TIDMREC
RNS Number : 1618C
Record PLC
17 June 2021
PRESS RELEASE
Record plc
17 June 2021
FINAL RESULTS ANNOUNCEMENT FOR THE YEARED 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 GBP25.4m (2020: GBP25.6m)
-- Growth in management fees of 8% to GBP24.9m (2020: GBP23.1m)
-- 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 GBP58.1bn at 31 March 2021
-- Performance fees for the year of GBP0.1m (2020: GBP1.8m)
-- Profit Before Tax (PBT) of GBP6.2m (2020: GBP7.7m)
-- Operating profit margin of 24% (2020: 30%)
-- Robust financial position with net assets of GBP26.8m at 31 March 2021 (2020: GBP28.2m)
-- 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
Switzerland.
"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
YEARED 31 MARCH 2021
2021 2020
GBP'000 GBP'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
GBP'000 GBP'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 UK's third lockdown.
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% (+GBP1.7 million) offset the
reduction in performance fees of GBP1.7 million versus FY-20, and
consequently revenues remained broadly in line with last year at
GBP25.4 million (2020: GBP25.6 million).
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 GBP6.1
million (2020: GBP7.6 million), and a reduction in earnings per
share to 2.75 pence (2020: 3.26 pence).
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 GBP0.4 million has
already been invested, with further investment into new projects of
approximately GBP0.8 million anticipated in the current financial
year (FY-22), including a mix of both operational and capital
expenditure.
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 1.15
pence per share (2020: 1.15 pence), with the full--year ordinary
dividend at 2.30 pence, which is equivalent to the full--year
ordinary dividend in respect of the prior year (2020: 2.30 pence).
The interim dividend of 1.15 pence per share was paid on 31
December 2020, and the final ordinary dividend of 1.15 pence per
share will be paid on 10 August 2021 to shareholders on the
register at 2 July 2021, subject to shareholders' approval.
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 UK, the Board remains conscious of the
potential longer-term effects from the pandemic and the uncertainty
that remains in this respect. Consequently the need remains for a
measured and prudent approach to ensuring the business retains
sufficient capital and liquidity to withstand any negative impacts
arising, whilst also allowing the business to continue to invest in
implementing its new strategy.
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
0.45 pence per share to be paid simultaneously with the final
ordinary dividend. Total dividends for the year are 2.75 pence per
share (2020: 2.71 pence) compared to earnings per share of 2.75
pence per share (2020: 3.26 pence).
The Board will continue to consider ordinary dividends and other
distributions to shareholders on a "total distribution" basis. The
total distribution for any year will be at least covered by
earnings, and will always be subject to the financial performance
of the business, the market conditions at the time and to any
further capital assessed as required under the policy described
above.
The Board
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 $80.1 billion, its highest ever level and up 37% over
last year. Total net inflows for the year of $9.7 billion spread
across our hedging products and also our Multi--product strategy
were further bolstered by positive movements both in markets and FX
of $8.4 billion and $3.4 billion respectively. This AUME growth and
its diversification into our higher-margin products. in addition to
the expected new fund launch, gives us a solid platform for revenue
growth into FY-22.
Detailed analysis of AUME is provided in the Operating review
below.
Whilst revenues of GBP25.4 million remained broadly flat on last
year, our increased costs associated with the implementation of our
strategy have resulted in a decrease to our short-term
profitability broadly in line with expectations, reducing our
operating margin to 24% (2020: 30%) and our profit before tax by
19% to GBP6.2 million (2020: GBP7.7 million).
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 Switzerland, and with the benefits of our modernisation
starting to bear fruit.
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 $6.6 trillion (source: BIS
Triennial Central Bank Survey of Foreign Exchange and OTC
Derivatives Markets 2019). The FX market is essential to global
trade and finance and includes a high proportion of
not--for--profit or forced participants, resulting in
profit--seeking financial institutions continuing to represent a
minority of FX market participants. Consequently, the market
displays persistent patterns of behaviour or inefficiencies which
we believe can best be exploited by a combination of systematic and
discretionary processes.
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 $6 trillion during the financial year, while debt to
GDP in those same countries is estimated to have risen by 18% over
the course of 2020.
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 Georgia. Crucially, this laid the
groundwork for major fiscal stimulus and, by the turn of the year,
expectations of robust vaccine rollouts and a fiscally fuelled
normalisation of the output gap began to pressure US fixed income.
