23
of $2.8 billion.
Currency for Return management fees of GBP3.1 million decreased
by 14% (GBP0.5 million) compared to H1-23 (H1-23: GBP3.6 million)
and by GBP0.1 million versus H2-23 (GBP3.2 million), predominantly
due to the full impact of net outflows of $0.5 billion since
H1-23.
Management fees of GBP3.7 million from the Multi-product
category are GBP0.4 million higher than both the first and second
half of last year (H1-23 and H2-23: GBP3.3 million), linked
predominantly to the impact from the net inflow of $0.8 billion in
the final quarter of FY-23.
Other income consists of ancillary currency management services,
including collateral management, signal hedging and tactical
execution services totalling GBP0.2 million (FY-23: GBP0.5
million), plus fees earned on the distribution of third-party
investment products of GBP0.2 million (FY-23: GBP0.1 million).
Expenditure
Expenditure analysis (GBPm)
Six months ended Six months ended Year ended
30 Sep 23 30 Sep 22 31 Mar 23
Personnel costs 7.1 6.3 12.8
Non-personnel costs 5.3 4.5 9.5
----------------- ----------------- -----------
Administrative expenditure excluding Group Bonus scheme 12.4 10.8 22.3
----------------- ----------------- -----------
Group Bonus 2.6 3.8 7.6
----------------- ----------------- -----------
Total administrative expenditure 15.0 14.6 29.9
----------------- ----------------- -----------
Other income and expenditure 0.3 - 0.3
----------------- ----------------- -----------
Total expenditure 15.3 14.6 30.2
----------------- ----------------- -----------
Total administrative expenditure (excluding Group Bonus) of
GBP12.4 million for the period represents an increase of 15%
(H1-23: GBP10.8 million) compared with the equivalent prior year
period, and an increase of 8% versus the second half of last year
(H2-23: GBP11.5 million).
Personnel costs of GBP7.1 million (excluding Group Bonus)
increased by 13% versus the same period in the prior year (H1-23:
GBP6.3 million) and by 9% compared to the second half of last year
(H2-23: GBP6.5 million). We continue to invest in the business in
line with our plans for diversification and succession and in
sourcing the right skill sets at the right level. Personnel changes
lead to occasional one-off reorganisation costs, which we would
expect to decrease as the changes required to resource levels and
skill sets begin to level off. In line with our succession
strategy, we remain committed both to recognising our future talent
through internal promotions, and to retention by utilising our
various share schemes, both of which add to our overall personnel
costs. We are supporting our employees during this prolonged period
of high inflation by committing to cost-of-living payments of
GBP2,000 per employee during FY-24 (paid over four quarters), and
have also awarded a general salary increase of 3%, effective from 1
October 2023, to ensure we remain both competitive and an
attractive potential employer in the current environment. Whilst we
expect pressure on personnel costs to continue in the short-term,
we are confident that the result will not repeat the material
increases seen in the level of our personnel costs in prior
periods.
As expected, inflation has also led to an increase in
non-personnel costs in addition to costs linked to our overseas
expansion and growth, including office and travel costs, IT-related
support and data costs, and professional fees including higher UK
audit fees and additional audit fees for the new regulated
subsidiary in Germany. Total non-personnel costs of GBP5.3 million
for the period represent an increase of 18% over the same period
last year (H1-23: GBP4.5 million) and of 6% versus the second half
of FY-23 (H2-23: GBP5.0 million).
Group Bonus Scheme
The Remuneration Committee operates the Group Bonus scheme to
reward and incentivise employees for the delivery of business
growth, having previously established the range within which the
scheme operates at 25% to 35% of pre-Bonus operating profit.
During the period, pre-Bonus operating profit of GBP8.7 million
reduced by 23% compared to H1-23 (GBP11.3 million) and by 19%
versus H2-23 (GBP10.8 million), and the cost of the Bonus Scheme
has decreased by 32% to GBP2.6 million for the period (H1 and
H2-23: GBP3.8 million). The decrease reflects both the reduction in
operating profit and the decrease in the percentage used to
calculate the bonus pool. Whilst the Remuneration Committee
acknowledged the continued effort and progress being made in the
growth and strategic direction of the business, in line with its
remuneration principles it has reduced the bonus pool percentage to
30% of pre-Bonus operating profit (H1-23: 33% and FY-23:
34.8%).
Cash flow
The Group generated GBP7.3 million of cash from operating
activities before tax during the period (H1-23: GBP6.8 million).
Taxation paid during the period increased to GBP1.3 million
compared to GBP1.0 million for the same period last year.
