Final Results

RNS Number : 1354C

Polar Capital Holdings PLC

24 June 2016

 

POLAR CAPITAL HOLDINGS plc

Group Audited Results for the year ended 31 March 2016

Highlights

•    Assets under Management ('AUM') at 31 March 2016 US$10.4bn/£7.3bn (2015: US$12.3bn/ £8.3bn)

•    Core operating profit excluding performance fees £23.7m (2015: £27.7m)

•    Profit before share-based payments of £27.5m (2015: £33.7m)

•    Pre-tax profit £24.2m (2015: £31.1m)

•    Basic earnings per share 21.2p (2015: 27.5p) and adjusted* diluted earnings per share 23.6p (2015: 28.1p)

•    Dividends for the year 25.0p per share (2015: 25.0p) including a second interim dividend of 19.5p per ordinary share to be paid on 15 July 2016 to shareholders on the register on 8 July 2016

•    Shareholders' funds £75.6m (2015: £75.2m) including a strong cash position

•    Expanded our fund range with the successful launch, in July 2015, of our European (ex UK) Income UCITS fund that was a product of investor led demand

•    Highly regarded UK value team of George Godber and Georgina Hamilton joining Polar Capital to build a multi-product UK value franchise

•    Current AUM as at 31 May 2016 US$ 10.3bn/£7.1bn

*Adjusted to exclude cost of share-based payments.

Tim Woolley, Chief Executive Officer, commented:

"Despite the lack of progress we have made in terms of AUM and profits growth, over the last two years the Group has continued to invest in new teams and in the business with further investment in client service, operations and support staff and systems.  This reflects our strategy of continuing to offer a diversified product range for our clients, supported by a robust and scalable infrastructure. With our investment led culture, active fund management talent continues to see us as an attractive destination in an increasingly challenging industry."

For further information please contact:
Polar Capital Tim Woolley (CEO) John Mansell (COO)	[phone]
Canaccord Genuity - Nomad and Joint Broker Simon Bridges (QE) Kit Stephenson	[phone]
Peel Hunt - Joint Broker Guy Wiehahn	[phone]
Camarco Ed Gascoigne-Pees	[phone]

Chairman's Statement

Our Assets Under Management (AUM) fell to $10.4bn from $12.3bn at the start of the year. This was a challenging year for global stock markets with many markets experiencing significant corrections over the period creating headwinds for long only funds. In addition, we experienced further redemptions from our Japanese funds as the team's style has struggled to deliver the returns clients had expected in the era of Abenomics. We also saw outflows from our Emerging Markets funds as clients reduced their asset allocation exposures to those markets and from our European long/short funds after a disappointing period of performance.

Funds and Performance

Although over the last 12 months the AUM across the Group decreased it should be noted that 7 of our 11 strategies saw net inflows over the year which gives us confidence we can enjoy another period of strong growth once our Japanese business stabilises.

Short-term returns across our funds have been somewhat mixed but the long-term performance figures remain excellent with 14 out of 18 of our UCITS funds outperforming their benchmarks net of all costs since launch.

There have been some exceptional performers over the period notably our UK Absolute fund and Insurance fund, both of which delivered top decile returns over the period.

Results

Nevertheless pre-tax profits before share based payments fell to £27.5m from £33.7m in the prior year. Core pre-tax profit fell from £27.7m to £23.7m. Net performance fees decreased from £5.2m to £3.0m although this was our fifteenth successive year of generating such fees.

Our balance sheet remains strong with net assets of £75.6m (2015: £75.2m) including net cash of £48.8m (2015: £41.4m).

Market Background

Whereas in recent years markets have generally proved supportive, our last financial year to 31 March 2016 was rather different with a number of the major stock markets around the world posting double-digit falls in local currency terms. Only in the US did we not see significant falls over the year with the S&P500 Index down 0.4%. Elsewhere the declines were more material with the UK FTSE All Share down 7.3%, the Nikkei 225 down 12.7%, the MSCI Emerging Markets Index down 14.1% and the MSCI Europe Index down 16.0%.

Market movements were dominated by two major factors over the year. The first was the strength of the US economy and its implications for when and how quickly the Federal Reserve would increase interest rates. The second was the weakness of the Chinese economy and the machinations of the Chinese stock market.