In turn, this allowed the US dollar to recover some of its
losses.
Meanwhile, the UK and EU managed to bridge the Brexit hurdle in
the nick of time after months of intense negotiations over
competition rules and other stickier agenda items, with an EU/UK
Trade and Cooperation Agreement coming into law on the last day of
the calendar year. With the risk of "No deal" and a subsequent hard
fallout of the EU in the rear-view mirror, the pound has traded on
stronger footing, taking impetus from political stabilisation,
successful vaccine rollouts and a more hawkish Bank of England into
2021 - though divorce acrimony between the UK and EU still remains
in periphery and long-term structural post-Brexit effects have yet
to materialise.
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
Russia, sanction risks resurfaced under a more hawkish Biden
administration, while hard-earned credibility at the Turkish
central bank unwound over a weekend following the surprise
dismissal of its market--friendly governor.
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 (GBPm)
Revenue is earned mainly from the provision of currency
management services in the form of management fees and performance
fees.
Revenue GBP 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 GBP1.7 million.
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 Special dividend
per share pence 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 0.04 pence, resulting in a 1.5%
increase in total dividends to 2.75 pence per share (2020: 2.71
pence per share).
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 $9.7 billion diversified across product lines.
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
$80.1 billion, its highest ever level.
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 $80.1
billion, an increase of 37% (2020: $58.6 billion). When expressed
in sterling, AUME increased by 23% to GBP58.1 billion (2020:
GBP47.3 billion).
AUME movements ($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 $61.5 billion at the
end of the year (2020: $50.3 billion), including net inflows of
$1.5 billion and $0.6 billion from new and existing clients
respectively. Further positive impacts arose from market movements
($6.4 billion) and movements in exchange rates ($2.7 billion).
Dynamic Hedging AUME increased by 271%, ending the year at $9.3
billion (2020: $2.5 billion). The majority of the $6.8 billion
increase is attributable to net inflows ($6.6 billion), of which
$5.5 billion was from new clients with the remaining $1.1 billion
from existing clients. Exchange rate movements added a further $0.2
billion.
Currency for Return AUME increased to $3.9 billion at the end of
the year (2020: $2.6 billion) as a result of positive movements in
exchange rates ($0.3 billion), scaling ($0.2 billion) and market
movements ($0.8 billion).
Multi-product AUME increased to $5.2 billion (2020: $3.0
billion) as the result of $1.0 billion of net inflows, market
movements of $0.9 billion and exchange rate movements of $0.3
billion.
Market performance
Record's AUME is affected by movements in market levels because
substantially all the Passive and Dynamic Hedging, and some of the
Multi-product mandates, are linked to equity, fixed income and
other market levels. Market movements increased AUME by $8.4
billion in the year ended 31 March 2021 (2020: decrease of $3.2
billion).
Further detail on the composition of assets underlying our
Hedging and Multi-product mandates is provided below to help
illustrate more clearly the impact of equity and fixed income
market movements on these mandate sizes.
AUME composition by underlying asset class as at 31 March
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 $3.1 billion
over the year. This movement does not have an equivalent impact on
the sterling value of fee income.
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 GBP 6.7bn GBP 6.3bn
US dollar USD 16.2bn USD 6.2bn
Swiss franc CHF 35.2bn CHF 31.0bn
Euro EUR 9.9bn EUR 8.1bn
Australian dollar AUD 2.1bn AUD 1.6bn
Canadian dollar CAD 4.8bn CAD 3.5bn
Swedish krona SEK 0.4bn SEK 3.9bn
----------------- ------------- -------------
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 GBP25.4 million
(2020: GBP25.6 million) supported by an 8% increase in management
fees offsetting the drop in performance fees of GBP1.7 million for
the year. Operating profit for the year fell to GBP6.1 million
(2020: GBP7.6 million) and the operating profit margin decreased to
24% (2020: 30%) with profit before tax falling to GBP6.2 million
(2020: GBP7.7 million). The fall in operating profit resulted from
an increase in operating expenses (excluding variable remuneration)
of 11% to GBP15.7 million, and variable remuneration fell to GBP3.2
million (2020: GBP3.5 million).
Profit and loss (GBPm)
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 $8.4 billion were broadly evenly split across
both halves of the year, the impact from the net inflows of $9.7
billion was felt in the second half of the year. Consequently,
revenues of GBP11.8 million for the first half increased by 14% to
GBP13.5 million in the second half (ignoring performance fees) with
the financial impact from the $80.1 billion headline AUME expected
to be seen more fully in FY-22.