The Group paid dividends totalling GBP6.0 million in the period
(H1-23: GBP5.2 million), more information for which is given in
note 5 to the financial statements.
Dividends and capital
The Board remains confident that the strategy of modernisation,
diversification and succession continues to be the right direction
for the Group. Consequently, in line with the Board's capital and
dividend policies targeted at sustained and progressive dividend
growth, the Group will pay an increased interim dividend of 2.15
pence per share in respect of the six-month period (H1-23: 2.05
pence). This will equate to a distribution of GBP4.3 million
(H1-23: GBP3.9 million), following which the business will retain
cash and money market instruments on the balance sheet, which are
significantly in excess of financial resource requirements required
for regulatory purposes.
The Group has no debt and is cash-generative with capital and
dividend policies aimed at ensuring continued balance sheet
strength to support future growth. Shareholders' funds were GBP28.5
million at 30 September 2023 (H1-23: GBP28.0 million).
Principal risks and uncertainties
The principal risks currently facing the Group and those that we
anticipate the Group will be exposed to in the short term remain
broadly the same as those outlined in the Annual Report 2023.
These risks are:
-- Strategic - principally concentration risk and competitive
threats, but also risk of failure to deliver strategy, regulatory
trends and exogenous threats (the greatest of which being the
global inflationary and geopolitical environment);
-- Operational and systems - primarily trade configuration and
execution, as well as information technology and security and cyber
risks;
-- Investment risk - we naturally embrace the risk that our
products underperform, while market liquidity is a risk we
continually review; and
-- People - key person and talent acquisition and retention.
Cautionary statement
This Interim Report contains certain forward-looking statements
with respect to the financial condition, results, operations and
business of Record. These statements involve risk and uncertainty
because they relate to events and depend upon circumstances that
will occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from
those expressed or implied in this Interim Report. Nothing in this
Interim Report should be construed as a profit forecast.
Statement of Directors' responsibilities
The interim financial report is the responsibility of the
Directors, who confirm that to the best of their knowledge:
-- the condensed set of consolidated financial statements has
been prepared in accordance with UK-adopted IAS 34 - "Interim
Financial Reporting"; and
-- the Interim management review includes a fair review of the information required by:
o DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of consolidated financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
o DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the Annual Report 2023 that could do so. Related party
transactions are disclosed in note 10.
The Directors of Record plc are listed on the Record plc website
at: https://recordfg.com/team-member-groups/record-plc-board/
David Morrison
Chairman
Steve Cullen
Chief Financial Officer
16 November 2023
Independent review report to Record plc
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2023 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2023 which comprises the consolidated
statement of comprehensive income, the consolidated statement of
financial position, the consolidated statement of changes in
equity, the consolidated statement of cash flows and the notes to
the financial statements, including a summary of significant
accounting policies
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the Group to cease to continue as a going concern.
Responsibilities of Directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, UK
16 November 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Consolidated statement of comprehensive income
Six months ended 30 September 2023
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 Sep 23 30 Sep 22 31 Mar 23
GBP'000
GBP'000
Note GBP'000
Revenue 3 21,469 22,059 44,689
Cost of sales (34) (3) (37)
------------------------------------------------------------ ------------------ ------------------ ------------
Gross profit 21,435 22,056 44,652
------------------------------------------------------------ ------------------ ------------------ ------------
Administrative expenses (15,048) (14,561) (29,888)
Other expense or income (260) 21 (293)
------------------------------------------------------------ ------------------ ------------------ ------------
Operating profit 6,127 7,516 14,471
------------------------------------------------------------ ------------------ ------------------ ------------
Finance income 153 61 182
Finance expense (19) (33) (55)
------------------------------------------------------------ ------------------ ------------------ ------------
Profit before tax 6,261 7,544 14,598
------------------------------------------------------------ ------------------ ------------------ ------------
Taxation (1,535) (1,334) (3,259)
------------------------------------------------------------ ------------------ ------------------ ------------
Profit after tax 4,726 6,210 11,339
------------------------------------------------------------ ------------------ ------------------ ------------
Total comprehensive income for the period 4,726 6,210 11,339
