RNS Number : 1618C
Record PLC
17 June 2021
PRESS RELEASE
Record plc
17 June 2021
FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2021
Record plc, the specialist currency and derivatives manager, today announces its audited results for the year ended 31 March 2021.
This is an announcement of the Annual Financial Report of Record plc as required to be published under DTR 4 of the UKLA Listing Rules'
Resilient, in-line performance; strong platform for growth, with final dividend and special dividend declared
Key developments:
- Strategic focus on accelerated and diversified growth has delivered highest ever AUME of
$80.1bn , including diverse inflows of$9.7bn . - The Record EM Sustainable Finance Fund developed in collaboration with large Swiss Wealth Manager – anticipated launch imminent
- Progress made with focus on succession, as illustrated by restructure of Client Team and change of CIO during the year
- Modernisation of business continues with further investment into IT infrastructure and new technology
- As expected, transitional year for the Group following last year’s change in leadership has impacted on profits in the short term
- Proven operational resilience and financial independence maintained throughout the current covid-19 pandemic
Financial headlines:
- Revenues broadly constant at
£25.4m (2020:£25.6m ) - Growth in management fees of 8% to
£24.9m (2020:£23.1m ) - 37% increase in USD AUME1 to
$80.1bn at 31 March 2021, including strong net inflows of$9.7bn for the year - 23% increase in GBP AUME to
£58.1bn at 31 March 2021 - Performance fees for the year of
£0.1m (2020:£1.8m ) - Profit Before Tax (PBT) of
£6.2m (2020:£7.7m ) - Operating profit margin of 24% (2020: 30%)
- Robust financial position with net assets of
£26.8m at 31 March 2021 (2020:£28.2m ) - Basic EPS of 2.75p per share (2020: 3.26p)
- Proposed final ordinary dividend of 1.15p per share; total ordinary dividend for the year of 2.30p per share (2020: 2.30p)
- Special dividend for the year of 0.45p per share (2020: 0.41p)
_____________________________________________________________________________________
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:
"Momentum has continued to build for our key strategic objectives of growth, diversification and planning for succession through this transitional period since the change of leadership was announced in February 2020.
"Implementing this change in strategy whilst adapting to the physical constraints arising from the impact of the pandemic have proved a challenge for most businesses, but one which our business has successfully risen to.
"As expected, the more immediate financial impact from implementing our wide ranging strategy in investing for growth has been a short-term decrease in profitability. However, looking forward, we start the year on our highest ever level of AUME, which is more diversified across our higher-margin products and provides us with an excellent platform for growth in FY-22.
"Added to this, we have been developing new products in collaboration with our clients, one of which, the innovative Record EM Sustainable Finance Fund, we anticipate launching by the end of this month alongside one of the largest Wealth Managers in
"Notwithstanding the short-term decrease in profitability and the challenging environment throughout the year, the Group continues to be self-financing, cash-generative and completely independent with no external debt.
"Against this backdrop, the Board remains confident that its change in strategic direction is the correct way forward for the long-term growth and success of the business, which is reflected in its decision to recommend payment of both a final ordinary dividend and also a special dividend in line with the Group's capital and dividend policy."
Analyst presentation
There will be a presentation for analysts at 9.30am on Thursday 17 June 2021 held via a Zoom call. Please contact the team at Buchanan via record@buchanan.uk.com for further details. A copy of the presentation will be made available on the Group's website at www.recordcm.com.
For further information, please contact:
Record plc +44 (0) 1753 852222
Neil Record - Chairman
Leslie Hill - Chief Executive Officer
Steve Cullen - Chief Financial Officer
Buchanan +44 (0) 20 7466 5163
Giles Stewart
Victoria Hayns
Henry Wilson
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 MARCH 2021
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
Revenue |
25,412 |
25,563 |
|
Cost of sales |
(399) |
(255) |
|
Gross profit |
25,013 |
25,308 |
|
Administrative expenses |
(18,934) |
(17,741) |
|
Other income or expense |
41 |
82 |
|
Operating profit |
6,120 |
7,649 |
|
Finance income |
71 |
146 |
|
Finance expense |
(38) |
(58) |
|
Profit before tax |
6,153 |
7,737 |
|
Taxation |
(802) |
(1,365) |
|
Profit after tax |
5,351 |
6,372 |
|
Total comprehensive income for the year |
5,351 |
6,372 |
|
Profit and total comprehensive income for the year attributable to |
|
|
|
Owners of the parent |
5,351 |
6,420 |
|
Non-controlling interests |
- |
(48) |
|
Total comprehensive income for the year |
5,351 |
6,372 |
|
|
|
|
|
Earnings per share for profit attributable to the equity holders of the Group during the year |
|
|
|
Basic earnings per share |
2.75 |
3.26p |
|
Diluted earnings per share |
2.73 |
3.26p |
Consolidated statement of financial position
As at 31 March 2021
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
Non‑current assets |
|
|
|
Intangible assets |
420 |
470 |
|
Right‑of‑use assets |
684 |
1,175 |
|
Property, plant and equipment |
683 |
751 |
|
Investments |
3,046 |
2,472 |
|
Deferred tax assets |
320 |
- |
|
Total non‑current assets |
5,153 |
4,868 |
|
Current assets |
|
|
|
Trade and other receivables |
8,006 |
8,704 |
|
Derivative financial assets |
260 |
193 |
|
Money market instruments with maturities > 3 months |
12,932 |
7,958 |
|
Cash and cash equivalents |
6,847 |
14,294 |
|
Total current assets |
28,045 |
31,149 |
|
Total assets |
33,198 |
36,017 |
|
Current liabilities |
|
|
|
Trade and other payables |
(3,426) |
(3,009) |
|
Corporation tax liabilities |
(315) |
(601) |
|
Lease liabilities |
(539) |
(544) |
|
Financial liabilities |
(1,696) |
(2,191) |
|
Derivative financial liabilities |
(16) |
(610) |
|
Total current liabilities |
(5,992) |
(6,955) |
|
Non-current liabilities |
|
|
|
Deferred tax liabilities |
(108) |
(86) |
|
Provisions |
(200) |
(200) |
|
Lease liabilities |
(99) |
(615) |
|
Total non-current liabilities |
(407) |
(901) |
|
Total net assets |
26,799 |
28,161 |
|
Equity |
|
|
|
Issued share capital |
50 |
50 |
|
Share premium account |
2,418 |
2,259 |
|
Capital redemption reserve |
26 |
26 |
|
Retained earnings |
24,305 |
25,694 |
|
Equity attributable to owners of the parent |
26,799 |
28,029 |
|
Non-controlling interests |
- |
132 |
|
Total equity |
26,799 |
28,161 |
CHAIRMAN'S STATEMENT
"In a challenging year, our focus has been first on resilience, and then on creating the environment for change."
Neil Record
Chairman
In my statement last year, I stated that 2020 would be noted as the Coronavirus year, and little did I expect to be writing this year's statement whilst still emerging from the restrictions imposed under the
In combination with the final outcome of the Brexit negotiations, this year has indeed been one of challenge and uncertainty where a firm's ability to adapt has been fundamental to its continued success, or in extremis its very existence.
Our business has responded well to the challenges - our operational resilience and commitment to both our clients and our people remains uppermost, and our strong and liquid balance sheet continues to support the transition under the new business strategy in terms of renewed focus on growth, modernisation and succession.
The two imperatives set out by the Board last year were to orientate the firm for growth, through a programme focused on both modernisation and diversification, and to establish a plan for succession in the most senior executive posts at Record. Significant progress has been made in both with focus on the development of new products including Record's EM Sustainable Finance Fund, and also with changes seen at senior management and Board level, further details of which are set out below and in Leslie Hill's CEO report.
Financial overview
Growth in management fees of 8% (
Increased costs linked to the restructuring of the business and investment both in our people and technology led to a 20% decrease in operating profit, broadly in line with expectations, to
Further information on AUME flows and financial results can be found in the Operating review and Financial review sections respectively.
Group strategy
Beyond ensuring Record's ability to survive enforced transition to home working, the first complete year under Leslie Hill's leadership has been focused on delivering modernisation, diversification and growth.
Modernisation is primarily related to the firm's IT capabilities. It has become clear to the Board that Record's IT infrastructure is in need of upgrading and investment; that the well‑established client-server business IT structure is giving way to significant advances in technology. This transition also opens the door to new applications to streamline workflow and the management of the large amount of data that a modern firm like Record utilises. To this end, approximately
The Board has also decided to begin to diversify by widening Record's investment offerings beyond the existing suite of currency‑related products and services. Several initiatives in this category are now underway, and we will be reporting them to investors when (and if) each reaches implementation stage.
Record's last decade was one of consolidation following the extraordinary period of the Global Financial Crisis. The Board has now decided to change the focus from consolidation to growth, and has asked management to put growth at the top of the priority list. As mentioned above, it is highly likely that some new lines of business will not include currency management as their primary focus.
Further detail on our progress made against initiatives can be found under "Key Performance Indicators" below.
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 and adjusted for changes in capital requirements, to shareholders, normally in the form of special dividends.
The Board is recommending a final ordinary dividend of
The Board is pleased with the progress made in the year from the change in strategy, as evidenced by the increases in AUME and client numbers, the change in revenue mix towards higher-margin products, and the development of new products including the Record EM Sustainable Finance Fund.
Notwithstanding the more positive outlook arising from the end of the third lockdown in the
Against this backdrop, the Group has reviewed its capital requirements taking account of the current market conditions and its anticipated costs and regulatory capital requirements, set against the solid platform for revenue growth delivered from the increase in AUME and the expected product launch in the current financial year. Consequently, the Board considers the current level of capital to be sufficient and is announcing a special dividend of
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
Bob Noyen stepped down from the Board of Record plc in February 2021 and subsequently relinquished his role as Chief Investment Officer, effective 31 March 2021. Bob agreed to assist with the transition and maintenance of client relationships by providing continued support over the next financial year. Bob's knowledge, market experience and energy have been invaluable over almost 22 years at Record, and on behalf of my colleagues I would like to thank him and wish him well for the future.
As previously announced on 4 June, Jane Tufnell will be stepping down from the Board for personal reasons at the Company AGM on 27 July. On behalf of the Board, I would like to thank Jane for her invaluable contribution and dedication since joining Record's Board back in 2015, and wish her well for the future.
Outlook
The covid-19 pandemic; the associated switch to home working; and the implications arising from the huge fiscal support provided by many governments has meant that the already difficult job of forecasting the outlook has become even more difficult. At the macro-level, the scale of developed-country debt, the now long-standing near-zero interest rates, and the imperative to get economies back on their feet means that both fiscal and monetary policies are pointing strongly in the same, expansionary, direction. While goods and services inflation has been quiescent for a decade or more, asset‑price inflation, especially in certain sectors, has been rampant. Adding this background to a renewed period of digitisation of core service provision; and the rapidly rising appetite for the elimination of fossil fuels in industrialised economies, and there appears to be a potent brew for change.
At a more geographic level, with Brexit now complete, Record has established a physical presence within the EU to minimise any cross-border regulatory barriers.
In summary, the Board has set a course that is designed to take advantage of the opportunities that appear in this newly uncertain era, while cognisant that unpredictable change brings unanticipated risks. I am confident that with our new management in place we can deliver on such opportunities.
Neil Record
Chairman
16 June 2021
CHIEF EXECUTIVE OFFICER'S STATEMENT
"Our AUME growth and its diversification into our higher-margin products gives us a solid platform for revenue growth into FY-22."
Leslie Hill
Chief Executive Officer
We have had a very busy year since our last Annual Report to you all, and lots of things have gone rather well.
I see the challenges we face as similar to those one would face when modernising and improving a house whilst still living in it, and also constantly receiving those much valued paying guests who are our clients. During the year we've made good progress and we are, with care and careful planning, seeing some real results which we can share with you all.
Progress against strategy
Our deep desire to diversify our business, both by showing new ideas to existing clients, and also by engaging with entirely new clients, is still at the heart of what we are doing. The longevity of our client relationships is a source of real pride to us all and will continue; I often feel we are not so good at getting clients (but getting better as we offer more and better products) but we are really good at keeping them once we have them. Now if we can combine that with exciting new projects then I am confident we can move forward over the next decade without losing momentum.
What has gone well? I would like to show you this by highlighting some of our key staff and their contribution, as we are, above all, a team effort.
Diversification
The move into some higher-margin products, which I think should continue, is critical to our long-term success. Our EM Sustainable Finance Fund, which we anticipate launching imminently, while tricky to develop and set up, with a lot of complex needs and requirements to ensure it is robust and scaleable, is one such example. We think this move into both Impact and Sustainable investing is one that our clients want and so will last, and we plan to stay in the forefront of this movement and keep investing, to ensure we are always relevant. The Head of our Swiss office Dr Jan Witte is to be commended for his diligence, patience and tenacity to get this project up and running. He is a powerhouse, and a real pleasure to work with.
Modernisation
Our modernisation plans, the work on our tech stack, our processes and our in-house capabilities is quite a long and complex project. We are fortunate that the software we need is now available at attractive prices and we are finding that the growth agenda at Record has increased our ability to attract more talent into the team, from all over the globe - perhaps one of the very few silver linings to come out of the pandemic. Our Director of IT and Strategic Initiatives, Rebecca Venis, has shown us how a really clever agile mind, coupled with a perennial curiosity and an understanding of the world of digital finance, together with an apparently inexhaustible source of energy, can be put to work with great results. Her contribution has been and continues to be awe-inspiring.