Management fees earned during the year increased by 8% to
GBP24.9 million (2020: GBP23.1 million), with the increase in
management fees of GBP1.7 million offsetting the decrease in
performance fees (of GBP1.7 million) for the year.
Revenue analysis (GBPm)
Year ended Year ended
31 March 31 March
2021 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 GBP11.4
million for the year (2020: GBP12.0 million). Whilst average AUME
increased over the year, the consequent increase in fees was more
than offset by the impact from the decision by some clients with
enhanced Passive Hedging mandates to change from a higher
management fee basis to a lower management plus performance fee
basis during the year.
Dynamic Hedging management fees increased by 41% to GBP5.6
million (2020: GBP4.0 million) as a result of the increase in AUME
arising from net inflows of $6.6 billion from new and existing
clients.
Management fees from Currency for Return mandates remained
consistent with last year at GBP2.0 million.
Multi-product management fees increased by 14% to GBP5.9 million
(2020: GBP5.1 million) linked to the net inflows of $1.0 billion in
the second half and the impact of positive market movements in the
year of $0.9 billion.
Performance fees
Performance fees are derived from a combination of hedging and
return--seeking products. Aggregate performance fees of GBP0.1
million were earned during the year (2020: GBP1.8 million).
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 GBP0.4 million (2020:
GBP0.7 million) and consists of fees from ancillary currency
management services including collateral management, signal hedging
and tactical execution services. Fees charged for these ancillary
services are not linked to AUME.
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 GBP15.7 million for the year
(2020: GBP14.2 million).
Growth in personnel costs of 20% to GBP10.3 million (2020:
GBP8.6 million) reflects salary increases from internal promotions
arising from restructuring plus the full-year effect of recruiting
at more senior levels towards the end of the last financial year.
The Group remains conscious of the need for good cost control
balanced with ensuring the business is appropriately resourced to
achieve its strategic goals of growth and succession.
Non-personnel costs decreased by 5% during the year to GBP5.4
million (2020: GBP5.7 million). Whilst the Group has continued to
invest in technology and systems, cost savings have been made in
client-facing activities such as travel and conferences due to the
impact of covid-19.
Other income was GBP41k for the year (2020: GBP82k) and
represents net gains made on derivative financial instruments
employed by the Group's seed funds, hedging activities and other FX
adjustments or revaluations.
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 GBP3.2
million, a decrease of 9% over the previous financial year (2020:
GBP3.5 million).
Operating profit and margin
Group operating profit decreased by 20% to GBP6.1 million (2020:
GBP7.6 million) and the Group operating margin decreased to 24%
(2020: 30%). Whilst revenue has remained constant with last year,
as expected the implementation of the new strategy has resulted in
a short-term negative impact on the operating margin.
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 GBP6.8
million (2020: GBP14.3 million) and the total assets managed as
cash were GBP19.8 million (2020: GBP22.3 million). The cash
generated from operating activities before tax is GBP7.7 million
(2020: GBP7.9 million). During the year, taxation of GBP1.4 million
was paid (2020: GBP1.4 million) and GBP5.3 million was paid in
dividends (2020: GBP5.9 million).
At the year end, the Group held money market instruments with
maturities between three and twelve months, worth GBP12.9 million
(2020: GBP8.0 million). These instruments are managed as cash by
the Group but are not classified as cash under IFRS rules (see note
18 of the financial statements for more details).
Dividends
An interim ordinary dividend of 1.15 pence per share (2020
interim: 1.15 pence) was paid to shareholders on 31 December 2020,
equivalent to GBP2.2 million.
As disclosed in the Chairman's statement, the Board is
recommending a final ordinary dividend of 1.15 pence per share,
equivalent to GBP2.3 million, taking the overall ordinary dividend
for the financial year to 2.30 pence per share. Simultaneously, the
Board is also paying a special dividend of 0.45 pence equivalent to
GBP0.8 million, making the total dividend in respect of the year
ending 31 March 2021 of GBP5.3 million equivalent to 100% of total
earnings.
The total ordinary and special dividends paid per share in
respect of the prior year ended 31 March 2020 were 2.30 pence and
0.41 pence respectively, equivalent to total dividends of GBP5.3
million and representing 83% of total earnings per share of 3.26
pence.