------------------------------------------------------------ ------------------ ------------------ ------------
Profit and total comprehensive income for the period
attributable to
Owners of the parent 4,726 6,210 11,339
------------------------------------------------------------ ------------------ ------------------ ------------
Earnings per share for the period (expressed in pence per
share)
Basic earnings per share 4 2.48p 3.27p 5.95p
Diluted earnings per share 4 2.44p 3.16p 5.81p
------------------------------------------------------------ ------------------ ------------------ ------------
Consolidated statement of financial position
As at 30 September 2023
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 Sep 23 30 Sep 22 31 Mar 23
GBP'000
GBP'000
Note GBP'000
Non-current assets
Intangible assets 1,643 1,036 1,390
Right-of-use assets 866 1,155 1,011
Property, plant and equipment 286 380 377
Investments 6 4,448 3,606 4,901
Deferred tax assets 178 231 134
----------------------------------------------------- ------------------ ------------------ ------------
Total non-current assets 7,421 6,408 7,813
----------------------------------------------------- ------------------ ------------------ ------------
Current assets
Trade and other receivables 13,097 12,207 14,373
Derivative financial assets 8 - 11 54
Money market instruments with maturities > 3 months 7 - - 4,549
Cash and cash equivalents 7 14,837 17,714 9,948
----------------------------------------------------- ------------------ ------------------ ------------
Total current assets 27,934 29,932 28,924
----------------------------------------------------- ------------------ ------------------ ------------
Total assets 35,355 36,340 36,737
----------------------------------------------------- ------------------ ------------------ ------------
Current liabilities
Trade and other payables (4,628) (5,512) (6,011)
Corporation tax liabilities (1,127) (1,252) (1,329)
Lease liabilities (290) (279) (285)
Derivative financial liabilities 8 (178) (381) (5)
----------------------------------------------------- ------------------ ------------------ ------------
Total current liabilities (6,223) (7,424) (7,630)
----------------------------------------------------- ------------------ ------------------ ------------
Non-current liabilities
Provisions (122) (122) (122)
Lease liabilities (551) (838) (694)
----------------------------------------------------- ------------------ ------------------ ------------
Total non-current liabilities (673) (960) (816)
----------------------------------------------------- ------------------ ------------------ ------------
Total net assets 28,459 27,956 28,291
----------------------------------------------------- ------------------ ------------------ ------------
Equity
Issued share capital 9 50 50 50
Share premium account 1,809 1,809 1,809
Capital redemption reserve 26 26 26
Retained earnings 26,574 26,071 26,406
----------------------------------------------------- ------------------ ------------------ ------------
Equity attributable to owners of the parent 28,459 27,956 28,291
----------------------------------------------------- ------------------ ------------------ ------------
Total equity 28,459 27,956 28,291
----------------------------------------------------- ------------------ ------------------ ------------
Approved by the Board on 16 November 2023 and signed on its
behalf by:
David Morrison
Chairman
Steve Cullen
Chief Financial Officer
Consolidated statement of changes in equity
As at 30 September 2023
Called Share Capital Retained Total
-- up premium redemption earnings equity
share account reserve GBP'000 GBP'000
capital GBP'000 GBP'000
Unaudited Note GBP'000
As at 1 April 2022 50 1,809 26 24,045 25,930
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
Profit and total
comprehensive
income for the
period - - - 6,210 6,210
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
Dividends paid - - - (5,169) (5,169)
Release of shares
held by EBT - - - 456 456
Share-based payment
reserve movement - - - 529 529
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
Transactions with
shareholders - - - (4,184) (4,184)
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
As at 30 September
2022 50 1,809 26 26,071 27,956
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
Profit and total
comprehensive
income for the
period - - - 5,129 5,129
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
Dividends paid - - - (3,926) (3,926)
Own shares acquired
by EBT - - - (3,572) (3,572)
Release of shares
held by EBT - - - 1,812 1,812
Tax on share-based
payments - - - 300 300
Share-based payment
reserve movement - - - 592 592
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
Transactions with
shareholders - - - (4,794) (4,794)
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
As at 31 March 2023 50 1,809 26 26,406 28,291
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
Profit and total
comprehensive
income for the
period - - - 4,726 4,726
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
Dividends paid 5 - - - (5,978) (5,978)
Own shares acquired
by EBT - - - (1,018) (1,018)
Release of shares
held by EBT - - - 1,987 1,987
Tax on share-based
payments - - - 317 317
Share-based payment
reserve movement - - - 134 134
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
Transactions with
shareholders - - - (4,558) (4,558)
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
As at 30 September