The US economy was looking increasingly robust as 2015 progressed, raising the prospect of the first Federal Reserve rate hike since 2006. The US consumer was buoyed by improving job prospects, real wage increases, rising house prices and the meaningful boost to their spending power resulting from the collapse in the oil price.

The Federal Reserve had been expected to raise rates in September but the dramatic gyrations of the Chinese stock market in August and fears over a hard landing for the Chinese economy led to a heavy sell off in stock markets around the world in late summer. As a result of this global uncertainty the Federal Reserve, to the surprise of a number of commentators, decided to keep rates on hold in September and through the autumn.

Markets recovered their poise as the Chinese stock market stabilised and the news on the Chinese economy was not as bad as feared in the summer. By December the Federal Reserve felt the global outlook had recovered sufficiently for it to increase rates a quarter point given that the US domestic economy was still looking strong.

The New Year brought with it another round of jitters on the Chinese economy and large falls in the Chinese stock market, once again leading to a sharp 'sell off' in stock markets around the world.

With data on the US economy becoming more mixed during the opening quarter of the calendar year, expectations of further US rate rises had ratcheted back considerably by the end of our financial year allowing most major markets to recover some of their earlier losses.

Developments

We added to our product range in the summer of 2015 with the launch of our European (ex UK) Income fund, a natural development for our Pan European Income manager Nick Davis and his team. The European Central Bank (ECB) continues to pursue its policy of Quantative Easing (QE) which distorts the bond market both in government and corporate bonds, denying bond buyers the level of interest they would anticipate in a more normalised economic and interest rate cycle. As the search for yield and income is likely to continue we expect UK investors will expand their search towards Continental European equities where some attractive yields can still be found.

Although no new teams arrived during the financial year, we were pleased to announce at our AUM update statement in early April that the highly regarded UK value team of George Godber and Georgina Hamilton will be joining us. The team has developed a strong following amongst our UK clients with their disciplined value investment process which has delivered excellent absolute, relative and risk adjusted returns over recent years. We look forward to them building us a multi-product UK value franchise over the next five years and beyond.

Awards

The following funds all picked up awards during the year: Asia Financials, Global Insurance, Income Opportunities, North America, Healthcare Opportunities, Global Technology and the Technology Trust.

At the inaugural Investment Week's Specialist Investment Awards in November we picked up all three of the specialist sector fund awards, winning Financials with our Global Insurance fund, Healthcare with our Healthcare Opportunities fund and Technology with our Global Technology fund.

Dividend

As previously stated the Board believes that the level of dividend should reflect the Company's trading results, its cash resources and also its future prospects.

The Board has declared a second interim dividend of 19.5p (2015: 19.5p) to be paid in July. Together with the interim dividend of 5.5p paid in January 2016 the total dividend for the year amounts to 25p. This is unchanged from the previous year despite the fall in AUM and earnings per share and reflects the strength of the Company's balance sheet and our continued confidence in the long-term outlook for the Company.

Outlook

There are no doubt substantial challenges facing the global economy and no shortage of political risk as well to contend with this year. The Brexit vote looks finely balanced at the time of writing and this will be followed by what is likely to be one of the most vitriolic US presidential campaigns ever, ahead of the vote on 8 November 2016.

The European Union (EU) continues to face significant economic and political challenges. Economic growth across the block remains muted although Germany, Spain and Ireland are bright spots.  Six years on from the most recent Greek crisis little seems to have been resolved there and arguably the situation is worse today with the additional challenge of the refugee crisis. The refugee issue is posing a serious political and economic challenge not only for Greece but also for many individual governments within the EU and for the EU itself at a federal level.

Major issues remain within the European banking sector. In response to the sustained weakness of the Euro area economy and persistent deflationary pressures, the ECB has pushed rates further into negative territory and expanded its QE program again. The Bank of Japan followed the ECB's lead and introduced negative interest rates although this failed to halt a resurgence of the Yen over recent months.

Economic data from the US has been more mixed of late whilst the outlook for the rest of the global economy remains murky with China continuing to slow, Japan back in recession, Europe remaining sluggish and the UK flagging ahead of the Brexit vote.