Financial stability and capital management
The Group's balance sheet is strong and liquid with total net
assets of GBP26.8 million at the end of the year, including current
assets managed as cash totalling GBP19.8 million. The business
remains cash generative, with net cash inflows from operating
activities after tax of GBP6.3 million for the year (see
consolidated statement of cash flows in the financial
statements).
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 UK by the Financial
Conduct Authority ("FCA"), and is a wholly owned subsidiary of
Record plc. Both RCML and the Group submit semi--annual capital
adequacy returns to the FCA, and held significant surplus capital
resources relative to the regulatory financial resource requirement
throughout the year.
The Board has concluded that the Group is adequately capitalised
both to continue its operations effectively and to meet regulatory
requirements, due to the size and liquidity of balance sheet
resources maintained by the Group.
The Group held regulatory capital resources based on the audited
financial statements as at 31 March as follows:
Regulatory capital resources (GBPm)
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% (+$8.4 billion)
in FY-21 as a result of such market movements.
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
YEARED 31 MARCH 2021
2021 2020
Note GBP'000 GBP'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 GBP'000 GBP'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
Equity
attributable
to equity
Called Share Capital holders
up share premium redemption Retained of the Non-controlling Total
capital account reserve earnings parent interests equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
Equity
attributable
to equity
Called Share Capital holders
up share premium redemption Retained of the Non-controlling Total
capital account reserve earnings parent interests equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP'000 GBP'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 GBP'000 GBP'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 GBP5,133,381
(2020: GBP6,098,249).
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
Capital Total
Called-up share Share premium redemption shareholders'
capital account reserve Retained earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
Capital Total
Called-up share Share premium redemption shareholders'
capital account reserve Retained earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP'000 GBP'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 GBP5,133,381 attributable to the
Company (2020: GBP6,098,249).
All intra--group transactions, balances, income, expenses and
dividends are eliminated on consolidation.
c. Foreign currencies
The financial statements are presented in sterling (GBP), which
is the functional currency of the parent company. Foreign currency
transactions are translated into the functional currency of the
parent company using prevailing exchange rates which are updated on
a monthly basis. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the 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 GBP'000 GBP'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 UK. Other relates to a number of
regions that are individually immaterial.
2021 2020
Revenue by geographical region GBP'000 GBP'000
-------------------------------------- ------- -------
Management and performance fee income
UK 2,322 2,328
US 8,619 6,209
Switzerland 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 GBP4.1 million and GBP2.7 million in
the year (2020: three largest clients generated revenues of GBP3.9
million, GBP3.5 million and GBP3.1 million in the year).
5. Operating profit
Operating profit for the year is stated after charging / (crediting): 2021 2020
GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'000
-------------------------------------------------- ------- -------
UK current year charge 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
GBP'000 GBP'000
------------------------------------------------------------------------------------------------- ------- -------
Profit before taxation 6,153 7,737
------------------------------------------------------------------------------------------------- ------- -------
Taxation at the standard rate of tax in the UK of 19% (2020: 19%) 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 UK corporation tax for the year is 19%
(2020: 19%). A full corporation tax computation is prepared at the
year end. The actual charge as a percentage of the profit before
tax may differ from the underlying tax rate. Differences typically
arise as a result of capital allowances differing from depreciation
charged, and certain types of expenditure not being deductible for
tax purposes. Other differences may also arise.
The tax charge for the year ended 31 March 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 GBP298k (2020: expense of GBP56k).
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 GBP5,290,324 (2.71 pence per share) which comprised a
final dividend in respect of the year ended 31 March 2020 of
GBP2,261,779 (1.15 pence per share), a special dividend in respect
of the year ended 31 March 2020 of GBP806,374 (0.41 pence per
share) and an interim dividend for the year ended 31 March 2021 of
GBP2,222,171 (1.15 pence per share).
The dividends paid by the Group during the year ended 31 March
2020 totalled GBP5,887,541 (2.99 pence per share) which comprised a
final dividend in respect of the year ended 31 March 2019 of
GBP2,261,970 (1.15 pence per share), a special dividend in respect
of the year ended 31 March 2019 of GBP1,357,182 (0.69 pence per
share) and an interim dividend for the year ended 31 March 2020 of
GBP2,268,389 (1.15 pence per share).