2023 50 1,809 26 26,574 28,459
-------------------- -------------- ----------------- ----------------- -------------------- ------------------ -----------------
Consolidated statement of cash flows
Six months ended 30 September 2023
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 Sep 23 30 Sep 22 31 Mar 23
Note GBP'000 GBP'000 GBP'000
Profit after tax 4,726 6,210 11,339
------------------------------------------------------- ------- ------------------ ------------------ ------------
Adjustments for non-cash movements
Depreciation of right-of-use assets 145 230 375
Depreciation of property, plant and equipment 110 170 285
Amortisation of intangible assets 163 75 135
Loss on asset disposals - 12 11
Share-based payments 559 360 916
(Increase)/decrease in other non-cash movements(1) (10) 98 1,780
Finance income (153) (61) (181)
Finance expense 19 33 55
Tax expense 1,535 1,334 3,259
Working capital changes
Decrease/(increase) in receivables 1,634 (2,324) (4,490)
(Decrease)/increase on payables (1,383) 752 1,290
(Decrease) in provisions - (78) (78)
------------------------------------------------------- ------- ------------------ ------------------ ------------
Cash generated from operations 7,345 6,811 14,696
------------------------------------------------------- ------- ------------------ ------------------ ------------
Corporation tax paid (1,335) (984) (2,433)
------------------------------------------------------- ------- ------------------ ------------------ ------------
Net cash inflow from operating activities 6,010 5,827 12,263
------------------------------------------------------- ------- ------------------ ------------------ ------------
Purchase of intangible software (416) (550) (964)
Purchase of property, plant and equipment (19) (160) (272)
Purchase of investments (29) (1,276) (3,570)
Redemption of bonds 753 859 1,607
Redemption of investments - 881 881
Sale of money market instruments with maturity > 3
months 4,549 13,914 9,363
Interest received 179 61 181
------------------------------------------------------- ------- ------------------ ------------------ ------------
Net cash inflow from investing activities 5,017 13,729 7,226
------------------------------------------------------- ------- ------------------ ------------------ ------------
Lease repayments (139) (174) (315)
Lease interest payments (19) (34) (55)
Purchase of own shares - - (3,572)
Dividends paid to equity shareholders 5 (5,978) (5,169) (9,095)
------------------------------------------------------- ------- ------------------ ------------------ ------------
Cash outflow from financing activities (6,136) (5,377) (13,037)
------------------------------------------------------- ------- ------------------ ------------------ ------------
Net increase in cash and cash equivalents in the
period 4,891 14,179 6,452
Effect of exchange rate changes (2) 190 151
------------------------------------------------------- ------- ------------------ ------------------ ------------
Cash and cash equivalents at the beginning of the
period 9,948 3,345 3,345
------------------------------------------------------- ------- ------------------ ------------------ ------------
Cash and cash equivalents at the end of the period 14,837 17,714 9,948
------------------------------------------------------- ------- ------------------ ------------------ ------------
Closing cash and cash equivalents consists of:
Cash 7 5,782 17,714 6,405
Cash equivalents 7 9,055 - 3,543
------------------------------------------------------- ------- ------------------ ------------------ ------------
Cash and cash equivalents 7 14,837 17,714 9,948
------------------------------------------------------- ------- ------------------ ------------------ ------------
Other non-cash items include GBP461k movement in shares held by
the Employee Benefit Trust and other share movements (FY23:
GBP2,473k), netted off against GBP228k unrealised loss in
derivatives (FY23: GBP175k gain), GBP19k foreign exchange loss
(FY23: GBP147k gains) and GBP204k unrealised loss on investments
(FY23: GBP371k gain).
Notes to the consolidated financial statements for the six
months ended 30 September 2023
These consolidated financial statements exclude disclosures that
are immaterial and judged to be unnecessary to understand our
results and financial position.
1. Basis of preparation
The condensed set of consolidated financial statements included
in this interim financial report has been prepared in accordance
with UK-adopted International Accounting Standard 34 - "Interim
Financial Reporting". The financial information set out in this
Interim Report does not constitute statutory accounts as defined in
section 434 of the Companies Act 2006. The Group's statutory
financial statements for the year ended 31 March 2023 were prepared
in accordance with UK-adopted IFRS and have been delivered to the
Registrar of Companies. The auditor's report on those financial
statements was unqualified and did not contain statements under
section 498(2) or section 498(3) of the Companies Act 2006.
The accounting policies for recognition, measurement,
consolidation and presentation as set out in the Group's Annual
Report for the year ended 31 March 2023 have been applied in the
preparation of the condensed consolidated half-year financial
information.
Application of new standards
There have been no new or amended standards adopted in the
financial year beginning 1 April 2023 which have a material impact
on the Group or any company within the Group.