Perhaps on a more positive note, US interest rates are not likely to increase as quickly as expected at the start of the year and elsewhere it is difficult to envisage anything other than a continuation of 'loose' monetary policy either from the ECB, the Bank of Japan or the authorities in China whilst the Bank of England is unlikely to increase rates anytime soon regardless of the Brexit outcome.

I expect markets to make little headway until there is greater clarity and resolution on some of the major economic and political uncertainties exercising investors and there could be a considerable amount of volatility in the interim.  The prospects for the Group are likely to remain restrained in the near term as a result.  With the addition of new teams and the ongoing strength in a good number of our strategies, we believe the Group remains well placed to generate AUM and earnings growth over the longer term.

Annual General Meeting

The Annual General Meeting will again this year be held at 16 Palace Street, London SW1E 5JD at 3:00pm on 29 July 2016 and I would encourage shareholders to attend and meet the Directors.

Full details of the meeting are given in the separate Notice of Annual General Meeting.

Tom Bartlam

Chairman

23 June 2016

Assets Under Management (AUM)

AUM split by strategy

2016			2015
	$bn	%		$bn	%
Long only	9.38	89.9%	Long only	11.18	91.3%
Alternative	1.05	10.1%	Alternative	1.05	8.7%
	10.43			12.25

AUM split by Business Unit

2016			2015
	$bn	%		$bn	%
Technology	1.98	19.0%	Technology	2.04	16.6%
Japan	2.18	20.9%	Japan	3.75	30.5%
European	0.51	4.9%	European	0.75	6.1%
Healthcare	1.32	12.6%	Healthcare	1.50	12.3%
Financials	1.05	10.1%	Financials	1.00	8.4%
Emerging Markets	0.55	5.3%	Emerging Markets	0.78	6.4%
Convertibles	0.45	4.3%	Convertibles	0.31	2.6%
North America	2.20	21.0%	North America	2.00	16.1%
Global Alpha	0.10	1.0%	Global Alpha	0.10	0.8%
UK Absolute Equity	0.05	0.5%	UK Absolute Equity	0.01	0.1%
European Income	0.04	0.4%	European Income	0.01	0.1%
	10.43			12.25

 

Chief Executive's Report

Strategy

In April we announced an evolution of our strategy expanding our targeted number of teams from a range of 10 to 12 to 12 to 15. This was the first change in strategy we have made since the Group was founded 15 years ago.

Despite the lack of progress we have made in terms of AUM and profits growth, over the last two years the Group has continued to invest in new teams and in the business with further investment in client service, operations and support staff and systems.  This reflects our strategy of continuing to offer a diversified product range for our clients, supported by a robust and scalable infrastructure.  With our investment led culture, active fund management talent continues to see us as an attractive destination in an increasingly challenging industry.

Few talented investment managers would wish to set up on their own in the current environment given the escalating cost and complexity of the regulatory environment. In addition, the capital investment required into operations, client service personnel and support systems to meet the necessary demands of many of today's clients is substantial. There is also the simple fact of human nature - many investment managers prefer a collegiate environment of like-minded talent.

We see no change to these secular shifts in the industry with regulatory and client servicing costs continuing to rise. These shifts will likely drive further consolidation in the industry which would most probably accelerate if market conditions remained poor for an extended period.

When we established Polar Capital in 2001 we set out with the aim of creating an environment which would attract and retain talented active managers. The talent we have assembled and the longevity of many of those teams is testimony to the model we provide and the investment led culture we have tried to create.

Recently we announced that we had secured the services of a 12^th team, a highly rated UK value team. With the addition of this team we reached the upper limit of our original target range for teams set all those years ago. Ironically, we reached the limit at a time when we are being approached by more managers and teams than at any point in our history.

What seemed an ambitious target for team numbers when we started has now been achieved and this has caused us to reflect on whether we should stick with the original target or set a new target? We decided on the latter as we believe we have the facilities, people and systems to support further teams and the culture to do so as well.

Funds and Teams

It was disappointing to experience the level of outflows we saw on our Japan, Emerging Markets and European long/short funds over the year. The Technology team also saw net outflows but on a very small scale.

We do though take encouragement from the fact that, despite the generally difficult market conditions, 7 of our 11 teams saw net inflows over the period. They were: Healthcare, Financials, North America, Global, European Income, Global Convertibles and UK Absolute.