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 GBP[2.3]
million and GBP[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 GBP'000 GBP'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 GBP'000 GBP'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 GBP880,329 of fully depreciated assets that
were not in use on 31 March 2021 and GBP71,377 of Trade Record
assets which were removed from the consolidation as the result of
the Group divesting from Trade Record on 21 December 2020. The
annual contractual commitment for the maintenance and support of
the above software is GBP221,004 (2020: GBP187,454). All
amortisation charges are included within administrative
expenses.
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, Windsor, at an
annual commitment of GBP507,603, expiring 1 September 2022.
On 16 March 2016, the Group signed a lease on premises in New
York City, at an average annual commitment of $125,840. The lease
expired on 31 May 2019.
On 1 June 2017, the Group signed a five-year lease on premises
in Zürich, at an annual commitment of CHF 49,680.
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 GBP'000 GBP'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 GBP'000 GBP'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
GBP'000 GBP'000
------------------------ ------- -------
Current 539 501
Non-current 99 96
------------------------ ------- -------
Total lease liabilities 638 597
------------------------ ------- -------
Group Company
GBP'000 GBP'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
GBP'000 GBP'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 GBP'000 GBP'000 GBP'000 GBP'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 GBP'000 GBP'000 GBP'000 GBP'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 UK.
14. Investments
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000
------------------------------------------------------------------- ------- -------
Investment in subsidiaries (at cost)
Record Currency Management Limited 10 10
Record Group Services Limited 10 10
Record Portfolio Management Limited 10 10
Record Currency Management (US) Inc. - -
Record Currency Management (Switzerland) GmbH 16 16
Trade Record Ltd - 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 (Switzerland) GmbH 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 Currency management services (FCA,
Limited SEC and CFTC registered)
Record Group Services Management services to other Group
Limited undertakings
Record Currency Management US advisory and service company (SEC
(US) Inc. and CFTC registered)
Record Currency Management
(Switzerland) GmbH Swiss advisory and service company
Prize competition allowing subscribers
to trade virtual money across asset
Trade Record Ltd 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 Delaware
(registered office: Corporation Service Company, 251 Little Falls
Drive, Wilmington, DE 19808), Record Currency Management
(Switzerland) GmbH is incorporated in Zürich (registered office:
Münsterhof 14, 8001 Zürich) and Record Asset Management GmbH is
incorporated Germany (registered office: Königsallee 92a, 40212
Düsseldorf).
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 GBP120,000 which equated to the Company's
total investment at cost.
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 Ireland. The two seed funds
invested in by the Company are shown in the table below.
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
GBP'000 GBP'000 GBP'000 GBP'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 GBP2,287,241 in impact
bonds; the fair value at the year end was GBP2,198,886 (prior year:
GBP2,472,241). Impact bonds are measured at fair value through
profit or loss.
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
GBP'000 GBP'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
GBP'000 GBP'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 GBP3,755,976 (2020: GBP7,357).
On exercise the Group will be entitled to a corporation tax
deduction in respect of the difference between the exercise price
and the strike price. There is no unprovided deferred taxation.
Deferred tax has been calculated based on the current tax rate of
19% and it is subject to change if tax rates change in future
years.
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
GBP'000 GBP'000 GBP'000 GBP'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: GBPnil).
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 GBP'000 GBP'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 GBP'000 GBP'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 GBP9,076,940 (31 March 2020: GBP10,993,268) for
the sale of foreign currencies in the normal course of business.
The fair value of the contracts is calculated using the market
forward contract rates prevailing at 31 March 2021. The Group does
not apply hedge accounting.
The net gain or loss on forward foreign exchange contracts held
to hedge non-sterling based assets is as follows:
2021 2020
Derivative financial instruments held to hedge non-sterling based assets GBP'000 GBP'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 GBP10,383,964 (31 March 2020:
GBP23,425,316).
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 GBP'000 GBP'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 GBP'000 GBP'000 GBP'000 GBP'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 GBP'000 GBP'000 GBP'000 GBP'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 GBP3,159,533 (31 March 2020: GBP2,731,819) and the money
market instruments with maturities > 3 months held by these
funds were GBP427,957 (31 March 2020: GBP1,599,741).
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 GBP'000 GBP'000 GBP'000 GBP'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 GBP1,644,761 for the Group Profit Share Scheme
(31 March 2020: GBP1,597,350). The Directors consider that the
carrying amount of trade and other payables approximates to their
fair value.