Impact of the global macro environment during the period
The current global macroeconomic environment continues to
provide both challenge and opportunity for the Group: challenge in
the form of managing the risk of the increased cost of doing
business linked to a high inflationary environment (in the form of
employee, energy and supply-chain costs), and opportunity, for
example in the form of increases in interest rate differentials and
clients seeking yield-enhancing strategies. Our focus continues to
be on making the most of such opportunities whilst managing the
balance between careful cost control whilst ensuring the
availability of sufficient and liquid resources to support the
growth trajectory of the Group.
Going concern
As part of the Directors' consideration of the appropriateness
of adopting the going concern basis for the preparation of the
interim financial statements, the Directors have assessed whether
the Group can meet its obligations as they fall due and can
continue to meet its solvency requirements over a period of at
least twelve months from the approval of this report. The Board has
considered financial projections which demonstrate the ability of
the Group to withstand market shocks in a range of scenarios. In
assessing the appropriateness of the going concern basis, the Board
considered base case liquidity and solvency projections that
incorporated an estimated view of potential macroeconomic
volatility, rising inflation and recession.
The projections demonstrated that excess capital would remain in
the Group under the scenarios, and there is cash to run the
business in the going concern period. As a result of the above
assessment, the Directors are satisfied that the Company and the
Group have adequate resources with which to continue to operate for
the foreseeable future. In arriving at this conclusion, the
Directors have considered in detail the impact of the current high
inflationary environment on the Group, the market it operates in
and its stakeholders. For this reason the financial statements have
been prepared on the going concern basis.
Consolidation
The accounting policies adopted in these interim financial
statements are identical to those adopted in the Group's most
recent annual financial statements for the year ended 31 March
2023.
The consolidated financial information contained within the
financial statements incorporates financial statements of the Group
and entities controlled by the Group (its subsidiaries) drawn up to
30 September 2023. Control is achieved where the Company has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. Where the Company
controls an entity, but does not own all the share capital of that
entity, the interests of the other shareholders are stated within
equity as non-controlling interests or within current liabilities
as financial liabilities depending on the characteristic of the
investment, being the proportionate share of the fair value of
identifiable net assets on the date of acquisition plus the share
of changes in equity since the date of consolidation.
An Employee Benefit Trust ("EBT") has been established for the
purposes of satisfying certain share-based awards. The Group has
"de facto" control over this entity. This trust is fully
consolidated within the financial statements (see note 9 for
further details).
2. Critical accounting estimates and judgements
The estimates and judgements applied in the interim financial
statements are consistent with those applied in the financial
statements for the year ended 31 March 2023.
3. Revenue
Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the provision of currency management services.
Our revenue typically arises from charging management fees or
performance fees and both are accounted for in accordance with IFRS
15 - "Revenue from Contracts with Customers".
Management fees are recorded on a monthly basis as the
underlying currency management service occurs. There are no other
performance obligations. Management fees are calculated as an
agreed percentage of the Assets Under Management Equivalents
("AUME") denominated in the client's chosen base currency. The
percentage varies depending on the nature of services and the level
of AUME. Management fees are typically invoiced to the customer
quarterly with receivables recognised for unpaid invoices.
The Group is entitled to earn performance fees from some clients
where the performance of the clients' mandates exceeds defined
benchmarks over a set time period, and are recognised when the fee
amount can be estimated reliably and it is highly probable that it
will not be subject to significant reversal.
Performance fee revenues are not considered to be highly
probable until the end of a contractual performance period and
therefore are not recognised until they crystallise, at which time
they are payable by the client and are not subject to any clawback
provisions. There are no other performance obligations or services
provided which suggest these have been earned either before or
after crystallisation date.
a) Revenue from contracts with customers
The following table provides a breakdown of revenue from
contracts with customers, with management fees analysed by product.
Other investment services income includes fees from signal hedging
and fiduciary execution.
Six months ended Six months ended Year ended
30 Sep 23 30 Sep 22 31 Mar 23
Revenue by product type GBP'000 GBP'000 GBP'000
Management fees
Passive Hedging 5,837 6,328 12,912
Dynamic Hedging 6,979 5,780 12,013
Currency for Return 3,097 3,544 6,789
Multi-product 3,662 3,308 6,584
----------------- ----------------- -----------
Total management fees 19,575 18,960 38,298
----------------- ----------------- -----------
Performance fees 1,517 2,833 5,805
Other investment services income 377 266 586
----------------- ----------------- -----------
Total revenue 21,469 22,059 44,689
----------------- ----------------- -----------
b) Geographical analysis
The geographical analysis of revenue is based on the destination
i.e. the location of the client to whom the services are
provided.