Succession
Our staff are our greatest asset and they have worked hard over the last year, putting their own wishes and desires to one side to, in the words of Spike Lee "do the right thing" in every way. If we did not have such a great HR team in Kevin Ayles and Liz Goddard we would be lost; they have worked so hard at pastoral care throughout a challenging period, whilst helping me implement necessary changes to allow for succession planning. They are both great assets to Record - skilled, kind and practical.
I am proud to say all of these staff are now meaningful equity owners and we plan to continue to roll out the share ownership and options programme going forward, so that everyone who is a big part of our future can feel engaged, empowered and sufficiently aligned.
After over 21 years at Record our CIO Bob Noyen handed over to Dr Dmitri Tikhonov. While we are glad to see Bob take a well-earned reduction in hands-on responsibility it is great to see Dmitri, who has himself been at Record for over 18 years, step up and take the reins. His calm and thoughtful approach to solving our investment issues and challenges is very welcome and his team is delighted to have the chance to step up themselves and take more responsibility.
Asset flows and financial performance
Solid progress has been made in growing our AUME, which closed the year at
Detailed analysis of AUME is provided in the Operating review below.
Whilst revenues of
The Financial review below gives additional commentary.
Outlook
I am personally quite pleased with the progress made during a difficult and challenging first year at the helm. Notwithstanding the short-term decrease in our profits for FY-21, we go into FY-22 with our highest ever AUME, the anticipated launch of our new EM Sustainable Finance Fund in collaboration with the largest Wealth Manager in
First and foremost, we remain committed to our clients and to our talented team of employees who themselves have shown great commitment and adaptability through a period of external challenge and internal change.
We also remain committed to our new strategy, which I believe has already started to deliver the growth, modernisation and diversification that the business needs and I look forward to building on this further into FY-22 alongside the talented team we are lucky enough to have here at Record.
Leslie Hill
Chief Executive Officer
16 June 2021
MARKETS
Our market environment and industry trends
Our market
The currency market represents the biggest and most liquid financial market available, with exceptionally low transaction costs and daily FX volumes averaging
The FX market continues to offer opportunities for investors. Record's expertise is in identifying and understanding these opportunities and then working with clients to understand how such opportunities may be used to their best advantage, taking account of each client's individual circumstances and attitude to risk.
Global and macro trends
Inflation and ultra-low or negative interest rates
The global pandemic cemented an era of accommodative policy, epitomised by ultra-low rates, multi-trillion dollar fiscal packages, and major central bank asset purchase programmes. Despite widespread disruption to global activity and trade, policy activism and the suppression of the time value of money helped to contain financial market volatility. It is the concern of many that these well-intentioned actions have inflated most traditional asset returns and valuations, with the implication that a repeat of such performance is not organically possible without new policy impulse. The best performing assets could now be the riskiest, and as the pandemic fades, investors must contend with economic realities. Of utmost concern is the prospect of rising inflation rates as economies reopen, posing the threat of disruption through forced central bank tightening.
What this means for our business
Record's Currency for Return strategies are designed to target persistent market patterns and risk premia. As economic, political, and societal norms change, so must our approach. As such, we constantly challenge the assumptions underlying our investment process. In particular, the centrally managed nature of financial markets and homogeneity of central bank policy contributed to uniformity among currencies and lower currency volatility. We continued to adjust our investment processes accordingly, for example by improving the way we capture currency value cycles, and extract growth premia from Emerging Markets. More broadly, the risks to traditional premia are seen as validating the need for legitimate and diversifying sources of return through currency.
Extraordinary Federal Reserve policy saw the US dollar take a round trip from currency strength to weakness, emphasising the benefits of active hedging strategies; we have since seen enhanced interest in Dynamic Hedging and in October on-boarded a new institutional Dynamic Hedging client. The prolonged anticipated effects of the pandemic in Emerging Markets are leading some investors to reassess the benefits of holding certain EM currencies. This has generated new interest in the bespoke management of EM currency exposures, for which we have the tools, processes and know-how. From a strategic hedging perspective, we are working with clients to help understand the risks and scenarios emanating from uncertainty around inflation and central bank normalisation.
Additionally, the bottoming out of yields across the globe has most investors searching high and low for yield, which creates a double opportunity for Record. Firstly in our well-established business working with alternative asset managers, particularly in private credit, since they are seeing ever-increasing demand as the yielding opportunities from the public markets have evaporated. This is driving both more interest in their strategies from foreign investors and a push to source assets in other jurisdictions, both of which introduce currency management into the equation. Secondly and in counterpoint to the first, there is significantly more demand for yielding, liquid strategies. Record has collaborated with a trade finance specialist, to be able to offer our clients access to solutions centred on diversified, short‑dated exposure to investment grade corporates. Initial engagement with clients and prospects alike has been very strong and we will work hard to develop this opportunity further into FY-22.
Industry trends
Increase in demand for sustainable investment products
The last twelve months has seen an acceleration in the widespread incorporation of sustainability-linked factors in investment products as investors become ever more focused on resilience. With broad understanding that "non-financial" data (climate, social, governance, etc.) can more completely fortify portfolios to weather global shocks, asset managers have had to review the remits of fiduciary duty to take account of these fast‑evolving investor preferences and broader understanding of material risk. Pandemic contagion flagged risks that occur concomitant with an increasingly interconnected world, reliant upon global supply chains and geared by closely intertwined national economies. Long-term climate risks and the global consequences of seemingly idiosyncratic sovereign-level physical risks are therefore now better comprehended in their magnitude, and the importance of international co-operation more seriously acknowledged. Investors have translated macroeconomic risks into portfolio risks, using frameworks such as that of the Sustainability Accounting Standards Board ("SASB") to understand what this means for the resilience of their investments, and it is on asset managers to respond with credible and prudent sustainable solutions.
What this means for our business
Sustainability has been placed at the heart of our business, both at an operations level and ever-increasingly at the investment level. In partnership with our clients, we have designed and crafted original sustainable solutions, as illustrated by the recent development of the Record EM Sustainable Finance Fund; displaying thought leadership in an asset class often forgone in sustainable investment strategies. We look to continue collaborating with our clients and other research bodies to reach bespoke sustainable solutions in the currency space, and continue in leading the way in our sector.
In keeping with our beliefs in responsible investment, and meeting demand for sustainable reporting within standardised and trusted reporting frameworks, this year we have reported according to the recommendations of the Task Force for Climate-related Financial Disclosures ("TCFD"), completed our UN PRI annual report, as well as released a Sustainability Report detailing extensively how we incorporate sustainability in every corner of our business. Whilst the standardised formats of the external reports are not always a fit for FX investment strategies, we continue to aim for transparency and disclosure wherever possible.
Advances in technology
Over recent years technological advances have changed the way in which businesses in our sector need to operate. This includes how data is collected and analysed for investment purposes, having the ability to trade using electronic platforms and algorithms, enabling improved client reporting processes, and introducing efficiencies in more manual processes and procedures. The speed of change is dramatic and will continue to change the way business is done in our sector going forward.
What this means for our business
Technology has a critical role to play in our business, both to create efficiency to deliver reliable low-cost solutions for clients, and to drive innovation in creating new products and markets. Technologies such as artificial intelligence and machine learning, as well as improvements in data science and the ability to utilise opportunities offered through third party systems, can all contribute to the aim of improving our investment management products and services. As a result, the need to continue to observe and invest in technology and innovation is paramount to protect our capability to respond effectively to disruption and change in our markets, as well as to support our investment management processes and systems, improve client service and enhance our operating efficiency and effectiveness.
Market review
Review of the year ended 31 March 2021
The financial year began just a week after the S&P500 bottomed out, following the shuttering of economies globally and a pause on all non‑essential activity in order to stop the spread of the covid-19 virus. The first quarter of the year was characterised by a relative stabilisation in financial market conditions as the unprecedented sudden stop in activity ushered in large-scale stimulus programmes from major central banks and governments alike. By our estimates, the G4 central banks alone grew their balance sheets by over
In spite of the damage evident in the real economy, these economy-saving measures were enough to prevent a broader credit crunch and what many feared could have amounted to a depression. To the contrary, risk markets generally rose for the rest of the year, with the S&P500 reaching new highs as soon as August. The rapid recovery of risk sentiment would not have been possible without the development of life-saving vaccines. With reopening prospects tied to the attainment of herd immunity, market fluctuations followed closely the various hurdles - including the discovery of new and more contagious virus strains - and advancements of the vaccine development and deployment process. By mid-financial year, market participants could be more confident of economic reopening in the year ahead.
Faced with the ongoing uncertainty of the pandemic and a notable inflation undershoot relative to its target, in August the Federal Reserve unveiled its Average Inflation Targeting framework. This new flexible approach, all else equal, would see the Federal Reserve committing to looser policy in order to make up for years of inflation undershooting the bank's target. As markets looked through transitory inflation weakness to higher expected levels in the future, falling ex ante US real yields weighed heavily on the US dollar, especially versus cyclically sensitive currencies like the Australian dollar. This also supported a reflation in Emerging Market assets through to the end of the calendar year.
Aside from navigating the impact of the pandemic, investors also had to contend with the US elections between November and January. In contrast to expectations of a mixed result, Democratic Presidential candidate Joe Biden took the Presidency, while his party maintained control over the House, and gained narrow control over the Senate via the state of
Meanwhile, the
Developed market risk assets remained resilient through the end of the financial year, however Emerging Markets ran into some headwinds. Lacking the economic degrees of freedom to hike interest rates decisively in response to higher US yields, the lagged rollout of vaccines, new covid-19 waves, and instances of idiosyncratic risks generated volatility in some currencies. For
Towards the end of the financial year, and notwithstanding unforeseen developments in virus variants, the end of the pandemic started to come into sight as countries (particularly in the developed world) upped the ante with mass inoculations. With that, so did questions around the longer-term implications of the economic measures put in place to combat the downturn. Principally, investors were left questioning how governments might handle the large debts accrued. With austere policy being difficult to sell politically, official default best avoided, and without sustained high growth rates, this raised the prospect of a prolonged period of financially repressive policies.
Relatedly, central banks began to carefully consider their exit strategies and investors were left wondering how or if normalisation might be achieved without financial market disruption. The covid-19 pandemic proved to be one of the largest economic shocks in modern economic history, yet with the well-intentioned actions of central banks and governments, currency volatility was contained over the period. Therefore, the prospect of policy tightening forced by a sudden resurgence in inflation as economies reopen remains a key risk in the minds of investors going into the 2022 financial year.
Please refer further below to see how the Group has managed the impact of the covid-19 pandemic.
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 and measure the performance of the Group against its strategic priorities. Some KPIs link to specific strategic areas as noted below, whilst others represent higher level key metrics in terms of the Group's business and financial performance.
Financial KPIs
Revenue (£m)
Revenue is earned mainly from the provision of currency management services in the form of management fees and performance fees.
|
Revenue |
£ million |
|
FY-21 |
25.4 |
|
FY-20 |
25.6 |
|
FY-19 |
25.0 |
|
FY-18 |
23.8 |
|
FY-17 |
23.0 |
Why this is important
Revenue is a key indicator of client experience, growth and a key driver of profitability. Growth in AUME resulted in an 8% increase in management fees, although challenging market conditions meant this was offset by a corresponding decrease in performance fees of
Operating profit margin (%)
Operating profit margin is an alternative performance measure, calculated by dividing operating profit by revenue.
|
Operating profit margin |
% |
|
FY-21 |
24 |
|
FY-20 |
30 |
|
FY-19 |
32 |
|
FY-18 |
31 |
|
FY-17 |
34 |
Why this is important
Operating profit margin is an indicator of the efficiency of the business in turning revenue into profit. Whilst revenues were broadly maintained for the year, costs increased as a result of restructuring and investing in technology, which have impacted the profitability of the business in the short term. Further information can be found in the Financial review section.
The Group aims to increase the operating profit margin over time through investment in resources and technology to maintain its premium products and services, whilst increasing operating efficiency and developing more diversified revenue streams in higher-margin products.
Basic earnings per share ("EPS") (pence per share)
The Group aims to create shareholder value over the long term, illustrated by a consistent growth in EPS.
|
EPS |
pence |
|
FY-21 |
2.75 |
|
FY-20 |
3.26 |
|
FY-19 |
3.27 |
|
FY-18 |
3.03 |
|
FY-17 |
2.91 |
Why this is important
EPS measures the overall effectiveness of the business model and drives both our dividend policy and the value generated for shareholders. Similarly to operating profit, EPS has been impacted in the short term by the increase in costs arising from the implementation of the new strategy.
Dividends per share ("DPS") (pence per share)
The Group's policy is that total distributions in any year will be covered by earnings. The Group aims to pay a progressive ordinary dividend and return surplus capital to shareholders where it is in excess of business requirements, usually in the form of special dividends.
|
DPS |
Ordinary dividend per share pence |
Special dividend per share pence |
|
FY-21 |
2.30 |
0.45 |
|
FY-20 |
2.30 |
0.41 |
|
FY-19 |
2.30 |
0.69 |
|
FY-18 |
2.30 |
0.50 |
|
FY-17 |
2.00 |
0.91 |
Why this is important
Repeatable dividend payments illustrate the cash generative nature of Record's business, and its strength in converting profits into cash and providing a suitable return to shareholders. The ordinary dividend per share is unchanged on last year. The special dividend per share has increased by
Non-financial KPIs
AUME ($ billion)
As a currency manager, Record manages only the impact of foreign exchange and not the underlying assets of its clients, therefore its AUM (Assets Under Management) are notional. 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.
|
AUME |
$ billion |
|
FY-21 |
80.1 |
|
FY-20 |
58.6 |
|
FY-19 |
57.3 |
|
FY-18 |
62.2 |
|
FY-17 |
58.2 |
Why this is important
AUME is a key driver of future revenue and an indicator of business growth. AUME increased by 37% for the year, including net inflows of
Clients
Client numbers represent the number of separate legal entities that have appointed Record directly as an investment manager or invested in a Record fund at the year end, and acts as a broad indicator of business growth.
|
Client |
|
|
FY-21 |
89 |
|
FY-20 |
72 |
|
FY-19 |
65 |
|
FY-18 |
60 |
|
FY-17 |
59 |
Why this is important
The sustained growth in client numbers is indicative of successful client engagement, quality client experience and the building of strong "trusted adviser" relationships.