Group Company
2021 2020 2021 2020
Current tax liabilities GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 Number GBP'000 Number
-------------------------------------- ------- ------- -----------
Authorised
Ordinary shares of 0.025p each 100 400,000,000 100 400,000,000
-------------------------------------- ------- ----------- ------- -----------
Called -- up, allotted and fully paid
Ordinary shares of 0.025p each 50 199,054,325 50 199,054,325
-------------------------------------- ------- ----------- ------- -----------
Movement in Record plc shares held by the Record plc Employee
Benefit Trust ("EBT")
The EBT was formed to hold shares acquired under the Record plc
share --based compensation plans. Under IFRS the EBT is considered
to be under de facto control of the Group, and has therefore been
consolidated into the Group financial statements.
Neither the purchase nor sale of own shares leads to a gain or
loss being recognised in the Group statement of comprehensive
income.
Number
---------------------------------------------
Record plc shares held by EBT as at 31 March
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 GBP765,606 (2020:
GBP838,483). Other employees receive two-thirds of their profit
share in cash and may elect to receive the final third as cash only
or to allocate some, or all, of the amount for the purchase of
Additional Shares.
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 GBP30,000 on the date of grant. There
is no such limit on the value of grant for Unapproved options,
which have historically been granted with a market value exercise
price in the same way as for the Approved options.
Options over an aggregate of 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 GBP181,095 for the year ended 31 March 2021 (2020:
GBP83,799).
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 At 1 April Granted Exercised Lapsed/ At 31 Earliest Latest Exercise
of grant 2020 forfeited March vesting vesting price
2021 date date
-------- --------
01/12/15 600,000 - - (600,000) - 01/12/20 01/12/20 GBP0.2888
27/01/16 106,250 - (106,250) - - 27/01/20 27/01/20 GBP0.2450
27/01/16 244,064 - (244,064) - - 27/01/20 27/01/20 GBP0.2450
27/01/16 109,167 - - (109,167) - 27/01/21 27/01/21 GBP0.2450
27/01/16 24,167 - - (24,167) - 27/01/21 27/01/21 GBP0.2450
30/11/16 288,574 - (198,574) - 90,000 30/11/20 30/11/20 GBP0.34072
30/11/16 695,000 - (632,500) - 62,500 30/11/19 30/11/20 GBP0.34072
30/11/16 1,466,668 - - (733,332) 733,336 30/11/20 30/11/21 GBP0.34072
26/01/18 1,310,000 - - (42,500) 1,267,500 26/01/22 26/01/22 GBP0.4350
26/01/18 236,625 - (78,875) (30,000) 127,750 26/01/20 26/01/22 GBP0.4350
26/01/18 52,000 - - (17,333) 34,667 26/01/21 26/01/23 GBP0.4350
26/01/18 1,933,000 - - (644,332) 1,288,668 26/01/21 26/01/23 GBP0.4350
29/03/19 525,000 - - (65,000) 460,000 29/03/23 29/03/23 GBP0.2830
29/03/19 370,000 - (92,500) - 277,500 29/03/20 29/03/23 GBP0.2830
21/08/19 1,985,000 - - - 1,985,000 21/08/22 21/08/24 GBP0.3110
18/03/20 1,950,000 - (32,500) (250,000) 1,667,500 18/03/21 18/03/24 GBP0.28902
21/09/20 - 3,425,000 - - 3,425,000 21/09/21 21/09/24 GBP0.3730
25/01/21 - 300,000 - - 300,000 25/01/22 25/01/25 GBP0.49425
09/03/21 - 125,000 - - 125,000 09/03/22 09/03/25 GBP0.63986
---------- --------- ----------- ----------- ---------- -------- -------- ----------
Total
options 11,895,515 3,850,000 (1,385,263) (2,515,831) 11,844,421
---------- --------- ----------- ----------- ---------- -------- -------- ----------
Weighted
average
exercise
price
of options GBP0.34 GBP0.39 GBP0.43 GBP0.34 GBP0.36
------------ ---------- --------- ----------- ----------- ---------- -------- -------- ----------
During the year 1,385,263 options were exercised. The weighted
average share price at date of exercise was GBP0.43. At 31 March
2021 a total of 701,375 options had vested and were exercisable
(2020: 869,189). At 31 March 2021 the weighted average exercise
price of the options vested and exercisable was GBP0.31 (2020:
GBP0.30) and the weighted average contractual life was two years
(2020: three years).
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
GBP11,797 in the year ended 31 March 2021 (2020: GBP17,058).
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:
Weighted
average
Model input 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.