Whilst the value style of our Japan and European long/short teams may remain out of favour for a while longer, we believe the Emerging Markets Income UCITS fund and the Technology UCITS fund are well placed to grow assets again if market sentiment turns more positive. We therefore see plenty of opportunity for growth within the existing product set.

The addition of the UK value team of George Godber and Georgina Hamilton will provide significant further growth potential in calendar 2017 and beyond and there are likely to be some additional products from our present teams within that timescale too.

Challenges and Opportunities

Ironically, the issues we have had on Japan have resulted in the business being better diversified today than at any point in our history, although it is not the route we would ideally have chosen to achieve such a level of diversification! The Japan funds as a percentage of our AUM peaked at around 43% but had fallen to 20.9% by the year end, fractionally below the North America funds at 21.0% of AUM.

It seems to be a major challenge within the industry to achieve growth without becoming overly reliant on a single strategy or team. Much larger competitors than us have had to grapple with the issue whilst smaller competitors inevitably have high concentration risks around a single strategy or team, often in excess of 50%.

Despite the undoubted challenges within the industry we also see tremendous opportunities as well. Some of the larger competitors struggle to provide a consistent and enjoyable environment for talented active managers to thrive and lack transparent models in terms of their remuneration. Some of the smaller boutiques are struggling to gain critical mass and cope with the growing burden, complexity and cost of regulation and the increasing demands of clients.

Whilst still being open to 'opportunistic opportunities' we intend to evolve to incorporate a greater level of strategic planning in our development over the coming years. We will look to strengthen the senior management team and continue investing in support personnel and systems and the opening up of new markets geographically and by type of client we serve.

Our push into the institutional marketplace remains nascent and although we have been successful historically in raising assets from US clients for hedge fund products, we have never made a concerted effort on the long only side of our business.

In terms of new team additions, we will keep an open mind although strategically we would like to expand our global product capabilities particularly in the institutional market place. We would also like to add additional resource on Asia and expand our product offering beyond our current Asia Financials fund, which despite its excellent long term performance record has limited appeal within our client base given its specialist nature.

Regulation

We all have an interest in operating in a serious and well-respected regulatory environment.  Such an environment ensures a fair and level playing field between competitors and engenders trust and security for clients both domestically and overseas. The Financial Conduct Authority (FCA) is doing an excellent job on many fronts in what is undoubtedly a very challenging environment.

However, it is also vital that regulation does not become too parochial and thereby put the large elements of the UK fund management industry that operate globally at a competitive disadvantage to our North American and Asian competitors. We have already experienced this in relation to the FCA's policy on corporate access, which has put us at a disadvantage to our US competitors in terms of meeting company management in the US. This disadvantage has not yet become material but it could become so if regulation were to continue to evolve in a manner that does not take account of the globally competitive market in which many, both small and large, UK fund management companies operate.

Finally

I wish to thank our shareholders for their understanding, patience and support through this rather extended period of consolidation. I can assure you we are working hard across the organisation and at a Board level to get back in a position where we can deliver the growth in profits and dividends we had all previously anticipated.

T.J.Woolley

23 June 2016

Financial Review

Results of the year

Profits for the year are lower than in 2015. Revenues have fallen and although costs have also reduced they have not fallen sufficiently to protect the Group's profits. The analysis below explains the reasons for each variance, starting with revenues.

Revenues	31 March 2016 £'m	31 March 2015 £'m
Net management fees (net of commissions and fees payable)	69.4	75.0
Performance fees	7.2	12.2
Other income	0.8	0.8
Total revenues	£77.4m	£88.0m

The fall in AUM from the last year end to this year end is the cause of a lower year on year average of AUM. This accounts for the decrease in net management fees received over the year. The decrease in performance fees received is a reflection of the weaker performance of some of the Group's products over the year.  Other income, the return on the Group's balance sheet investments, is unchanged from last year.

Costs	31 March 2016 £'m	31 March 2015 £'m
Salaries, bonuses and other staff costs	16.6	16.7
Manager distributions	17.2	19.5
Compensation costs	33.8	36.2
NIC on share options	0.6	1.9
Other operating costs	11.3	9.1
Core operating costs	45.7	47.2
Performance fee interests	4.2	7.1
Total operating costs	£49.9m	£54.3m

Total operating costs fell to £49.9m from £54.3m last year. 