Client longevity (%)
Client longevity measures how long Record has been providing currency management services to each client with a mandate active as at 31 March 2021.
|
Client longevity |
% |
|
0-1 yrs |
21 |
|
1-3 yrs |
25 |
|
3-6 yrs |
18 |
|
6-10 yrs |
12 |
|
>10 yrs |
24 |
Why this is important
Client longevity is both an indicator of recent client growth, and also of the Group's success in sustaining quality client relationships through investment cycles.
Average number of employees
The average number of employees through the year includes Non-executive Directors.
|
Average number of employees |
|
|
FY-21 |
83 |
|
FY-20 |
82 |
|
FY-19 |
85 |
|
FY-18 |
81 |
|
FY-17 |
73 |
Why this is important
Average employee numbers is an indicator of growth and also of how effectively the Group is using technology to make processes more efficient.
Staff retention (%)
Staff retention is the number of employees who were employed by Record throughout the period as a percentage of the number of employees at the beginning of the period.
|
Staff retention |
% |
|
FY-21 |
90 |
|
FY-20 |
81 |
|
FY-19 |
84 |
|
FY-18 |
93 |
|
FY-17 |
83 |
Why this is important
The Group's third cornerstone is talent development, which includes the development and retention of our talented employees. Whilst every business expects a degree of employee turnover, the monitoring of employee retention acts as a general indicator for factors affecting our employees' wellbeing, development, and issues such as longer-term succession.
Employees with equity interest (%)
The percentage of employees who own shares in Record plc at year end.
|
Employees with equity interest |
% |
|
FY-21 |
68 |
|
FY-20 |
69 |
|
FY-19 |
70 |
|
FY-18 |
72 |
|
FY-17 |
68 |
Why this is important
The alignment of employee interests with those of our shareholders is an important factor in ensuring the longer-term success of our business and is an important tool in managing generational change.
OPERATING REVIEW
AUME increased by 37% in US dollar terms, finishing the year at
Product investment performance
Hedging
Our hedging products are predominantly systematic in nature. The effectiveness of each client mandate is assessed regularly and adjustments are made when necessary in order to respond to changing market conditions or to bring the risk profile of the hedging mandate in line with the client's risk tolerance.
Passive Hedging
Record's enhanced Passive Hedging service aims to reduce the cost of hedging by introducing 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. High levels of central bank intervention have meant there have been particularly high levels of liquidity in the FX derivatives market since April 2020. This has, for the most part, had a dampening effect on volatility and reduced the opportunity set available for clients. In December 2020, however, we saw significant volatility arise in the FX forwards market for a period of a couple of weeks. We positioned client portfolios appropriately to extract value from this volatility. Positive performance for the year can be attributed to actively managing clients' duration profiles in such a way that they benefited from these market opportunities as and when they arose.
The table below shows the total value added relative to a fixed-tenor benchmark for an enhanced Passive Hedging programme for a representative account. The base currency used is Swiss francs.
|
|
Return for year to 31 March 2021 |
Return since inception |
|
Value added by enhanced Passive Hedging programme relative to a fixed‑tenor benchmark |
0.05% |
0.08% p.a. |
Dynamic Hedging
The performance of our Dynamic Hedging product depends on how the foreign currencies change in value relative to the base currency of our client. During the year, US investors saw gains from currency on international assets when valuing positions in US dollars, as the US dollar depreciated against the majority of G10 currencies. Record's Dynamic Hedging product adjusted hedge ratios in line with US dollar fluctuations, reducing hedging losses when the US dollar was weaker and helping to protect against currency losses when the US dollar was episodically stronger - as a result, on the net basis, this allowed our clients to participate in currency gains on the underlying foreign currency exposure.
The performance of the Dynamic Hedging programmes hedging US dollar exposures into other currencies was opposing and reflective of the mandates' specific objectives, benchmarks and inception dates in the reported period.
|
|
Return for year to 31 March 2021 |
Return since inception |
|
Value added by Dynamic Hedging programme |
(0.49%) |
0.45% p.a. |
Currency for Return
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, which include:
· Forward Rate Bias ("FRB", also known as Carry) and Emerging Market strategies which are founded on market risk premia and as such perform more strongly in "risk on" environments; and
· Momentum, Value and Range Trading strategies which are more behavioural in nature, and as a result are less risk‑sensitive.
Record's Multi-Strategy mandates delivered positive overall performance over the year which was driven by the outperformance in FRB and EM strategies given their positive correlation to sentiment. Positive vaccine news supported the global growth outlook and the mitigation of negative tail risk scenarios around a prolonged recession, which enticed inflows into EM and risk-on DM currencies.
|
|
Return for 12 months to 31 March 2021 |
Return since inception |
Volatility since inception |
|
Returns |
% |
% p.a. |
% p.a. |
|
Record Multi‑Strategy composite |
2.86 |
0.86 |
3.19 |
Scaling
The Currency for Return product group allows clients to select the level of exposure they desire in their currency programmes by selecting the required 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 to the mandate size. This is limited by the willingness of counterparty banks to take exposure to the client. The AUME of those mandates where scaling or a volatility target is selected is represented in Record's AUME at the scaled value of the mandate, as opposed to the mandate size.
AUME development
AUME expressed in US dollar terms finished the year at
AUME movements ($bn)
|
AUME at 1 April 2020 |
58.6 |
|
Net flows |
+ 9.7 |
|
Markets |
+ 8.4 |
|
FX and scaling |
+ 3.4 |
|
AUME at 31 March 2021 |
80.1 |
Passive Hedging AUME increased by 22% to
Dynamic Hedging AUME increased by 271%, ending the year at
Currency for Return AUME increased to
Multi-product AUME increased to
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 movements increased AUME by
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 2021
|
|
Equity |
Fixed income |
Other |
|
|
% |
% |
% |
|
Passive Hedging |
30% |
37% |
33% |
|
Dynamic Hedging |
97% |
0% |
3% |
|
Multi-product |
0% |
0% |
100% |
Forex
Approximately 80% of the Group's AUME is non‑US dollar denominated. Therefore, foreign exchange movements may have an impact on AUME when expressing non-US dollar denominated AUME in US dollars. Foreign exchange movements increased AUME by
At 31 March 2021, the split of AUME by base currency was 12% in sterling, 47% in Swiss francs, 20% in US dollars, 15% in euros and 6% in other currencies.
AUME composition by base currency
|
Base currency |
31 March 2021 |
31 March 2020 |
|
Sterling |
|
|
|
US dollar |
|
|
|
Swiss franc |
|
|
|
Euro |
|
|
|
Australian dollar |
AUD 2.1bn |
AUD 1.6bn |
|
Canadian dollar |
|
|
|
Swedish krona |
|
|
Product mix
AUME composition by product
|
|
31 March 2021 |
31 March 2020 |
||
|
|
US $bn |
% |
US $bn |
% |
|
Passive Hedging |
61.5 |
77% |
50.3 |
86% |
|
Dynamic Hedging |
9.3 |
12% |
2.5 |
4% |
|
Currency for Return |
3.9 |
5% |
2.6 |
4% |
|
Multi-product |
5.2 |
6% |
3.0 |
5% |
|
Cash |
0.2 |
0% |
0.2 |
1% |
|
Total |
80.1 |
100% |
58.6 |
100% |
The mix of hedging AUME changed during the year with net inflows into higher-margin Dynamic Hedging reducing the concentration from lower-margin Passive Hedging AUME.
FINANCIAL REVIEW
"The year has been one of transition, with focus on the implementation of the new strategy arising from the Group's change of leadership."
Steve Cullen
Chief Financial Officer
Overview
As expected, the financial impact of such change has been felt in the form of reduced profitability in the short term as the business seeks to embed structural and resource changes necessary in the implementation of the new strategy.
Notwithstanding a challenging year due to the impact of covid-19, strong progress was made in the second half in terms of growth in AUME in existing products as well as in the development of new products, the full benefits from which we expect to see in the current year: FY-22. The Group remains independent and profitable, supported by its strong and liquid balance sheet.
Revenues remained broadly flat on last year at
Profit and loss (£m)
|
|
2021 |
2020 |
|
Revenue |
25.4 |
25.6 |
|
Cost of sales |
(0.4) |
(0.3) |
|
Gross profit |
25.0 |
25.3 |
|
Personnel (excluding GPS) |
(10.3) |
(8.6) |
|
Non‑personnel cost |
(5.4) |
(5.7) |
|
Other income or expense |
0.0 |
0.1 |
|
Total expenditure (excluding GPS) |
(15.7) |
(14.2) |
|
GPS |
(3.2) |
(3.5) |
|
Operating profit |
6.1 |
7.6 |
|
Operating profit margin |
24% |
30% |
|
Net interest received |
0.1 |
0.1 |
|
Profit before tax |
6.2 |
7.7 |
|
Tax |
(0.8) |
(1.3) |
|
Profit after tax |
5.4 |
6.4 |
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.
Growth in AUME drives growth in management fees. Whilst positive market movements of
Management fees earned during the year increased by 8% to
Revenue analysis (£m)
|
|
Year ended 31 March 2021 |
Year ended 31 March 2020 |
|
Management fees |
|
|
|
Passive Hedging |
11.4 |
12.0 |
|
Dynamic Hedging |
5.6 |
4.0 |
|
Currency for Return |
2.0 |
2.0 |
|
Multi-product |
5.9 |
5.1 |
|
Total management fees |
24.9 |
23.1 |
|
Performance fees |
0.1 |
1.8 |
|
Other currency services income |
0.4 |
0.7 |
|
Total revenue |
25.4 |
25.6 |
Management fees
Passive Hedging management fees decreased by 5% to
Dynamic Hedging management fees increased by 41% to
Management fees from Currency for Return mandates remained consistent with last year at
Multi-product management fees increased by 14% to
Performance fees
Performance fees are derived from a combination of hedging and return‑seeking products. Aggregate performance fees of
In contrast to February and March 2020 when most assets were re-priced down as a result of the pandemic, the year saw reduced volatility linked to unprecedented amounts of central bank interventions. Consequently, some assets rebounded faster while both our Currency for Return and enhanced Passive Hedging products are taking longer to make up lost ground versus previous high water marks, resulting in reduced performance fees for the year.
Other currency services income
Other currency services income totalled
Expenditure
Cost of sales
Cost of sales comprises referral fees and costs in relation to the Record Umbrella Fund.
Operating expenditure
The Group operating expenditure (excluding variable remuneration) increased by 11% to
Growth in personnel costs of 20% to
Non-personnel costs decreased by 5% during the year to
Other income was
Group Profit Share ("GPS") Scheme
The Group operates a discretionary GPS Scheme i.e. variable remuneration, which is linked to both the financial performance of the Group and the achievement against individual performance objectives for staff. Historically a long‑term average of 30% of underlying operating profit before GPS ("GPS pool") has been made available to be awarded to staff. However, for the prior year ended 31 March 2020 the Remuneration Committee introduced changes to the operation of the scheme with the aim of rewarding individual employee performance that drives revenue growth, improvements to efficiency and reduced costs. Consequently, the expectation is that the average GPS % will now diverge from the long‑term average due to the Remuneration Committee using the flexibility and discretion it already holds in varying the GPS pool between 25% to 35% of underlying operating profit before GPS.
For the year ended 31 March 2021, the GPS pool is 34% of pre‑GPS underlying operating profit, which represents
Operating profit and margin
Group operating profit decreased by 20% to
Cash flow
The Group consolidated statement of cash flows is shown in the financial statements.
The Group's year‑end cash and cash equivalents stood at
At the year end, the Group held money market instruments with maturities between three and twelve months, worth
Dividends
An interim ordinary dividend of
As disclosed in the Chairman's statement, the Board is recommending a final ordinary dividend of
The total ordinary and special dividends paid per share in respect of the prior year ended 31 March 2020 were
Financial stability and capital management
The Group's balance sheet is strong and liquid with total net assets of
The Board's conservative 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
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 (£m)
|
|
2021 |
2020 |
|
Core Tier 1 capital |
26.8 |
28.0 |
|
Deductions: intangible assets |
(0.4) |
(0.4) |
|
Regulatory capital resources |
26.4 |
27.6 |
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.
Covid-19
Whilst the impact of covid-19 continues to disrupt the world economy, many businesses, including those in financial services, have successfully adapted to working under the change in environment, including full remote working. Market liquidity has now returned and the temporary market dislocations seen during the pandemic have now receded. However, at time of writing, the pandemic continues to cause severe disruption across certain parts of the globe, including the identification of new strains of the virus, which has limited the progress in the global recovery. Therefore, whilst no longer an emerging risk, a degree of uncertainty persists and the risk continues to be assessed under business risk.
Information on how the Group has been impacted by the pandemic, including on its business and operations, is given in more detail below.