Six months ended Six months ended Year ended
30 Sep 23 30 Sep 22 31 Mar 23
Revenue by geographical region GBP'000 GBP'000 GBP'000
UK 1,269 1,237 2,545
Europe (excluding UK and Switzerland) 7,772 4,764 9,339
US 7,909 7,070 14,179
Switzerland 4,051 8,127 16,985
Other 468 861 1,641
----------------- ----------------- -----------
Total revenue 21,469 22,059 44,689
----------------- ----------------- -----------
4. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the financial period by the weighted average number of ordinary
shares in issue during the period.
Diluted earnings per share is calculated as for the basic
earnings per share with a further adjustment to the weighted
average number of ordinary shares to reflect the effects of all
potential dilution.
There is no difference between the profit for the financial
period used in the basic and diluted earnings per share
calculations.
Six months ended Six months ended Year ended
30 Sep 23 30 Sep 22 31 Mar 23
Weighted average number of shares used in calculation 190,789,948 189,813,531 190,483,365
Effect of potential dilutive ordinary shares - share options 2,849,607 6,615,565 4,830,186
Weighted average number of shares used in calculation 193,639,555 196,429,096 195,313,551
----------------- ----------------- ------------
Basic earnings per share 2.48p 3.27p 5.95p
Diluted earnings per share 2.44p 3.16p 5.81p
----------------- ----------------- ------------
The potential dilutive shares relate to the share options, Joint
Share Ownership Plan ("JSOP") and Long Term Incentive Plan ("LTIP")
awards granted in respect of the Group's Share Scheme. At the
beginning of the period there were 14,724,582 Group Share Scheme
share awards outstanding. During the six-month period 3,275,000
share options were granted. During the period 1,915,336 share
options were exercised and 601,875 JSOP awards vested. No JSOP or
LTIP awards lapsed in the period. 330,832 share options lapsed in
the period.
As at 30 September 2023, there were 11,589,039 share options in
place, 672,500 JSOP and 2,890,000 LTIP awards.
5. Dividends
The dividends paid during the six months ended 30 September 2023
totalled GBP5,977,593. The total dividend paid was 3.13 pence per
share, being a final ordinary dividend in respect of the year ended
31 March 2023 of 2.45 pence per share and a special dividend of
0.68 pence per share. An interim dividend of 2.05 pence per share
was also paid for the six months ended 30 September 2022, thus the
full ordinary dividend in respect of the year ended 31 March 2023
was 4.50 pence per share.
The dividends paid during the six months ended 30 September 2022
totalled GBP5,169,285. The total dividend paid was 2.72 pence per
share, being a final ordinary dividend in respect of the year ended
31 March 2022 of 1.80 pence per share and a special dividend of
0.92 pence per share. An interim dividend of 1.80 pence per share
was paid in the six months ended 30 September 2021, thus the full
ordinary dividend in respect of the year ended 31 March 2022 was
3.60 pence per share.
The interim dividend declared in respect of the six months ended
30 September 2023 is 2.15 pence per share.
6. Accounting for investments
All investments are measured at fair value through profit or
loss.
As at As at As at
30 Sep 23 30 Sep 22 31 Mar 23
GBP'000 GBP'000 GBP'000
Impact bonds - 1,614 770
Investment in funds 3,569 1,782 2,530
Other investments 879 210 1,601
----------- ----------- -----------
Total investments 4,448 3,606 4,901
----------- ----------- -----------
7. Cash management
The Group's cash management strategy employs a variety of
treasury management instruments including cash, money market
deposits and treasury bills with maturities of up to one year. We
note that not all of these instruments are classified as cash or
cash equivalents under IFRS.
IFRS defines cash and cash equivalents as cash in hand, on
demand and collateral deposits held with banks, and other
short-term highly liquid investments that are readily convertible
to a known amount of cash and are subject to an insignificant risk
of changes in value. Moreover, instruments can only generally be
classified as cash and cash equivalents where they are held for the
purpose of meeting short-term cash commitments rather than for
investment or other purposes.
In the Group's judgement, bank deposits and treasury bills with
maturities in excess of three months do not meet the definition of
short-term or highly liquid and are held for purposes other than
meeting short-term commitments. In accordance with IFRS, these
instruments are not categorised as cash or cash equivalents and are
disclosed as money market instruments with maturities greater than
three months.