The small decrease in salaries, bonuses and other staff costs was, despite a small increase in head count in the firm, a product of reduced discretionary bonus pool being paid out due to the year's lower profits.

The decrease in core distributions was a function of the fall in management fee revenues and the management fee profitability of the firm.

The National Insurance cost relating to the Group's conventional share option plan has returned to a more normal figure. Last year's cost had been flagged as abnormal due to the increased quantity of options that became able to vest that year.

Over half of the increase in operating costs to £11.3m from £9.1m is a combination of an increase in rent and rates and Bloomberg terminal costs. The increase in rent and rates was flagged last year when we stated that the move into our new premises would result, from April 2015, in a £1.0m per annum increase in rent and rates.

The fall in performance fee interests to £4.2m from £7.1m in 2015 is directly correlated to the reduction in performance fee revenues.

Profits	31 March 2016 £'m	31 March 2015 £'m
Core operating profit	23.7	27.7
Performance fee profit	3.0	5.2
Interest and similar income	0.8	0.8
Profit before share-based payments and tax	27.5	33.7
Share-based payments	(3.3)	(2.6)
Profit before tax	£24.2m	£31.1m

The headline profit before tax for the year has decreased to £24.2m from last year's £31.1m.

The Group believes that the best measure of the Group's profitability is the profit before share based payments (as detailed more fully below) and tax. On this basis the Group shows a fall in profits to £27.5m compared to last year's £33.7m. The decrease can be attributed as follows:

•  Core operating profits

the decrease in profits reflects the reduction in management fee revenues driven by the decrease in average value of assets managed over the year.

•  Performance fee profits

weaker performance across the product range compared to 2015 has resulted in the reduction in performance fee profits.

•  Interest and similar income

this contribution of profits has remained stable.

Share-based payments

The face of the consolidated income statement includes a line titled "share-based payments" which accounts for a charge of £3.3m (2015: £2.6m). The figures are broken-down as follows:

	31 March 2016 £'m	31 March 2015 £'m
Cost attributed to preference shares	2.4	1.6
Cost attributed to conventional options	0.9	1.0
Total cost of share-based payments	£3.3m	£2.6m

The increase in this charge is dominated by the increase in the charge associated with the Group's preference shares arrangement which is explained below.

Earnings per share

The effect that the charge for share-based payments has on the EPS figures of the Group is as follows:

	31 March 2016 Pence	31 March 2015 Pence
Diluted earnings per share	20.1	25.4
Impact of share- based payments	3.5	2.7
Adjusted diluted earnings per share	23.6p	28.1p

Preference shares

Part of the Group's business model since 2001 is a share based method of providing fund managers an economic interest in their funds. In keeping with the entrepreneurial philosophy of the Group a separate class of preference share is issued by Polar Capital Partners Limited for purchase by each new team of fund managers on their arrival at the firm. These shares provide each team with an economic interest in the funds that they run and ultimately enable the teams to convert their interest in the revenues generated from their funds into equity in Polar Capital Holdings plc. The equity is awarded in return for the forfeiture of their current core economic interest and is issued over three years with the full quantum of the dilution being reflected in the diluted share count (and so diluted EPS) from the point of conversion. The event has been designed to be, at both the actual and the diluted levels, earnings enhancing to shareholders.

In the year to 31 March 2016 (as was also the case in the year to March 2015) there were no new conversions of preference shares into Polar Capital Holdings equity.

As at 31 March 2016 three sets of preference shares have the ability to call for a conversion. The call has to be made on or before 30 November 2016 if any conversion is to take place with effect from 31 March 2016. It is the relative success and profitability of the funds represented by these three sets of preference shares that accounts for the increase cost attributed to preference shares that has been identified above (2016: £2.4m versus 2015: £1.6m).

Balance sheet and cash

At the year end the cash balances of the Group were £48.8m (2015: £41.4m). The increase was mainly a product of the reduction, over the year, in the Group's portfolio of seed investments.