Review of the impact of covid-19
Our people
Covid-19 is a public health crisis and first and foremost our focus has been on the health and wellbeing of our people and their families. During the crisis, Record has not furloughed any staff nor made any covid-19 related redundancies, and we have not relied on any external support in the form of government assistance schemes. At time of writing, planning has begun for the easing of restrictions and how these may impact the return to "normal" working conditions in terms of social distancing, travel, increased office hygiene requirements and other measures. As a result of the pandemic, all of our employees are fully able to work remotely, giving us an opportunity to offer a more flexible working pattern thereby improving the work-life balance for our employees going forward.
Our clients
Record's clients are institutional and of high quality with strong, long‑standing and trusted relationships built over many years. Record has not lost any clients as a result of the covid-19 pandemic and, using technology-led solutions and digital channels, has maintained strong lines of communication and service levels throughout the crisis, responding to client requests in volatile markets and restricted liquidity, and underpinning the quality of our service offering. The quality of our clients is reflected in the business having not suffered from any unpaid fees for over 20 years through various market crises and cycles, and we have not seen any change in our recovery rates as a result of the pandemic.
Our technology and operations
Full business continuity has been maintained throughout all stages of the crisis. Remote access systems have been strengthened and over the course of the lockdown additional IT equipment and resource has been sourced to facilitate both the necessary communication channels with clients, and the required working environment from home.
Our governance and oversight
Virtual meetings have replaced physical meetings in the office and broadly follow the same pattern as prior to the crisis, although the frequency for some meetings was increased in the early stages of the pandemic, for example more regular Audit and Risk Committee meetings and weekly Executive Committee catch‑ups to discuss employee wellbeing, market behaviour and other management issues.
Our risk and management reporting framework has continued to function as planned, as have monitoring and oversight tasks operated by the compliance team.
Our business model
With the exception of those changes mentioned above, the impact of covid-19 on our business model has been fairly limited and well contained. Our costs have not materially increased as a result of the virus and our balance sheet remains well capitalised and robust, maintaining our independence throughout. In terms of revenue, whilst we have not seen and do not anticipate any direct material outflows as a result of covid-19, the link between some of our clients' mandates with other markets, such as equity and fixed income, means our AUME is also affected to a lesser extent by movements in such markets. Consequently, whilst we saw a relatively small impact (-7%) on our AUME at the start of the pandemic in the final quarter of FY-20, this proved relatively short lived. Markets have since rebounded and our AUME increased by 14% (
As expected, our short-term profitability has been impacted by the investment made in implementing our new strategy and not as a result of the impact of covid-19 on the business, which remains profitable and cash generative, with no changes to our capital or dividend policy.
Directors' responsibility statement pursuant to DTR4
The Directors confirm to the best of their knowledge that:
- the financial statements have been prepared in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group; and
- the annual report includes a fair review of the development and performance of the business and the financial position of the Group, together with a description of the principal risks and uncertainties that they face.
Financial statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 MARCH 2021
|
|
|
2021 |
2020 |
|
|
Note |
£'000 |
£'000 |
|
Revenue |
4 |
25,412 |
25,563 |
|
Cost of sales |
|
(399) |
(255) |
|
Gross profit |
|
25,013 |
25,308 |
|
Administrative expenses |
|
(18,934) |
(17,741) |
|
Other income or expense |
5 |
41 |
82 |
|
Operating profit |
5 |
6,120 |
7,649 |
|
Finance income |
|
71 |
146 |
|
Finance expense |
|
(38) |
(58) |
|
Profit before tax |
|
6,153 |
7,737 |
|
Taxation |
7 |
(802) |
(1,365) |
|
Profit after tax |
|
5,351 |
6,372 |
|
Total comprehensive income for the year |
|
5,351 |
6,372 |
|
Profit and total comprehensive income for the year attributable to |
|
|
|
|
Owners of the parent |
|
5,351 |
6,420 |
|
Non-controlling interests |
|
- |
(48) |
|
Total comprehensive income for the year |
|
5,351 |
6,372 |
|
|
|
|
|
|
Earnings per share for profit attributable to the equity holders of the Group during the year |
|
|
|
|
Basic earnings per share |
8 |
2.75 |
3.26p |
|
Diluted earnings per share |
8 |
2.73 |
3.26p |
The notes below are an integral part of these consolidated financial statements.
Consolidated statement of financial position
As at 31 March 2021
|
|
|
2021 |
2020 |
|
|
Note |
£'000 |
£'000 |
|
Non‑current assets |
|
|
|
|
Intangible assets |
11 |
420 |
470 |
|
Right‑of‑use assets |
12 |
684 |
1,175 |
|
Property, plant and equipment |
13 |
683 |
751 |
|
Investments |
14 |
3,046 |
2,472 |
|
Deferred tax assets |
15 |
320 |
- |
|
Total non‑current assets |
|
5,153 |
4,868 |
|
Current assets |
|
|
|
|
Trade and other receivables |
16 |
8,006 |
8,704 |
|
Derivative financial assets |
17 |
260 |
193 |
|
Money market instruments with maturities > 3 months |
18 |
12,932 |
7,958 |
|
Cash and cash equivalents |
18 |
6,847 |
14,294 |
|
Total current assets |
|
28,045 |
31,149 |
|
Total assets |
|
33,198 |
36,017 |
|
Current liabilities |
|
|
|
|
Trade and other payables |
19 |
(3,426) |
(3,009) |
|
Corporation tax liabilities |
19 |
(315) |
(601) |
|
Lease liabilities |
12 |
(539) |
(544) |
|
Financial liabilities |
20 |
(1,696) |
(2,191) |
|
Derivative financial liabilities |
17 |
(16) |
(610) |
|
Total current liabilities |
|
(5,992) |
(6,955) |
|
Non-current liabilities |
|
|
|
|
Deferred tax liabilities |
15 |
(108) |
(86) |
|
Provisions |
21 |
(200) |
(200) |
|
Lease liabilities |
12 |
(99) |
(615) |
|
Total non-current liabilities |
|
(407) |
(901) |
|
Total net assets |
|
26,799 |
28,161 |
|
Equity |
|
|
|
|
Issued share capital |
22 |
50 |
50 |
|
Share premium account |
|
2,418 |
2,259 |
|
Capital redemption reserve |
|
26 |
26 |
|
Retained earnings |
|
24,305 |
25,694 |
|
Equity attributable to owners of the parent |
|
26,799 |
28,029 |
|
Non-controlling interests |
|
- |
132 |
|
Total equity |
|
26,799 |
28,161 |
Approved by the Board on 16 June 2021. Company registered number: 1927640
The notes on below are an integral part of these consolidated financial statements.
Consolidated statement of changes in equity
Year ended 31 March 2021
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Called up share capital |
Share premium account |
Capital redemption reserve |
Retained earnings |
Equity attributable to equity holders of the parent |
Non-controlling interests |
Total equity |
|
||||||
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
||||||
|
As at 1 April 2020 |
|
50 |
2,259 |
26 |
25,694 |
28,029 |
132 |
28,161 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Profit and total comprehensive |
|
|
|
|
|
|
|
|
|
||||||
|
income for the year |
|
- |
- |
- |
5,351 |
5,351 |
- |
5,351 |
|
||||||
|
Trade Record sale |
|
- |
- |
- |
32 |
32 |
(132) |
(100) |
|
||||||
|
Dividends paid |
9 |
- |
- |
- |
(5,290) |
(5,290) |
- |
(5,290) |
|
||||||
|
Own shares acquired by EBT |
|
- |
- |
- |
(2,338) |
(2,338) |
- |
(2,338) |
|
||||||
|
Release of shares held by EBT |
|
- |
159 |
- |
994 |
1,153 |
- |
1,153 |
|
||||||
|
Share-based payment reserve movement |
|
- |
- |
- |
(138) |
(138) |
- |
(138) |
|
||||||
|
Transactions with shareholders |
|
- |
159 |
- |
(6,772) |
(6,613) |
- |
(6,613) |
|
||||||
|
As at 31 March 2021 |
|
50 |
2,418 |
26 |
24,305 |
26,799 |
- |
26,799 |
|
||||||
Year ended 31 March 2020
|
|
|
Called up share capital |
Share premium account |
Capital redemption reserve |
Retained earnings |
Equity attributable to equity holders of the parent |
Non-controlling interests |
Total equity |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
As at 1 April 2019 |
|
50 |
2,243 |
26 |
25,022 |
27,341 |
60 |
27,401 |
|
IFRS 16 opening adjustment |
|
- |
- |
- |
(98) |
(98) |
- |
(98) |
|
Profit and total comprehensive |
|
|
|
|
|
|
|
|
|
income for the year |
|
- |
- |
- |
6,420 |
6,420 |
(48) |
6,372 |
|
Dividends paid |
9 |
- |
- |
- |
(5,888) |
(5,888) |
- |
(5,888) |
|
Issue of shares in subsidiary |
|
- |
- |
- |
- |
- |
120 |
120 |
|
Own shares acquired by EBT |
|
- |
- |
- |
(1,020) |
(1,020) |
- |
(1,020) |
|
Release of shares held by EBT |
|
- |
16 |
- |
971 |
987 |
- |
987 |
|
Share-based payment reserve movement |
|
- |
- |
- |
287 |
287 |
- |
287 |
|
Transactions with shareholders |
|
- |
16 |
- |
(5,650) |
(5,634) |
120 |
(5,514) |
|
As at 31 March 2020 |
|
50 |
2,259 |
26 |
25,694 |
28,029 |
132 |
28,161 |
The notes below are an integral part of these consolidated financial statements.
Consolidated statement of cash flows
Year ended 31 March 2021
|
|
|
2021 |
2020 |
|
|
Note |
£'000 |
£'000 |
|
Profit after tax |
|
5,351 |
6,372 |
|
Adjustments for non-cash movements |
|
|
|
|
Depreciation of right‑of‑use assets |
12 |
490 |
504 |
|
Depreciation of property, plant and equipment |
13 |
298 |
253 |
|
Amortisation of intangible assets |
11 |
168 |
129 |
|
Share-based payments |
|
486 |
738 |
|
(Increase)/decrease in other non-cash movements |
|
(492) |
(786) |
|
Finance income |
|
(71) |
(146) |
|
Finance expense |
|
38 |
58 |
|
Tax expense |
7 |
802 |
1,365 |
|
Changes in working capital |
|
|
|
|
Decrease/(increase) in receivables |
|
696 |
(1,281) |
|
Increase in payables |
|
417 |
618 |
|
Cash inflow from operating activities |
|
8,183 |
7,824 |
|
Corporation tax paid |
|
(1,385) |
(1,399) |
|
Net cash inflow from operating activities |
|
6,798 |
6,425 |
|
Purchase of intangible software |
11 |
(189) |
(311) |
|
Purchase of property, plant and equipment |
13 |
(230) |
(243) |
|
Purchase of investments |
|
(881) |
(1,113) |
|
Subscription/(redemption) of units in funds |
|
(335) |
118 |
|
Investment in subsidiaries |
|
(23) |
- |
|
(Purchase)/sale of money market instruments with maturity > 3 months |
|
(4,973) |
2,777 |
|
Sale of Trade Record shares |
|
120 |
- |
|
Interest received |
|
71 |
160 |
|
Net cash (outflow)/inflow from investing activities |
|
(6,440) |
1,388 |
|
Cash flow from financing activities |
|
|
|
|
Lease repayments |
12 |
(560) |
(576) |
|
Subscription for shares in subsidiary |
|
- |
120 |
|
Purchase of own shares |
|
(1,808) |
(487) |
|
Dividends paid to equity shareholders |
9 |
(5,290) |
(5,888) |
|
Cash outflow from financing activities |
|
(7,658) |
(6,831) |
|
Net (decrease)/increase in cash and cash equivalents in the year |
|
(7,300) |
982 |
|
Exchange (losses) and gains |
|
(147) |
346 |
|
Cash and cash equivalents at the beginning of the year |
|
14,294 |
12,966 |
|
Cash and cash equivalents at the end of the year |
|
6,847 |
14,294 |
|
Closing cash and cash equivalents consist of: |
|
|
|
|
Cash |
|
2,372 |
8,004 |
|
Cash equivalents |
|
4,475 |
6,290 |
|
Cash and cash equivalents |
18 |
6,847 |
14,294 |
The notes below are an integral part of these consolidated financial statements.
Company statement of financial position
As at 31 March 2021
|
|
|
2021 |
2020 |
|
|
Note |
£'000 |
£'000 |
|
Non‑current assets |
|
|
|
|
Right‑of‑use assets |
12 |
642 |
1,096 |
|
Investments |
14 |
4,315 |
3,516 |
|
Deferred tax |
|
7 |
- |
|
Total non‑current assets |
|
4,964 |
4,612 |
|
Current assets |
|
|
|
|
Corporation tax |
|
17 |
- |
|
Trade and other receivables |
16 |
1,387 |
142 |
|
Cash and cash equivalents |
18 |
173 |
2,241 |
|
Total current assets |
|
1,577 |
2,383 |
|
Total assets |
|
6,541 |
6,995 |
|
Current liabilities |
|
|
|
|
Trade and other payables |
19 |
(16) |
(10) |
|
Corporation tax liabilities |
19 |
- |
(2) |
|
Lease liabilities |
|
(501) |
(495) |
|
Total current liabilities |
|
(517) |
(507) |
|
Non-current liabilities |
|
|
|
|
Lease liabilities |
|
(96) |
(584) |
|
Provisions |
21 |
(200) |
(200) |
|
Total non-current liabilities |
|
(296) |
(784) |
|
Total net assets |
|
5,728 |
5,704 |
|
Equity |
|
|
|
|
Issued share capital |
22 |
50 |
50 |
|
Share premium account |
|
1,809 |
1,809 |
|
Capital redemption reserve |
|
26 |
26 |
|
Retained earnings |
|
3,843 |
3,819 |
|
Total equity |
|
5,728 |
5,704 |
The Company's total comprehensive income for the year (which is principally derived from intra-group dividends) was
Approved by the Board on 16 June 2021.