The table below summarises the instruments managed by the Group
as cash, and their IFRS classification:
As at As at As at
30 Sep 23 30 Sep 22 31 Mar 23
Assets managed as cash GBP'000 GBP'000 GBP'000
Bank deposits with maturities > 3 months - - 4,549
----------------------------------------------------- ----------- ----------- -----------
Money market instruments with maturities > 3 months - - 4,549
----------------------------------------------------- ----------- ----------- -----------
Cash 5,782 8,214 6,405
Bank deposits with maturities <= 3 months 9,055 9,500 3,543
----------------------------------------------------- ----------- ----------- -----------
Cash and cash equivalents 14,837 17,714 9,948
----------------------------------------------------- ----------- ----------- -----------
Total assets managed as cash 14,837 17,714 14,497
----------------------------------------------------- ----------- ----------- -----------
8. Fair value measurement
The following table presents financial assets and liabilities
measured at fair value in the consolidated statement of financial
position in accordance with the fair value hierarchy based on the
significance of inputs used in measuring their fair value.
The hierarchy has the following levels:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level within which the financial asset or liability is
classified is determined based on the lowest level of input to the
fair value measurement. The financial assets and liabilities
measured at fair value in the statement of financial position are
grouped into the fair value hierarchy as follows:
As at 30 September 2023 Total Level 1 Level 2 Level 3
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair value through profit or loss
Investment in funds 3,569 1,129 - 2,440
Other investments 879 479 - 400
--------- --------- --------- ---------
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts held to hedge non-sterling-based
assets (178) - (178) -
--------- --------- --------- ---------
Total 4,270 1,608 (178) 2,840
--------- --------- --------- ---------
As at 30 September 2022 Total Level 1 Level 2 Level 3
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair value through profit or loss
Impact bonds 1,614 1,614 - -
Investment in funds 1,782 1,146 - 636
Other investments 210 - - 210
Forward foreign exchange contracts to hedge non-sterling assets 11 - 11 -
--------- --------- --------- ---------
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts to hedge non-sterling assets (297) - (297) -
Forward foreign exchange contracts used for hedging (84) - (84) -
--------- --------- --------- ---------
Total 3,236 2,760 (370) 846
--------- --------- --------- ---------
As at 31 March 2023 Total Level 1 Level 2 Level 3
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair value through profit or loss
Impact bonds 770 770 - -
Investment in funds 2,530 1,077 - 1,453
Other i nvestments 1,601 1,001 - 600
Forward foreign exchange contracts to hedge non-sterling assets 54 - 54 -
--------- --------- --------- ---------
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts to hedge non-sterling assets (5) - (5) -
--------- --------- --------- ---------
Total 4,950 2,848 49 2,053
--------- --------- --------- ---------
There have been no transfers between levels in any of the
reported periods.
Basis for classification of financial instruments within the
fair value hierarchy
Listed funds and other listed investments are classified as
level 1. These investments are valued using market prices and
coupon rates as applicable.
Forward foreign exchange contracts are classified as level 2.
The fair value of forward foreign exchange contracts is established
using interpolation of observable market data rather than a quoted
price.
Direct investments in private funds and share capital of
start-up companies in the digital sector have been classified as
level 3. There is no observable market for these investments,
therefore fair value measurements have been derived from valuation
techniques that include inputs that are not based on observable
market data. The private funds are valued at net asset value, and
the direct investments in capital of the start-up companies are
measured using the valuation technique that is most suitable to the
applicable investment. These valuation methods are applied in
accordance with International Private Equity and Venture Capital
Valuation Guidelines.
Movements in assets and liabilities classified as level 3 during
the period were:
Six months ended Six months ended Year ended
30 Sep 23 30 Sep 22 31 Mar 23
GBP'000 GBP'000 GBP'000
At start of period 2,053 326 326
Additions 855 448 1,742
Disposals (200) - -
Net gain or loss 132 72 (15)
----------------- ----------------- -----------
At end of period 2,840 846 2,053
----------------- ----------------- -----------
9. Called-up share capital
The share capital of Record plc consists only of fully paid
ordinary shares with a par value of 0.025 pence. All shares are
equally eligible to receive dividends and the repayment of capital
and represent one vote at the shareholders' meeting.
Unaudited as at Unaudited as at Audited as at
30 Sep 23 30 Sep 22 31 Mar 23
GBP'000 Number GBP'000 Number GBP'000 Number
-------- -------- ------------ -------- ------------
Authorised
Ordinary shares of 0.025 pence each 100 400,000,000 100 400,000,000 100 400,000,000
-------- ------------ -------- ------------ -------- ------------
Called up, allotted and fully paid
Ordinary shares of 0.025 pence each 50 199,054,325 50 199,054,325 50 199,054,325
-------- ------------ -------- ------------ -------- ------------
Movement in Record plc shares held by the Record plc Employee
Benefit Trust ("EBT")
The EBT was formed to hold shares acquired under the Record plc
share-based compensation plans. Under IFRS the EBT is considered to
be under de facto control of the Group, and has therefore been
consolidated into the Group financial statements.