At the balance sheet date the Group held £40.1m of seed investments in its funds (2015: £51.7m).

Capital management

The Group believes in retaining a strong balance sheet. The capital that is retained in the business is used either to seed new investment products or if not so required is invested into the Group's absolute return funds as investment capital. As at March 2016 there were no pure investments, but £40.1m of the Group's balance sheet was invested to seed fledgling funds.

Business risk

There are a number of risks and uncertainties faced by the Group which are more fully described later in the Strategic Report. Amongst the major risks to the business strategy is the loss of assets under management due to markets falling, poor investment performance or the loss of key investment personnel. These events will not only have an immediate impact on the management fees earned by the Group but also deprive the Group of possible performance fees.

Going concern

The Financial Reporting Council has determined that all companies should carry out a rigorous assessment of all the factors affecting the business in deciding to adopt a going concern basis for the preparation of the accounts.

The Directors have reviewed and examined the financial and other processes embedded in the business, in particular the annual budget process and the financial stress testing inherent in the Internal Capital Adequacy Assessment Process ("ICAAP"). On the basis of such review and the significant liquid assets underpinning the balance sheet relative to the Group's predictable operating cost profile, the Directors consider that the adoption of a going concern basis, covering a period of at least 12 months from the date of this report, is appropriate.

John Mansell

Finance Director

23 June 2016

 

Consolidated Statement of Profit or Loss For the year ended 31 March 2016

	31 March 2016 £'000	31 March 2015 £'000
Revenue	84,252	96,225
Other income	790	801
Gross income	85,042	97,026
Commissions and fees payable	(7,630)	(8,977)
Net income	77,412	88,049
Operating costs before share-based payments	(49,879)	(54,366)
Operating profit before share-based payments, amortisation/impairment and tax	27,533	33,683
Share-based payments	(3,290)	(2,557)
Profit for the year before tax	24,243	31,126
Taxation	(5,423)	(7,251)
Profit for the year attributable to ordinary shareholders	18,820	23,875
Basic earnings per ordinary share	21.22p	27.46p
Diluted earnings per ordinary share	20.13p	25.40p
Adjusted basic earnings per ordinary share (Non GAAP measure)	24.93p	30.41p
Adjusted diluted earnings per ordinary share (Non GAAP measure)	23.65p	28.12p

All of the items in the above statements are derived from continuing operations.

 

Consolidated Statement of Other Comprehensive Income For the year ended 31 March 2016

	31 March 2016  £'000	31 March 2015 £'000
Profit for the year attributable to ordinary shareholders	18,820	23,875
Other comprehensive income - items that may be reclassified to profit or loss in subsequent periods
Reclassification of losses on available-for-sale financial assets	-	285
Deferred tax effect	2	(57)
	2	228
Net movement on cash flow hedges	360	(2,311)
Deferred tax effect	(169)	552
	191	(1,759)
Exchange differences on translation of foreign operations	4	5
Total comprehensive income for the year, net of tax, attributable to ordinary shareholders	19,017	22,349

Consolidated Balance Sheet as at 31 March 2016

	31 March 2016 £'000	31 March 2015 £'000
Non-current assets
Property, plant and equipment	2,862	2,007
Deferred tax assets	3,654	5,136
Total non-current assets	6,516	7,143
Current assets
Assets at fair value through profit or loss	33,293	38,071
Assets held for sale	6,835	13,614
Trade and other receivables	7,984	9,334
Cash and cash equivalents	48,762	41,385
Total current assets	96,874	102,404
Total assets	103,390	109,547
Non-current liabilities
Provisions and other liabilities	2,132	-
Deferred tax liabilities	124	102
Total non-current liabilities	2,256	102
Current liabilities
Trade and other payables	21,235	26,276
Other financial liabilities	2,966	5,357
Current tax liabilities	1,332	2,581
Total current liabilities	25,533	34,214
Total liabilities	27,789	34,316
Net assets	75,601	75,231
Capital and reserves
Issued share capital	2,280	2,232
Share premium	18,509	16,715
Investment in own shares	(878)	(962)
Capital and other reserves	6,897	6,665
Retained earnings	48,793	50,581
Total equity - attributable to ordinary shareholders	75,601	75,231