Company registered number: 1927640
The notes below are an integral part of these consolidated financial statements.
Company statement of changes in equity
Year ended 31 March 2021
|
|
|
|
|
|
|
|
|
|
|
Called-up share capital |
Share premium account |
Capital redemption reserve |
Retained earnings |
Total shareholders' equity |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
As at 1 April 2020 |
|
50 |
1,809 |
26 |
3,819 |
5,704 |
|
Profit and total comprehensive income for the year |
|
- |
- |
- |
5,133 |
5,133 |
|
Dividends paid |
9 |
- |
- |
- |
(5,290) |
(5,290) |
|
Share option reserve movement |
|
- |
- |
- |
181 |
181 |
|
Transactions with shareholders |
|
- |
- |
- |
(5,109) |
(5,109) |
|
As at 31 March 2021 |
|
50 |
1,809 |
26 |
3,843 |
5,728 |
Year ended 31 March 2020
|
|
|
Called-up share capital |
Share premium account |
Capital redemption reserve |
Retained earnings |
Total shareholders' equity |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
As at 1 April 2019 |
|
50 |
1,809 |
26 |
3,616 |
5,501 |
|
IFRS 16 opening adjustment |
|
- |
- |
- |
(91) |
(91) |
|
Profit and total comprehensive income for the year |
|
- |
- |
- |
6,098 |
6,098 |
|
Dividends paid |
9 |
- |
- |
- |
(5,888) |
(5,888) |
|
Share option reserve movement |
|
- |
- |
- |
84 |
84 |
|
Transactions with shareholders |
|
- |
- |
- |
(5,804) |
(5,804) |
|
As at 31 March 2020 |
|
50 |
1,809 |
26 |
3,819 |
5,704 |
The notes below are an integral part of these consolidated financial statements.
Company statement of cash flows
Year ended 31 March 2021
|
|
|
2021 |
2020 |
|
|
Note |
£'000 |
£'000 |
|
Profit after tax |
|
(137) |
68 |
|
Adjustments for non-cash movements |
|
|
|
|
Depreciation of right‑of‑use assets |
|
453 |
453 |
|
Loss on investments |
|
167 |
25 |
|
Other non-cash movements |
|
- |
(162) |
|
Finance income |
|
- |
(1) |
|
Finance expense |
|
35 |
54 |
|
Tax expense |
|
(30) |
5 |
|
Changes in working capital |
|
|
|
|
(Increase) in receivables |
|
(1,245) |
(271) |
|
Increase in payables |
|
6 |
298 |
|
Cash (outflow)/inflow from operating activities |
|
(751) |
469 |
|
Corporation taxes received/(paid) |
|
4 |
(17) |
|
Net cash (outflow)/inflow from operating activities |
|
(747) |
452 |
|
Cash flow from investing activities |
|
|
|
|
Dividends received |
|
5,270 |
6,030 |
|
Investment in subsidiaries |
|
(23) |
(80) |
|
Purchase of investments |
|
(881) |
- |
|
Redemption of seed funds |
|
- |
2,247 |
|
Interest received |
|
- |
2 |
|
Disposal of subsidiary |
|
120 |
- |
|
Net cash (outflow) from investing activities |
|
4,486 |
8,199 |
|
Cash flow from financing activities |
|
|
|
|
Lease repayments |
|
(517) |
(517) |
|
Dividends paid to equity shareholders |
9 |
(5,290) |
(5,888) |
|
Cash (outflow) from financing activities |
|
(5,807) |
(6,405) |
|
Net (decrease)/increase in cash and cash equivalents in the year |
|
(2,068) |
2,246 |
|
FX revaluation |
|
- |
(8) |
|
Cash and cash equivalents at the beginning of the year |
|
2,241 |
3 |
|
Cash and cash equivalents at the end of the year |
|
173 |
2,241 |
|
Closing cash and cash equivalents consist of: |
|
|
|
|
Cash |
|
173 |
2,241 |
|
Cash equivalents |
|
- |
- |
|
Cash and cash equivalents |
18 |
173 |
2,241 |
The notes below are an integral part of these consolidated financial statements.
Notes to the financial statements
For the year ended 31 March 2021
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 financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and the Company financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements have been prepared on a historical cost basis, modified to include fair valuation of derivative instruments.
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 covid-19 pandemic on the Group, the market it operates in and its stakeholders. 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.
Future accounting developments
The Group did not implement the requirements of any other standards or interpretations that were in issue but were not required to be adopted by the Group at the year end date. No other standards or interpretations have been issued that are expected to have a material impact on the Group's financial statements.
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 2021. 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.
At the end of the financial year, the Group held investments in two seed 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 (either in isolation or together with its related parties) it 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 the fund 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 in such funds 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 seed funds which have accounting reference dates of 30 September. The consolidated financial statements incorporate the financial performance of the seed funds in the year ended 31 March 2021 and the financial position of the seed funds as at 31 March 2021.
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
All intra‑group transactions, balances, income, expenses and dividends are eliminated on consolidation.
c. Foreign currencies
The financial statements are presented in sterling (£), 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 remeasurement of monetary items at year‑end exchange rates are recognised in the statement of comprehensive income under "other income or expense".
d. Administrative expenses
Administrative expense includes staff costs, marketing and IT costs, which are recognised on an accruals basis as services are provided to the Group.
e. 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.
f. 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.
g. 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.
h. 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. From time to time, the Group has bought in ordinary shares for cancellation. The cost of the buy-ins was taken directly to retained earnings. The nominal value of the shares was taken to a capital redemption reserve. 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 1b 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 14.
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 23) and deferred tax (see note 15), 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.
Calculation of leased assets and liabilities requires the use of both estimation and judgement. The identification of an appropriate discount rate to use in the calculation of the lease liability involves both estimation and judgement. Where the lease's implicit rate is not readily determinable, an incremental borrowing rate must be calculated by the Group. The discount rate used has a direct effect on the size of the lease liability capitalised and although this has been included as an area where the use of estimation and judgement in note 12 is important, it is unlikely to materially impact the Group. Intangible assets are written down in accordance with the Group's amortisation policy. The assets are reviewed by management to ensure the amortisation period is appropriate. Investments are revalued at market value monthly and any potential impairments would be written down as and when the company is notified.
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, performance fees and other currency services income and are accounted for in accordance with IFRS 15 - "Revenue from contracts with customers".
Management fees and other currency services income are recorded on a monthly basis as the 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.
|
|
2021 |
2020 |
|
Revenue by product type |
£'000 |
£'000 |
|
Management fees |
|
|
|
Passive Hedging |
11,377 |
12,026 |
|
Dynamic Hedging |
5,623 |
3,995 |
|
Currency for Return |
2,005 |
1,982 |
|
Multi-product |
5,873 |
5,130 |
|
Total management fee income |
24,878 |
23,133 |
|
Performance fee income |
81 |
1,819 |
|
Other currency services income |
453 |
611 |
|
Total revenue from contracts with customers |
25,412 |
25,563 |
b. Geographical analysis
The geographical analysis of revenue is based on the destination i.e. the location of the client to whom the services are provided. All turnover originated in the
|
|
2021 |
2020 |
|
Revenue by geographical region |
£'000 |
£'000 |
|
Management and performance fee income |
|
|
|
|
2,322 |
2,328 |
|
US |
8,619 |
6,209 |
|
|
9,097 |
11,377 |
|
Other |
5,374 |
5,649 |
|
Total revenue |
25,412 |
25,563 |
c. Major clients
During the year ended 31 March 2021, two clients individually accounted for more than 10% of the Group's revenue. The two largest clients generated revenues of
5. Operating profit
|
Operating profit for the year is stated after charging / (crediting): |
2021 |
2020 |
|
|
£'000 |
£'000 |
|
Staff costs |
13,470 |
12,087 |
|
Depreciation of property, plant and equipment |
299 |
253 |
|
Depreciation of leased property |
490 |
504 |
|
Amortisation of intangibles |
168 |
129 |
|
Auditor fees |
|
|
|
- Fees payable to the Group's auditor for the audit of the Company's annual accounts |
70 |
64 |
|
- Fees payable to the Group's auditor for the audit of subsidiary undertakings |
80 |
53 |
|
- Fees payable to the Group's auditor for the audit of consolidated funds |
- |
43 |
|
Auditor fees total |
150 |
160 |
|
Fees payable to the Group's auditor and its associates for other services: |
|
|
|
- Audit-related assurance services required by law or regulation |
5 |
7 |
|
- Other non-audit services |
12 |
26 |
|
(Profit)/loss on forward FX contracts held to hedge cash flow |
(673) |
509 |
|
Loss on derivative financial instruments held by seed funds |
53 |
323 |
|
Exchange losses/(gains) on revaluation of external holding in seed funds |
97 |
(115) |
|
Other exchange losses/(gains) |
652 |
(515) |
|
Investment (gains)/losses |
(170) |
(283) |
6. Staff costs
The average number of employees, including Directors, employed by the Group during the year was:
|
|
2021 |
2020 |
|
Corporate |
7 |
8 |
|
Client relationships |
17 |
16 |
|
Investment research |
16 |
16 |
|
Operations |
23 |
24 |
|
Risk management |
5 |
5 |
|
Support |
15 |
13 |
|
Annual average |
83 |
82 |
|
The aggregate costs of the above employees, including Directors, were as follows: |
2021 |
2020 |
|
|
£'000 |
£'000 |
|
Wages and salaries |
10,542 |
9,356 |
|
Social security costs |
1,349 |
1,278 |
|
Pension costs |
574 |
514 |
|
Other employment benefit costs |
1,005 |
939 |
|
Aggregate staff costs |
13,470 |
12,087 |
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.
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
|
1,144 |
1,402 |
|
Overseas taxes |
64 |
50 |
|
Prior year adjustments |
(108) |
(143) |
|
Current tax charge |
1,100 |
1,309 |
|
Origination and reversal of temporary differences |
(298) |
56 |
|
Total deferred tax |
(298) |
56 |
|
Tax on profit on ordinary activities |
802 |
1,365 |
The total charge for the year can be reconciled to the accounting profit as follows:
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
Profit before taxation |
6,153 |
7,737 |
|
Taxation at the standard rate of tax in the |
1,169 |
1,470 |
|
Tax effects of: |
|
|
|
Other disallowable expenses and non‑taxable income |
- |
4 |
|
Higher tax rates on subsidiary undertakings |
19 |
17 |
|
Adjustments recognised in current year in relation to Research and Development claims in respect of prior years |
(108) |
(143) |
|
Other temporary differences |
(278) |
17 |
|
Total tax expense |
802 |
1,365 |
|
The tax expense comprises: |
|
|
|
Current tax expense |
1,100 |
1,309 |
|
Deferred tax (income)/expense |
(298) |
56 |
|
Total tax expense |
802 |
1,365 |
The standard rate of
The tax charge for the year ended 31 March 2021 was 13.0% of profit before tax (2020: 17.6%). Other temporary differences for the year ended 31 March 2021 include the impact of deferred tax income of
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.
|
|
2021 |
2020 |
|
Weighted average number of shares used in calculation of basic earnings per share |
194,461,787 |
196,679,874 |
|
Effect of potential dilutive ordinary shares - share options |
1,705,089 |
390,156 |
|
Weighted average number of shares used in calculation of diluted earnings per share |
196,166,876 |
197,070,030 |
|
|
pence |
pence |
|
Basic earnings per share |
2.75 |
3.26 |
|
Diluted earnings per share |
2.73 |
3.26 |
The potential dilutive shares relate to the share options granted in respect of the Group's Share Scheme (see note 23). There were share options in place at the beginning of the year over 11,895,515 shares. During the year 1,385,263 share options were exercised, and a further 2,515,831 share options lapsed or were forfeited. The Group granted 3,850,000 share options with a potentially dilutive effect during the year. Of the 11,844,421 share options in place at the end of the period, 9,391,908 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 2021 totalled
The dividends paid by the Group during the year ended 31 March 2020 totalled
For the year ended 31 March 2021, a final ordinary dividend of [1.15] pence per share has been proposed and a special dividend of [0.45] pence per share has been declared, totalling £[2.3] million and £[0.8] million respectively.
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. 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 deployment. No internal costs of software development are capitalised. Internal software costs would be capitalised if they meet the IAS 38 criteria. The carrying amounts can be analysed as follows:
|
|
Software |
Total |
|
2021 |
£'000 |
£'000 |
|
Cost |
|
|
|
At 1 April 2020 |
1,903 |
1,903 |
|
Additions |
189 |
189 |
|
Disposals |
(951) |
(951) |
|
At 31 March 2021 |
1,141 |
1,141 |
|
Amortisation |
|
|
|
At 1 April 2020 |
1,433 |
1,433 |
|
Charge for the year |
168 |
168 |
|
Disposals |
(880) |
(880) |
|
At 31 March 2021 |
721 |
721 |
|
Net book amounts |
|
|
|
At 31 March 2021 |
420 |
420 |
|
At 1 April 2020 |
470 |
470 |
|
|
Software |
Total |
|
2020 |
£'000 |
£'000 |
|
Cost |
|
|
|
At 1 April 2019 |
1,592 |
1,592 |
|
Additions |
311 |
311 |
|
Disposals |
- |
- |
|
At 31 March 2020 |
1,903 |
1,903 |
|
Amortisation |
|
|
|
At 1 April 2019 |
1,304 |
1,304 |
|
Charge for the year |
129 |
129 |
|
Disposals |
- |
- |
|
At 31 March 2020 |
1,433 |
1,433 |
|
Net book amounts |
|
|
|
At 31 March 2020 |
470 |
470 |
|
At 1 April 2019 |
288 |
288 |
Disposals represent
12. Leases
The Group's lease arrangements consist of business premises property leases. Rental contracts are typically made for fixed periods of three to six years but they may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets cannot be used as security for borrowing purposes.