Neither the purchase nor sale of own shares leads to a gain or
loss being recognised in the Group statement of comprehensive
income. Any such gains or losses are recognised directly in
equity.
Number
Record plc shares held by EBT as at 31 March 2022 9,632,031
------------
Net change in holding of own shares by EBT in period (1,495,441)
Record plc shares held by EBT as at 30 September 2022 8,136,590
------------
Net change in holding of own shares by EBT in period 598,412
Record plc shares held by EBT as at 31 March 2023 8,735,002
------------
Net change in holding of own shares by EBT in period (1,580,869)
Record plc shares held by EBT as at 30 September 2023 7,154,133
------------
The EBT holds shares in Record plc which are used to meet the
Group's obligations to employees under the Group Bonus Scheme and
the Record plc Share Scheme. Own shares are recorded at cost and
are deducted from retained earnings.
10. Related parties
Related parties of the Group include key management personnel,
close family members of key management personnel, subsidiaries and
the EBT.
On 24 June 2023 a new joint venture, Dair Record Ltd, was
incorporated. This entity is in the early stages of development
and, as at 30 September 2023, is not yet operational. Record's CTO,
Rebecca Venis, serves as a Non-Executive Director on the Board of
one of RDAV's investments, Block Scholes Limited, which constitutes
a related party relationship. There have been no other changes in
related parties from those disclosed in the Annual Report 2023.
Transactions or balances between Group entities have been
eliminated on consolidation and, in accordance with IAS 24, are not
disclosed in this note.
Key management personnel
The compensation given to key management personnel is as
follows:
Six months ended Six months ended Year ended
30 Sep 23 30 Sep 22 31 Mar 23
GBP'000 GBP'000 GBP'000
Short-term employee benefits 5,118 5,061 10,311
Post-employment benefits 144 189 327
Share-based payments 1,422 1,632 3,539
----------------- ----------------- -----------
6,684 6,882 14,177
----------------- ----------------- -----------
Compensation to key management personnel has increased in line
with the profitability of the Group. It includes variable
remuneration paid through the Group Bonus Scheme as well as
inflationary increases and promotions. More detail of the Group's
financial performance is provided in the Financial Review
section.
The dividends paid to key management personnel in the six months
ended 30 September 2023 totalled GBP2,669,149 (six months ended 30
September 2022: GBP2,278,904; year ended 31 March 2023:
GBP4,073,511).
11. Post-reporting date events
No adjusting or significant non-adjusting events have occurred
between the reporting date and the date of approval.
Information for shareholders
Record plc
Record plc is a public limited company incorporated in the
UK.
Registered in England and Wales
Company No. 1927640
Registered office
Morgan House
Madeira Walk
Windsor
Berkshire
SL4 1EP
United Kingdom
Tel: +44 (0)1753 852 222
Fax: +44 (0)1753 852 224
Principal UK trading subsidiaries
Record Currency Management Limited
Registered in England and Wales
Company No. 1710736
Record Group Services Limited
Registered in England and Wales
Company No. 1927639
Both principal UK trading subsidiaries are based in Windsor.
Further information on Record plc can be found on the Group's
website: www.recordfg.com
Dates for 2023 interim dividend
Ex-dividend date 30 November 2023
Record date 1 December 2023
Interim dividend payment date 22 December 2023
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street Leeds
LS1 4DL
Further information about the Registrar is available on their
website: www.linkgroup.eu
AUME definition
The basis for measuring AUME differs for each product and is
detailed below:
-- Passive Hedging mandates - the aggregate nominal amount of
passive hedges actually outstanding in respect of each client;
-- Dynamic Hedging mandates - total amount of clients'
investment portfolios denominated in liquid foreign currencies, and
hence capable (under the terms of the relevant mandate) of being
hedged;
-- Currency for Return mandates - the maximum aggregate nominal
amount of outstanding forward contracts for segregated clients, and
the Net Asset Value of the EMSF for which RCM acts as Investment
Manager;
-- Multi-product mandates - the chargeable mandate size for each client; and
-- Cash and Futures/other - the total set aside by clients to
cover hedging cash flows and managed by Record, and the initial Net
Asset Value of funds for which RAM acts as Investment Manager
--
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END
IR DBBDBBDBDGXL
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