Consolidated Statement of Changes in Equity For the year ended 31 March 2016

	Issued share capital £'000	Share premium £'000	Investment in own shares £'000	Capital reserves £'000	Other reserves £'000	Retained earnings £'000	Total equity £'000
As at 1 April 2014	2,184	16,288	(1,017)	143	9,507	47,065	74,170
Profit for the year	-	-	-	-	-	23,875	23,875
Other comprehensive income	-	-	-	-	(1,526)	-	(1,526)
Total comprehensive income	-	-	-	-	(1,526)	23,875	22,349
Dividends	-	-	-	-	-	(22,891)	(22,891)
Issue of shares	38	427	55	-	-	(25)	495
Issue of share capital against preference shares	10	-	-	(10)	-	-	-
Share-based payment	-	-	-	-	-	2,557	2,557
Current tax in respect of employee share options	-	-	-	-	1,565	-	1,565
Deferred tax in respect of employee share options	-	-	-	-	(3,014)	-	(3,014)
As at 1 April 2015	2,184	16,715	(962)	133	6,532	50,581	75,231
Profit for the year	-	-	-	-	-	18,820	18,820
Other comprehensive income	-	-	-	-	197	-	197
Total comprehensive income	-	-	-	-	197	18,820	19,017
Dividends	-	-	-	-	-	(22,073)	(22,073)
Issue of shares	38	1,794	84	-	-	(1,825)	91
Issue of share capital against preference shares	10	-	-	(10)	-	-	-
Share-based payment	-	-	-	-	-	3,290	3,290
Current tax in respect of employee share options	-	-	-	-	1,182	-	1,182
Deferred tax in respect of employee share options	-	-	-	-	(1,137)	-	(1,137)
As at 31 March 2016	2,280	18,509	(878)	123	6,774	48,793	75,601

 

Consolidated Cash Flow Statement For the year ended 31 March 2016

	31 March 2016 £'000	31 March 2015 £'000
Cash flows generated from operating activities
Cash generated from operations	34,992	37,641
Tax paid	(5,298)	(6,454)
Net cash inflow generated from operating activities	29,694	31,187
Investing activities
Interest received and similar income	45	18
Purchase of assets held for sale	-	(12,470)
Purchase of property, plant and equipment	(373)	(1,995)
Net cash outflow used in investing activities	(328)	(14,447)
Financing activities
Equity dividends paid	(22,073)	(22,891)
Issue of share capital	-	440
Receipts in relation to investment in own shares	84	55
Net cash outflow from financing activities	(21,989)	(22,396)
Net increase in cash and cash equivalents	7,377	(5,656)
Cash and cash equivalents at start of the year	41,385	47,041
Cash and cash equivalents at end of the year	48,762	41,385

 

Selected notes to the Financial Statements for the year ended 31 March 2016

Principal Accounting Policies

General

Polar Capital Holdings plc (the 'Company') is a public limited company registered in England and Wales whose shares are traded on the Alternative Investment Market ("AIM") of the London Stock Exchange.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

 Basis of preparation

The consolidated financial statements have been prepared on a going concern basis in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS.

The consolidated financial statements have been prepared under the historical cost convention, modified by the measurement at fair value of financial instruments at fair value through profit or loss and derivative financial instruments. The consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand (£'000), except when otherwise stated.

The Company financial statements have been prepared in accordance with FRS 102. The Company transitioned from previously extant UK GAAP to FRS 102 as at 1 April 2015 with no changes to its previously reported financial position or financial performance. No profit or loss account is presented for the Company as permitted under section 408 of the Companies Act 2006.

Basis of consolidation

The consolidated financial statements of the Group comprise the financial statements of the Company and its subsidiaries as at 31 March 2016. Subsidiaries are those entities over which the Group has control. The Group controls an investee if, and only if, the Group has:

•   Power over the investee;

•   Exposure, or rights, to variable returns from its involvement with the investee;

•   The ability to use its power over the investee to affect returns.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company and where necessary, adjustments are made to the financial statements of the subsidiaries to bring their accounting policies in line with those of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Operating Segments

The Group is a specialist investment management group offering professional and institutional investors a range of geographical and sector investment opportunities. The Group's assets under management are separated into products and services but as the strategic and financial management decisions are determined centrally, by the Chief Executive, the Group only has one class of business, being the provision of investment management and advisory services. The Group's revenue generating operations are in London, with small offices in Tokyo, Jersey, Connecticut and Geneva that do not generate any revenue.