Leases have been recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Right-of-use assets include the net present value of the lease payments less any lease incentives receivable.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Group's incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. As the Group has no borrowings it has estimated the incremental borrowing rate based on interest rate data available in the market, adjusted to reflect Record's creditworthiness, the leased asset in question and the terms and conditions of the lease. For those leases which existed prior to the IFRS 16 transition date on 1 April 2019, a discount rate of 4% was used in calculating the lease liability on transition.
The leases relevant to the twelve months ended 31 March 2021, and the comparative period, are as described below.
On 7 September 2016, the Group signed a new lease on premises at Second and Third Floors, Morgan House, Madeira Walk,
On 16 March 2016, the Group signed a lease on premises in
On 1 June 2017, the Group signed a five-year lease on premises in
Record assesses whether a contract is or contains a lease at the inception of the contract.
Right‑of‑use ("ROU") assets
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial measurement of lease liability;
· any lease payments made at or before the commencement date, less any lease incentives received;
· any initial direct costs; and
· an estimate of costs to be incurred to restore the assets to the condition required by the terms and conditions of the lease.
Depreciation is calculated on a straight-line basis over the lease term and included within administration costs (note 5).
|
Net book value of right‑of‑use assets |
Group |
Company |
|
Year ended 31 March 2021 |
£'000 |
£'000 |
|
Net book value at 1 April 2020 |
1,175 |
1,096 |
|
Addition |
- |
- |
|
Depreciation |
(490) |
(454) |
|
FX revaluation |
(1) |
- |
|
Net book value at 31 March 2021 |
684 |
642 |
|
|
Group |
Company |
|
Year ended 31 March 2020 |
£'000 |
£'000 |
|
Net book value on transition at 1 April 2019 |
1,560 |
1,435 |
|
Addition |
114 |
114 |
|
Depreciation |
(504) |
(453) |
|
FX revaluation |
5 |
- |
|
Net book value at 31 March 2020 |
1,175 |
1,096 |
Lease liabilities
|
|
Group |
Company |
|
|
£'000 |
£'000 |
|
Current |
539 |
501 |
|
Non-current |
99 |
96 |
|
Total lease liabilities |
638 |
597 |
|
|
Group |
Company |
|
|
£'000 |
£'000 |
|
At 1 April 2020 |
1,159 |
1,079 |
|
Interest expense |
38 |
35 |
|
Lease payments |
(518) |
(482) |
|
Lease interest payments |
(38) |
(35) |
|
Foreign exchange movements |
(3) |
- |
|
At 31 March 2021 |
638 |
597 |
Lease payments
At 31 March 2021, the undiscounted operating lease payments on an annual basis are as follows:
Maturity of lease liability at 31 March 2021
|
|
Group |
Company |
|
|
£'000 |
£'000 |
|
Within 1 year |
556 |
518 |
|
1-2 years |
100 |
96 |
|
2-3 years |
- |
- |
|
After 3 years |
- |
- |
|
Total lease liability before discounting |
656 |
614 |
The remainder of the movement in the lease liability relates to non-cash movements. The lease term is determined as the non-cancellable period of a lease, together with periods covered by an option to extend the lease if the Group considers that exercise of the option is reasonably certain.
13. 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 as follows:
· 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 |
|
2021 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
|
At 1 April 2020 |
692 |
952 |
327 |
1,971 |
|
Additions |
1 |
228 |
2 |
231 |
|
Disposals |
- |
(197) |
(24) |
(221) |
|
At 31 March 2021 |
693 |
983 |
305 |
1,981 |
|
Depreciation |
|
|
|
|
|
At 1 April 2020 |
397 |
573 |
250 |
1,220 |
|
Charge for the year |
123 |
139 |
37 |
299 |
|
Disposals |
- |
(197) |
(24) |
(221) |
|
At 31 March 2021 |
520 |
515 |
263 |
1,298 |
|
Net book amounts |
|
|
|
|
|
At 31 March 2021 |
173 |
468 |
42 |
683 |
|
At 1 April 2020 |
295 |
379 |
77 |
751 |
|
|
Leasehold |
Computer |
Fixtures |
|
|
|
improvements |
equipment |
and fittings |
Total |
|
2020 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
|
At 1 April 2019 |
692 |
711 |
325 |
1,728 |
|
Additions |
- |
241 |
2 |
243 |
|
Disposals |
- |
- |
- |
- |
|
At 31 March 2020 |
692 |
952 |
327 |
1,971 |
|
Depreciation |
|
|
|
|
|
At 1 April 2019 |
271 |
484 |
212 |
967 |
|
Charge for the year |
126 |
89 |
38 |
253 |
|
Disposals |
- |
- |
- |
- |
|
At 31 March 2020 |
397 |
573 |
250 |
1,220 |
|
Net book amounts |
|
|
|
|
|
At 31 March 2020 |
295 |
379 |
77 |
751 |
|
At 1 April 2019 |
421 |
227 |
113 |
761 |
The Group's tangible non-current assets are located predominantly in the
14. Investments
|
|
Group |
Company |
||
|
|
2021 |
2020 |
2021 |
2020 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Investment in subsidiaries at cost |
- |
- |
69 |
166 |
|
Capitalised investment in respect of share-based payments |
- |
- |
1,460 |
1,279 |
|
Investment in funds |
847 |
- |
2,786 |
2,071 |
|
Investment in impact bonds |
2,199 |
2,472 |
- |
- |
|
Total investments |
3,046 |
2,472 |
4,315 |
3,516 |
Company
Investments in subsidiaries
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.
|
|
2021 |
2020 |
|
|
£'000 |
£'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 ( |
16 |
16 |
|
Trade Record Ltd |
- |
120 |
|
Record Asset Management GmbH |
23 |
- |
|
Record Fund Management Limited |
- |
- |
|
N P Record Trustees Limited |
- |
- |
|
Total investment in subsidiaries (at cost) |
69 |
166 |
|
Capitalised investment in respect of share‑based payments |
|
|
|
Record Group Services Limited |
1,341 |
1,186 |
|
Record Currency Management (US) Inc. |
89 |
89 |
|
Record Currency Management ( |
30 |
4 |
|
Total capitalised investment in respect of share‑based payments |
1,460 |
1,279 |
|
Total investment in subsidiaries |
1,529 |
1,445 |
Particulars of subsidiary undertakings
|
Name |
Nature of business |
|
Record Currency Management Limited |
Currency management services (FCA, SEC and CFTC registered) |
|
Record Group Services Limited |
Management services to other Group undertakings |
|
Record Currency Management (US) Inc. |
US advisory and service company (SEC and CFTC registered) |
|
Record Currency Management ( |
Swiss advisory and service company |
|
Trade Record Ltd |
Prize competition allowing subscribers to trade virtual money across asset classes |
|
Record Asset Management GmbH |
German advisory and service company |
|
Record Portfolio Management Limited |
Dormant |
|
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. Record Currency Management (US) Inc. is incorporated in
Investment in Trade Record Ltd ("Trade Record")
On 21 December 2020, Record plc disposed of its 40% shareholding in the ordinary share capital of Trade Record Ltd. Proceeds of the disposal amounted to
Capitalised investment in respect of share-based payments
The accounting treatment of capitalised investment in respect of share-based payments can be found in note 23.
Investment in seed funds
In addition to the subsidiaries listed above, the Company holds investments in seed 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.
The seed fund investments are presented within investments in the Company statement of financial position, and all seed fund entities are sub-funds of the Record Umbrella Fund, an open-ended umbrella unit trust authorised in
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 seed funds
The Group has controlled the Record Currency - Strategy Development Fund and Record - Currency Multi-Strategy Fund throughout both the year ended 31 March 2021 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.
|
|
Group |
Company |
||
|
|
2021 |
2020 |
2021 |
2020 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Investment in seed funds |
|
|
|
|
|
Record Currency - Strategy Development Fund |
- |
- |
1,077 |
1,181 |
|
Record - Currency Multi-Strategy Fund |
- |
- |
862 |
890 |
|
Total investment in seed funds |
- |
- |
1,939 |
2,071 |
Investment in impact bonds
In January 2020, the Group invested
15. 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 amounts 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 profit or loss nor the taxable profit or loss, is not recognised.
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
Credit/(charge) to income statement in year |
298 |
(57) |
|
(Liability) brought forward |
(86) |
(29) |
|
Asset/(liability) carried forward |
212 |
(86) |
The deferred tax asset / (liability) consists of the tax effect of temporary differences in respect of:
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
Deferred tax allowance on unvested share options |
320 |
1 |
|
Excess of taxation allowances over depreciation on fixed assets |
(108) |
(87) |
|
Total |
212 |
(86) |
At the year end there were share options not exercised with an intrinsic value for tax purposes of
It was announced in the March 2021 Budget that Corporation Tax will increase to 25% on 1 April 2023.
16. 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 25 years on the total balance of non-credit impaired trade receivables. Accrued income relates to accrued management and performance fees earned but not yet invoiced.
An analysis of receivables is provided below:
|
|
Group |
Company |
||
|
|
2021 |
2020 |
2021 |
2020 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Trade receivables |
6,519 |
5,192 |
1,345 |
142 |
|
Accrued income |
37 |
2,264 |
- |
- |
|
Other receivables |
470 |
308 |
- |
- |
|
Prepayments |
980 |
940 |
42 |
- |
|
Total |
8,006 |
8,704 |
1,387 |
142 |
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 2021. The Group's trade receivables are generally short-term and do not contain significant financing components.
The Group applies the IFRS 9 simplified approach to measuring ECLs for trade receivables and contract assets at an amount equal to lifetime ECLs. The ECLs on trade receivables are calculated based on actual historic credit loss experience over the preceding 25 years on the total balance of non-credit impaired trade receivables. Contract assets relate to accrued management and performance fees earned but not yet invoiced and have substantially the same risk characteristics as the trade receivables. The Group has therefore concluded that the ECLs for trade receivables are a reasonable approximation of the loss rates for the contract assets. The Group does not expect to incur any credit losses and has not recognised any ECLs in the current year (2020: £nil).
17. 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 other income or expense.
|
|
2021 |
2020 |
|
Derivative financial assets |
£'000 |
£'000 |
|
Forward foreign exchange contracts held to hedge non-sterling based assets |
- |
- |
|
Forward foreign exchange contracts held for trading |
215 |
178 |
|
Foreign exchange options held for trading |
45 |
15 |
|
Total |
260 |
193 |
|
|
2021 |
2020 |
|
Derivative financial liabilities |
£'000 |
£'000 |
|
Forward foreign exchange contracts held to hedge non-sterling based assets |
- |
(316) |
|
Forward foreign exchange contracts held for trading |
(16) |
(294) |
|
Total |
(16) |
(610) |
Derivative financial instruments held to hedge non-sterling based assets
At 31 March 2021 there were outstanding contracts with a principal value of
The net gain or loss on forward foreign exchange contracts held to hedge non-sterling based assets is as follows:
|
|
2021 |
2020 |
|
Derivative financial instruments held to hedge non-sterling based assets |
£'000 |
£'000 |
|
Net loss on forward foreign exchange contracts at fair value through profit or loss |
673 |
509 |
Derivative financial instruments held for trading
The Record - Currency Multi‑Strategy Fund and 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 Multi-Strategy Fund and the Record Currency - Strategy Development Fund were classified as held for trading throughout the period.
At 31 March 2021 there were outstanding contracts with a principal value of
The net gain or loss on derivative financial instruments held for trading for the year was as follows:
|
|
2021 |
2020 |
|
Derivative financial instruments held to hedge non-sterling based assets |
£'000 |
£'000 |
|
Net loss on forward foreign exchange contracts and foreign exchange options at fair value through profit or loss |
53 |
323 |
18. 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 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 >3 months.
|
|
Group |
Company |
||
|
|
2021 |
2020 |
2021 |
2020 |
|
Assets managed as cash |
£'000 |
£'000 |
£'000 |
£'000 |
|
Bank deposits with maturities > 3 months |
12,932 |
7,958 |
- |
- |
|
Treasury bills with maturities > 3 months |
- |
- |
- |
- |
|
Money market instruments with maturities > 3 months |
12,932 |
7,958 |
- |
- |
|
Cash |
2,372 |
8,004 |
173 |
2,241 |
|
Bank deposits with maturities <= 3 months |
4,475 |
6,290 |
- |
- |
|
Cash and cash equivalents |
6,847 |
14,294 |
173 |
2,241 |
|
Total assets managed as cash |
19,779 |
22,252 |
173 |
2,241 |
|
|
Group |
Company |
||
|
|
2021 |
2020 |
2021 |
2020 |
|
Cash and cash equivalents |
£'000 |
£'000 |
£'000 |
£'000 |
|
Cash and cash equivalents - sterling |
3,108 |
10,426 |
173 |
2,241 |
|
Cash and cash equivalents - USD |
2,692 |
3,654 |
- |
- |
|
Cash and cash equivalents - CHF |
183 |
161 |
- |
- |
|
Cash and cash equivalents - other currencies |
864 |
53 |
- |
- |
|
Total cash and cash equivalents |
6,847 |
14,294 |
173 |
2,241 |
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 14 for explanation of accounting treatment). As at 31 March 2021, the cash and cash equivalents held by the seed funds over which the Group had control totalled
Details of how the Group manages credit risk are provided in note 24.