At 1 As at Earliest Latest
Date of April Lapsed 31 March vesting vesting
grant 2020 Granted Exercised / forfeited 2021 date date Hurdle
--------- --------- ---------- ----------
21/09/2020 - 2,375,000 - - 2,375,000 21/09/2021 21/09/2024 GBP0.3730
09/03/2021 - 125,000 - - 125,000 09/03/2021 09/03/2025 GBP0.63986
------ --------- --------- ------------ --------- ---------- ---------- ----------
Total
JSOP awards - 2,500,000 - - 2,500,000
------ --------- --------- ------------ --------- ---------- ---------- ----------
Weighted
average
exercise
price
of options - GBP0.3863 - - GBP0.3863
------ --------- --------- ------------ --------- ---------- ---------- ----------
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 GBP'000 GBP'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:
Neither
impaired More than
Carrying nor past 0-3 months 3 months
amount due past due past due
At 31 March 2021 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- --------- ---------- ---------
Trade receivables 6,519 6,519 - -
Accrued income 37 37 - -
-------- --------- ---------- ---------
Total 6,556 6,556 - -
-------- --------- ---------- ---------
100% 0% 0%
------------------ -------- --------- ---------- ---------
Neither
impaired More than
Carrying nor past 0-3 months 3 months
amount due past due past due
At 31 March 2020 GBP'000 GBP'000 GBP'000 GBP'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:
Due or
due in Due between Due between
Carrying less than 1 and 3 3 months
amount 1 month months and 1 year
At 31 March 2021 GBP'000 GBP'000 GBP'000 GBP'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
--------------------------------- -------- ---------- ----------- -----------
Due or
due in Due between Due between
Carrying less than 1 and 3 3 months
amount 1 month months and 1 year
At 31 March 2020 GBP'000 GBP'000 GBP'000 GBP'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.
Floating No interest
Interest rate profiles Fixed rate rate rate Total
At 31 March 2021 GBP'000 GBP'000 GBP'000 GBP'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)
---------------------------------------------------------------------- ---------- -------- ----------- -------
Floating No interest
Fixed rate rate rate Total
At 31 March 2020 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'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
Singapore dollar (SGD) 14 8 25 14
------------------------ -------- --------- -------- ---------
The value of revenues for the year ended 31 March 2021 that were
denominated in currencies other than sterling was GBP24.7 million
(31 March 2020: GBP22.8 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 Impact on total
for the year ended equity
31 March as at 31 March
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'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 GBP1 = $1.32 this would result in
sterling weakening to GBP1 = $1.20 and sterling strengthening to
GBP1 = $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 GBP1 = CHF 1.21 this would result in
sterling weakening to GBP1 = CHF 1.10 and sterling strengthening to
GBP1 = 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 Impact on total
for the year ended equity
31 March as at 31 March
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'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
Financial Assets Liabilities
liabilities at fair at fair
Assets measured value through value through
at amortised at amortised profit profit
cost cost or loss or loss
At 31 March 2021 Note GBP'000 GBP'000 GBP'000 GBP'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)
-------------------------------------------------- ---- ------------- ------------- -------------- --------------
Financial Assets Liabilities
liabilities at fair at fair
Assets measured value through value through
at amortised at amortised profit profit
cost cost or loss or loss
At 31 March 2020 Note GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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:
GBPnil). 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 GBP120,000 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
GBP'000 GBP'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 GBP3,028,563 (2020: GBP3,113,776).
Directors' remuneration 2021 2020
GBP'000 GBP'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-Collins left the Board of Directors on 13 February
2020 and left the Group on 13 August 2020 after working his
six-month notice period. Payments from 1 April to 13 August were
GBP287,804. These payments comprise GBP105,201 salary, GBP16,306
cash in lieu of pension, GBP343 medical benefits, GBP68,954
short-term incentives (GPS cash) and GBP97,000 for loss of office.
No other payments were made to former Directors.
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 GBP1,492,000.
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 GBP167,063 and GBP256,989 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 UK Financial Conduct
Authority.
The Group sets the amount of capital in proportion to risk. The
Group manages the capital structure and makes adjustments to it in
light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders, or
issue new shares. The Group had no debt in the current or prior
financial year and consequently does not calculate a
debt--to--adjusted capital ratio.
The Group's capital is managed within the categories set out
below:
2021 2020
GBPm GBPm
------------------------ ---- ----
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
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END
FR KZGMVVVKGMZM
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