        Geographical analysis of income (based on the residency of source)

	31 March 2016 £'000	31 March 2015 £'000
UK	11,213	10,054
Ireland	64,480	70,952
Cayman	7,628	13,592
Europe	1,871	1,467
(Loss)/ profit on forward currency contracts	(940)	160
	84,252	96,225

        Analysis of income by type of fees

	31 March 2016 £'000	31 March 2015 £'000
Investment management fees	77,986	83,811
Investment performance fees	7,206	12,254
(Loss)/ profit on forward currency contracts	(940)	160
	84,252	96,225

Earnings per Ordinary Share

The calculation of basic earnings per ordinary share is based on the profit for the year of £18,819,702 (2015: £23,873,443) and on 88,685,262 (2015: 86,924,177) ordinary shares, being the weighted number of ordinary shares.

The calculation of diluted earnings per ordinary share is based on the profit of the year of £18,819,702 (2015: £23,873,443) and 93,493,781 (2015: 94,000,334) ordinary shares, being the weighted average number of ordinary shares allowing for all options of 4,808,519 (2015: 7,076,157) which are dilutive.

The calculation of adjusted basic earnings per ordinary share is based on the profit for the year of £18,819,702 but adjusted for the cost of share-based payments of £3,290,173 (2015: profit of £23,873,443 adjusted for the cost of share-based payments of £2,557,462) and on 88,685,262 (2015: 86,924,177) ordinary shares, being the weighted number of ordinary shares.

The calculation of adjusted earnings per ordinary share is based on profit for the year of £18,819,702 but adjusted for the cost of share-based payments of £3,290,173 (2015: profit of £23,873,443 adjusted for the cost of share-based payments of £2,557,462) and 93,493,781 (2015: 94,000,334) ordinary shares being the weighted average number of ordinary shares allowing for all dilutive options.

As at 31 March 2016, the fully diluted number of ordinary shares which would be in issue is 94,948,510 (2015: 95,191,410) shares, if all outstanding options were exercised.

 

 

Status of results announcement

The Board of Directors approved this results announcement on 23 June 2016. Whilst the financial information included in this announcement has been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union, this announcement does not itself contain sufficient information to comply with all the disclosure requirements of IFRS and does not constitute statutory accounts of the Group for the years ended 31 March 2016 or 31 March 2015.

The financial information has been extracted from the statutory accounts of the Company for the years ended 31 March 2016 and 31 March 2015. The auditors reported on those accounts; their reports were unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

The statutory accounts for the year ended 31 March 2015 have been delivered to the Registrar of Companies and those for the year ended 31 March 2016 will be delivered to the Registrar of Companies in due course.

Copies of Report and Accounts

The full annual report and accounts will be posted to shareholders in June 2016 and copies will be available thereafter from the Company Secretary at the Company's Registered Office, 16 Palace Street, London SW1E 5JD (020 7227 2700) or from the Company's website at www.polarcapital.co.uk

Annual General Meeting

The Annual General Meeting will be held at 3:00pm on 29 July 2016 at the offices of the Company at 16 Palace Street, London SW1E 5JD

Directors

T H Bartlam	Non executive Chairman
T J Woolley	Chief Executive Officer
J B Mansell	Chief Operating Officer
H G C Aldous	Non executive director, Chairman of Audit Committee
M W Thomas	Non executive director, Chairman of Remuneration Committee
B J D Ashford-Russell	Non executive director
J M B Cayzer-Colvin	Non executive director
G V Bumeder	Non executive director

Forward looking statements

This preliminary announcement contains certain forward looking statements with respect to the financial condition, results of operations and businesses and plans for Polar Capital Holdings plc.  These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that have not yet occurred.  There are a number of different factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements.  Nothing in this statement should be construed as a profit forecast.

The release, publication, transmission or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published, transmitted or distributed should inform themselves about and observe such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities laws of any such jurisdiction.

Neither the contents of the Company's website nor the contents of any website accessible from the hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement.

 

END

 

 

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