19. 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.
|
|
Group |
Company |
||
|
|
2021 |
2020 |
2021 |
2020 |
|
Trade and other payables |
£'000 |
£'000 |
£'000 |
£'000 |
|
Trade payables |
384 |
425 |
- |
- |
|
Amounts owed to Group undertaking |
- |
- |
10 |
10 |
|
Other payables |
16 |
11 |
- |
- |
|
Other tax and social security |
486 |
443 |
- |
- |
|
Accruals |
2,540 |
2,130 |
6 |
- |
|
Total |
3,426 |
3,009 |
16 |
10 |
Accruals include
|
|
Group |
Company |
||
|
|
2021 |
2020 |
2021 |
2020 |
|
Current tax liabilities |
£'000 |
£'000 |
£'000 |
£'000 |
|
Corporation tax |
315 |
601 |
- |
2 |
20. Financial liabilities
Record plc has made investments in a number of seed funds where it is in a position to be able to control those funds by virtue of the size of its holding. When Record plc is not the only investor in such funds and the external investment instrument does not meet the definition of an equity instrument under IAS 32 then the instrument is classified as a financial liability. The financial liabilities are measured at cost plus movement in value of the third‑party investment in the fund.
The Record - Currency Multi-Strategy Fund and the Record Currency - Strategy Development Fund were considered to be under control of the Group as the combined holding of Record plc and its Directors constituted a majority interest throughout the current and prior years.
The mark‑to‑market value of units held by investors in these funds other than Record plc are shown as financial liabilities in the Group financial statements, in accordance with IFRS.
Mark‑to‑market value of external holding in seed funds consolidated into the accounts of the Record Group
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
Record - Currency Multi-Strategy Fund |
1,696 |
2,191 |
|
Record Currency - Strategy Development Fund |
- |
- |
|
Total financial liabilities |
1,696 |
2,191 |
The financial liabilities relate only to the fair value of the external investors' holding in the seed funds, and are in no sense debt.
21. Provisions
The Group has provisions reflecting its contractual obligations connected to reaching the end of its contractual lease terms.
|
|
Group |
Company |
||
|
|
2021 |
2020 |
2021 |
2020 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Provisions |
200 |
200 |
200 |
200 |
22. 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.
|
|
2021 |
2020 |
||
|
|
£'000 |
Number |
£'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 2019 |
2,986,036 |
|
Adjustment for net purchases by EBT |
233,351 |
|
Record plc shares held by EBT as at 31 March 2020 |
3,219,387 |
|
Adjustment for net purchases by EBT |
3,077,270 |
|
Record plc shares held by EBT as at 31 March 2021 |
6,296,657 |
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 23.
23. Share-based payments
During the year ended 31 March 2021 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.
d) The Record plc Jointly Owned Share Plan: participants' interests awarded under the Jointly Owned Share Plan ("JSOP") are classified as equity-settled share-based payments under IFRS 2.
All obligations arising from the four 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
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. Shares awarded under the Group Profit Share Scheme are subject to restrictions over subsequent sale and transfer and these restrictions are automatically lifted over one-third on each anniversary of the Profit Share payment date for the next three years. In the meantime, these shares cannot be sold, transferred or otherwise disposed of without the consent of the Remuneration Committee.
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.
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 including any market or performance conditions, 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 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
Options over an aggregate of 3,850,000 shares were granted under the Share Scheme during the year (2020: 3,935,000), which were all granted as Unapproved options (2020: all granted as Unapproved options). All options were granted with an exercise price per share equal to the share price prevailing at the time of grant.
The 3,425,000 Unapproved options issued to employees on 21 September 2020 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 300,000 Unapproved options issued to employees on 25 January 2021 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 125,000 Unapproved options issued to employees on 9 March 2021 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 2021, and for which a charge to profit or loss was made in the year, were determined using a Black-Scholes option-pricing method and the following assumptions:
|
Model input |
Weighted average value |
|
Share price |
39.1p |
|
Dividend yield |
7.23% |
|
Exercise price |
39.1p |
|
Expected volatility |
35% |
|
Option life |
2.5 years |
|
Risk-free interest rate (%) |
0.10% |
Expected volatility is based on historical volatility.
The Group share‑based payment expense in respect of the Share Scheme was
Outstanding share options
At 31 March 2021, the total number of ordinary shares of 0.025p outstanding under Record plc share compensation schemes was 11,844,421 (2020: 11,895,515). 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:
|
Date of grant |
At 1 April 2020 |
Granted |
Exercised |
Lapsed/ forfeited |
At 31 March 2021 |
Earliest vesting date |
Latest vesting date |
Exercise price |
|
|
01/12/15 |
600,000 |
- |
- |
(600,000) |
- |
01/12/20 |
01/12/20 |
|
|
|
27/01/16 |
106,250 |
- |
(106,250) |
- |
- |
27/01/20 |
27/01/20 |
|
|
|
27/01/16 |
244,064 |
- |
(244,064) |
- |
- |
27/01/20 |
27/01/20 |
|
|
|
27/01/16 |
109,167 |
- |
- |
(109,167) |
- |
27/01/21 |
27/01/21 |
|
|
|
27/01/16 |
24,167 |
- |
- |
(24,167) |
- |
27/01/21 |
27/01/21 |
|
|
|
30/11/16 |
288,574 |
- |
(198,574) |
- |
90,000 |
30/11/20 |
30/11/20 |
|
|
|
30/11/16 |
695,000 |
- |
(632,500) |
- |
62,500 |
30/11/19 |
30/11/20 |
|
|
|
30/11/16 |
1,466,668 |
- |
- |
(733,332) |
733,336 |
30/11/20 |
30/11/21 |
|
|
|
26/01/18 |
1,310,000 |
- |
- |
(42,500) |
1,267,500 |
26/01/22 |
26/01/22 |
|
|
|
26/01/18 |
236,625 |
- |
(78,875) |
(30,000) |
127,750 |
26/01/20 |
26/01/22 |
|
|
|
26/01/18 |
52,000 |
- |
- |
(17,333) |
34,667 |
26/01/21 |
26/01/23 |
|
|
|
26/01/18 |
1,933,000 |
- |
- |
(644,332) |
1,288,668 |
26/01/21 |
26/01/23 |
|
|
|
29/03/19 |
525,000 |
- |
- |
(65,000) |
460,000 |
29/03/23 |
29/03/23 |
|
|
|
29/03/19 |
370,000 |
- |
(92,500) |
- |
277,500 |
29/03/20 |
29/03/23 |
|
|
|
21/08/19 |
1,985,000 |
- |
- |
- |
1,985,000 |
21/08/22 |
21/08/24 |
|
|
|
18/03/20 |
1,950,000 |
- |
(32,500) |
(250,000) |
1,667,500 |
18/03/21 |
18/03/24 |
|
|
|
21/09/20 |
- |
3,425,000 |
- |
- |
3,425,000 |
21/09/21 |
21/09/24 |
|
|
|
25/01/21 |
- |
300,000 |
- |
- |
300,000 |
25/01/22 |
25/01/25 |
|
|
|
09/03/21 |
- |
125,000 |
- |
- |
125,000 |
09/03/22 |
09/03/25 |
|
|
|
Total options |
11,895,515 |
3,850,000 |
(1,385,263) |
(2,515,831) |
11,844,421 |
|
|
|
|
|
Weighted average exercise price of options |
|
|
|
|
|
|
|
|
|
During the year 1,385,263 options were exercised. The weighted average share price at date of exercise was
The Directors' interests in the combined share schemes are as follows:
|
|
Ordinary shares held as at |
|
|
|
31 March |
31 March |
|
|
2021 |
2020 |
|
Record plc Group Profit Share Scheme (interest in restricted share awards) |
|
|
|
Leslie Hill |
379,841 |
613,458 |
|
Bob Noyen (stepped down from the Board of Record plc on 5 February 2021) |
277,568 |
311,296 |
|
Steve Cullen |
75,849 |
142,648 |
|
Record plc Share Scheme (interest in unvested share options) |
|
|
|
Leslie Hill |
945,001 |
1,405,001 |
|
Bob Noyen (stepped down from the Board of Record plc on 5 February 2021) |
945,001 |
1,405,001 |
|
Steve Cullen |
526,668 |
935,000 |
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, adjusted for the impact of the performance conditions.
|
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 33,971 matching shares (2020: 54,935 matching shares) to employees. The expense charged in respect of the SIP was £11,797 in the year ended 31 March 2021 (2020: £17,058).
There are no restrictions over shares issued under the Record Share Incentive Plan.
d. The Record plc Jointly Owned Share Plan ("JSOP")
Equity-settled share-based payments
At inception the employee is required to pay the Employee Benefit Trust ("EBT") for the market value of the participation interest, and the employing subsidiary has agreed to bear the expense of 50% of the amount due. The participation interest paid over at inception is non-refundable, regardless of whether the hurdle is reached. Therefore the amount paid by the employing subsidiary is expensed at inception.
The fair value of the amounts payable to employees under JSOP 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.
During the year, the Group introduced the JSOP scheme, under which a set number of ordinary shares are held jointly by the participant and the EBT. Under the terms of the JSOP agreement, the participant holds the beneficial interest in the future growth of the shares above the hurdle, whilst the trustee is entitled to the value up to the hurdle; the hurdle being the market price upon grant date. Upon vesting, the participant is entitled to receive the growth in value of the shares above the hurdle, which is settled in shares priced at market value on the vesting date.
The fair value of the JSOP award is measured at grant date using an appropriate valuation model, taking into account the terms and conditions upon which the instruments were granted including any performance conditions, and using quoted share prices.
The 2,375,000 shares over which a JSOP agreement was entered into on 21 September 2020 will each vest in four equal tranches on the first, second, third and fourth anniversary of the date of award, subject to the employee being in employment with the Group at the relevant vesting date.
The 125,000 shares over which a JSOP agreement was entered into on 9 March 2021 will each vest in four equal tranches on the first, second, third and fourth anniversary of the date of award, subject to the employee being in employment with the Group at the relevant vesting date.
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 JSOP awards granted in the year ended 31 March 2021, and for which a charge to profit or loss was made in the year, were determined using a Black-Scholes option-pricing model and the following assumptions:
|
Model input |
Weighted average value |
|
Share price |
38.6p |
|
Dividend yield |
7.38% |
|
Exercise price |
38.6p |
|
Expected life (years) |
35% |
|
Volatility |
2.5 years |
|
Risk-free rate |
0.11% |
Expected volatility is based on historical volatility.
At 31 March 2021, the total number of ordinary shares of 0.025p outstanding under the Record plc JSOP was 2,500,000. These shares are jointly owned and are ring-fenced within the EBT. The JSOP award vests immediately on the vesting date, and the participant is entitled to any value over the hurdle, the trustee is then entitled to the value up to the hurdle.
|
Date of grant |
At 1 April 2020 |
Granted |
Exercised |
Lapsed / forfeited |
As at 31 March 2021 |
Earliest vesting date |
Latest vesting date |
Hurdle |
|
21/09/2020 |
- |
2,375,000 |
- |
- |
2,375,000 |
21/09/2021 |
21/09/2024 |
£0.3730 |
|
09/03/2021 |
- |
125,000 |
- |
- |
125,000 |
09/03/2021 |
09/03/2025 |
£0.63986 |
|
Total JSOP awards |
- |
2,500,000 |
- |
- |
2,500,000 |
|
|
|
|
Weighted average exercise price of options |
- |
£0.3863 |
- |
- |
£0.3863 |
|
|
|
No JSOP awards vested during the year. There are no Directors' interests in the JSOP scheme.
No performance measures are attached to the JSOP.
The JSOP scheme rules contain clawback provisions allowing re-transfer of the participant's interest and/or any vested shares for nil consideration under certain circumstances including a material breach of contract or an error in performance of duties.
24. 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, financial liabilities relating to investment in seed funds, lease liabilities and derivative financial liabilities. The main risks arising from financial instruments are credit risk, liquidity risk, foreign currency risk, interest rate risk and concentration 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, cash and cash equivalents, 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. Market risk is not considered to have a material impact on financial instruments, neither is it one of the Group's principal risks, however the second order effects of market movements are discussed under the operating review.
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 impact of covid-19
The quality of our clients and banking counterparties is reflected in the business having not suffered from any credit default for over 20 years through various market crises and cycles, and we do not anticipate this changing under the current circumstances.
The Group's maximum exposure to credit risk is as follows:
|
|
2021 |
2020 |
|
Financial assets at 31 March |
£'000 |
£'000 |
|
Trade receivables |
6,519 |
5,192 |
|
Accrued income |
37 |
2,264 |
|
Other receivables |
470 |
308 |
|
Derivative financial assets |
260 |
193 |
|
Money market instruments with maturities > 3 months |
12,932 |
7,958 |
|
Cash and cash equivalents |
6,847 |
14,294 |
|
Total financial assets |
27,065 |
30,209 |
The debtors' age analysis is also evaluated on a regular basis for expected credit losses. It is management's opinion that there is no requirement to provide for any expected credit losses. The table below is an analysis of trade receivables and accrued income by due date:
|
|
Carrying amount |
Neither impaired nor past due |
0-3 months past due |
More than 3 months past due |
|
At 31 March 2021 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Trade receivables |
6,519 |
6,519 |
- |
- |
|
Accrued income |
37 |
37 |
- |
- |
|
Total |
6,556 |
6,556 |
- |
- |
|
|
|
100% |
0% |
0% |
|
|
Carrying amount |
Neither impaired nor past due |
0-3 months past due |
More than 3 months past due |
|
At 31 March 2020 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Trade receivables |
5,192 |
5,041 |
5 |
146 |
|
Accrued income |
2,264 |
2,264 |
- |
- |
|
Total |
7,456 |
7,305 |
5 |
146 |
|
|
|
98% |
0% |
2% |
The Group offers standard credit terms of 30 days from invoice date. It is the Group's policy to assess debtors for expected loss 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 past due not being provided for unless individual circumstances indicate that a debt is impaired.
Trade receivables are made up of 82 debtors' balances (2020: 62). The largest individual debtor corresponds to 15% of the total balance (2020: 15%). Debtor days, based on the generally accepted calculation of debtor days, is 94 days (2020: 74 days). This reflects the quarterly billing cycle used by the Group for the vast majority of its fees. As at 31 March 2021, 0% of debt was overdue (2020: 2%). 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 29 days (2020: 29 days).
The impact of covid-19 has been considered, and management believe that the Group's ability to meet its obligations is unaffected.
Contractual maturity analysis for financial liabilities:
|
|
Carrying amount |
Due or due in less than 1 month |
Due between 1 and 3 months |
Due between 3 months and 1 year |
|
At 31 March 2021 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Trade payables |
384 |
191 |
30 |
163 |
|
Accruals |
2,538 |
420 |
809 |
1,309 |
|
Derivative financial liabilities |
16 |
6 |
10 |
- |
|
Total |
2,938 |
617 |
849 |
1,472 |
|
|
|
|
|
|
|
|
Carrying amount |
Due or due in less than 1 month |
Due between 1 and 3 months |
Due between 3 months and 1 year |
|
At 31 March 2020 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Trade payables |
425 |
425 |
- |
- |
|
Accruals |
2,130 |
67 |
1,793 |
270 |
|
Derivative financial liabilities |
610 |
148 |
462 |
- |
|
Total |
3,165 |
640 |
2,255 |
270 |
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 rate |
Floating rate |
No interest rate |
Total |
|
At 31 March 2021 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Financial assets |
|
|
|
|
|
Trade receivables |
- |
- |
6,519 |
6,519 |
|
Accrued income |
- |
- |
37 |
37 |
|
Other receivables |
- |
- |
470 |
470 |
|
Derivative financial assets at fair value through profit or loss |
- |
- |
260 |
260 |
|
Money market instruments with maturities > 3 months |
12,932 |
- |
- |
12,932 |
|
Cash and cash equivalents |
682 |
6,165 |
- |
6,847 |
|
Total financial assets |
13,614 |
6,165 |
7,286 |
27,065 |
|
Financial liabilities |
|
|
|
|
|
Trade payables |
- |
- |
(384) |
(384) |
|
Accruals |
- |
- |
(2,538) |
(2,538) |
|
Lease liability |
- |
- |
(539) |
(539) |
|
Derivative financial liabilities at fair value through profit or loss |
- |
- |
(16) |
(16) |
|
Financial liabilities |
- |
- |
(1,696) |
(1,696) |
|
Total financial liabilities |
- |
- |
(5,173) |
(5,173) |
|
|
|
|
|
|
|
|
Fixed rate |
Floating rate |
No interest rate |
Total |
|
At 31 March 2020 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Financial assets |
|
|
|
|
|
Trade receivables |
- |
- |
5,191 |
5,191 |
|
Accrued income |
- |
- |
2,264 |
2,264 |
|
Other receivables |
- |
- |
308 |
308 |
|
Derivative financial assets at fair value through profit or loss |
- |
- |
193 |
193 |
|
Money market instruments with maturities > 3 months |
7,958 |
- |
- |
7,958 |
|
Cash and cash equivalents |
6,271 |
8,023 |
- |
14,294 |
|
Total financial assets |
14,229 |
8,023 |
7,956 |
30,208 |
|
Financial liabilities |
|
|
|
|
|
Trade payables |
- |
- |
(425) |
(425) |
|
Accruals |
- |
- |
(2,130) |
(2,130) |
|
Lease liability |
- |
- |
(544) |
(544) |
|
Derivative financial liabilities at fair value through profit or loss |
- |
- |
(610) |
(610) |
|
Financial liabilities |
- |
- |
(2,191) |
(2,191) |
|
Total financial liabilities |
- |
- |
(5,900) |
(5,900) |
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 revenue invoices 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.
Foreign currency risk
During the year ended 31 March 2021, the Group invoiced the following amounts in currencies other than sterling:
|
|
2021 |
2020 |
||
|
|
Local |
Value in |
Local |
Value in |
|
|
currency |
reporting |
currency |
reporting |
|
|
value |
currency |
value |
currency |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Swiss franc (CHF) |
13,375 |
11,072 |
14,416 |
11,533 |
|
US dollar (USD) |
13,185 |
9,912 |
9,217 |
7,274 |
|
Euro (EUR) |
3,185 |
3,828 |
3,028 |
2,644 |
|
Australian dollar (AUD) |
838 |
467 |
1,520 |
804 |
|
Canadian dollar (CAD) |
1,238 |
719 |
742 |
436 |
|
Swedish krona (SEK) |
672 |
49 |
1,436 |
101 |
|
|
14 |
8 |
25 |
14 |
The value of revenues for the year ended 31 March 2021 that were denominated in currencies other than sterling was £24.7 million (31 March 2020: £22.8 million).
Record's policy is to reduce the risk associated with the Group's revenues 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 18) 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 for the year ended 31 March |
Impact on total equity as at 31 March |
||
|
|
||||
|
|
2021 |
2020 |
2021 |
2020 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Sterling weakening by 10% against the dollar |
489 |
334 |
489 |
334 |
|
Sterling strengthening by 10% against the dollar |
(489) |
(334) |
(489) |
(334) |
|
Sterling weakening by 10% against the Swiss franc |
551 |
622 |
551 |
622 |
|
Sterling strengthening by 10% against the Swiss franc |
(551) |
(622) |
(551) |
(622) |
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 £1 = $1.32 this would result in sterling weakening to £1 = $1.20 and sterling strengthening to £1 = $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 £1 = CHF 1.21 this would result in sterling weakening to £1 = CHF 1.10 and sterling strengthening to £1 = CHF 1.35.
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.
Concentration risk
The Group is exposed to concentration risk in respect of product, client type and geographical location, which could lead to over-reliance on any one category of revenue. Note 4 provides detail on clients contributing greater than 10% of revenue.
Concentration risk - sensitivity analysis
The Group has considered the impact of losing the Group's largest client, assuming that only variable remuneration costs can be reduced in the short term.
|
|
Impact on profit after tax for the year ended 31 March |
Impact on total equity as at 31 March |
||
|
|
||||
|
|
2021 |
2020 |
2021 |
2020 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Loss of largest client |
2,352 |
2,214 |
2,352 |
2,214 |
As part of the Group's ICAAP process, several more severe scenarios are considered.
25. 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:
|
|
2021 |
Level 1 |
Level 2 |
Level 3 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
Impact bonds |
2,199 |
2,199 |
- |
- |
|
Forward foreign exchange contracts used by seed funds |
215 |
- |
215 |
- |
|
Foreign exchange options used by seed funds |
45 |
- |
45 |
- |
|
Financial liabilities at fair value through profit or loss |
|
|
|
|
|
Forward foreign exchange contracts used for hedging |
- |
- |
- |
- |
|
Forward foreign exchange contracts used by seed funds |
(16) |
- |
(16) |
- |
|
Total |
2,443 |
2,199 |
244 |
- |
|
|
2020 |
Level 1 |
Level 2 |
Level 3 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
Impact bonds |
2,472 |
2,472 |
- |
- |
|
Forward foreign exchange contracts used by seed funds |
178 |
- |
178 |
- |
|
Foreign exchange options used by seed funds |
15 |
- |
15 |
- |
|
Financial liabilities at fair value through profit or loss |
|
|
|
|
|
Forward foreign exchange contracts used for hedging |
(316) |
- |
(316) |
- |
|
Forward foreign exchange contracts used by seed funds |
(294) |
- |
(294) |
- |
|
Total |
2,055 |
2,472 |
(417) |
- |
There have been no transfers between levels in the reporting period (2020: none).
Basis for classification of financial instruments classified as level 1 within the fair value hierarchy
Impact bonds are classified as level 1. These bonds are valued using the market price and coupon rate.
Basis for classification of financial instruments classified as level 2 within the fair value hierarchy
Forward foreign exchange contracts and options are both 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
|
|
|
Assets at amortised cost |
Financial liabilities measured at amortised cost |
Assets at fair value through profit or loss |
Liabilities at fair value through profit or loss |
|
At 31 March 2021 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
Impact bonds |
14 |
- |
- |
2,199 |
- |
|
Trade and other receivables (excludes prepayments) |
16 |
7,027 |
- |
- |
- |
|
Money market instruments with maturities > 3 months |
18 |
12,932 |
- |
- |
- |
|
Cash and cash equivalents |
18 |
6,847 |
- |
- |
- |
|
Derivative financial assets at fair value through profit or loss |
17 |
- |
- |
260 |
- |
|
Trade payables |
19 |
- |
(384) |
- |
- |
|
Accruals |
19 |
- |
(2,540) |
- |
- |
|
Derivative financial liabilities at fair value through profit or loss |
17 |
- |
- |
- |
(16) |
|
Total |
|
26,806 |
(2,924) |
2,459 |
(16) |
|
|
|
|
|
|
|
|
|
|
Assets at amortised cost |
Financial liabilities measured at amortised cost |
Assets at fair value through profit or loss |
Liabilities at fair value through profit or loss |
|
At 31 March 2020 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
Impact bonds |
14 |
- |
- |
2,472 |
- |
|
Trade and other receivables (excludes prepayments) |
16 |
7,764 |
- |
- |
- |
|
Money market instruments with maturities > 3 months |
18 |
7,958 |
- |
- |
- |
|
Cash and cash equivalents |
18 |
14,294 |
- |
- |
- |
|
Derivative financial assets at fair value through profit or loss |
17 |
- |
- |
193 |
- |
|
Trade payables |
19 |
- |
(425) |
- |
- |
|
Accruals |
19 |
- |
(2,130) |
- |
- |
|
Derivative financial liabilities at fair value through profit or loss |
17 |
- |
- |
- |
(610) |
|
Total |
|
30,016 |
(2,555) |
2,665 |
(610) |
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 14, which includes a description of the nature of their business.
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
Amounts due from subsidiaries |
1,265 |
132 |
|
Net dividends received from subsidiaries |
5,270 |
6,030 |
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 (2020: £nil). No expense has been recognised during the year in respect of bad or doubtful debts due from related parties.
Disposal of interest in Trade Record
On 21 December 2020, Record plc disposed of its 40% shareholding in the ordinary share capital of Trade Record Ltd. Proceeds of the disposal amounted to £120,000 which equated to the Company's total investment at cost.
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
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
Short‑term employee benefits |
6,214 |
5,627 |
|
Post‑employment benefits |
309 |
242 |
|
Share‑based payments |
949 |
909 |
|
Total |
7,472 |
6,778 |
Key management personnel dividends
The dividends paid to key management personnel in the year ended 31 March 2021 totalled £3,028,563 (2020: £3,113,776).
|
Directors' remuneration |
2021 |
2020 |
|
|
£'000 |
£'000 |
|
Emoluments (excluding pension contribution) |
2,015 |
2,328 |
|
Pension contribution (including payments made in lieu of pension contributions) |
125 |
163 |
|
Total |
2,140 |
2,491 |
During the year, one Director of the Company (2020: one) participated in the Group Personal Pension Plan, a defined contribution scheme.
James Wood-
During the period, the Trustee of the Record plc EBT entered into a trading plan with the Company in connection with the launch of the JSOP, the new share-based incentive scheme. On 21 September 2020, the EBT acquired four million ordinary shares from Neil Record (Non-executive Chairman of the Company) at a market price of 37.30 pence per ordinary share, equating to a total consideration of £1,492,000.
Transactions with seed funds
From time to time, the Group injects capital into funds operated by the Group to trial new products (seed capital). If the Group is able to exercise control over such a seed fund by holding a majority interest (whether the majority interest is held by Record plc alone, or by combining the interests of Record plc and its Directors), then the fund is considered to be a related party.
Record Currency - Strategy Development Fund and Record - Currency Multi-Strategy Fund are all related parties on this basis.
During the year, Record plc Directors Leslie Hill and Bob Noyen redeemed £167,063 and £256,989 respectively from the Record - Currency Multi-Strategy Fund.
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
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:
|
|
2021 |
2020 |
|
|
£m |
£m |
|
Regulatory capital |
9.4 |
9.4 |
|
Other operating capital |
15.5 |
16.5 |
|
Operating capital |
24.9 |
25.9 |
|
Seed capital |
1.9 |
2.1 |
|
Total capital |
26.8 |
28.0 |
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 Financial review.
28. Ultimate controlling party
As at 31 March 2021 the Company had no ultimate controlling party, nor at 31 March 2020.
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 16 June 2021. The financial information set out above does not constitute the Company's statutory accounts.
The statutory accounts for the financial year ended 31 March 2020 have been delivered to the Registrar of Companies, and those for the year ended in 31 March 2021 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.
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