Preliminary Results

RNS Number : 0258H

Polar Capital Holdings PLC

14 June 2013

 



POLAR CAPITAL HOLDINGS plc

Preliminary Group Audited Results for the year ended 31 March 2013

14 June 2013

Financial Highlights

·     Net inflows every quarter over the financial year, despite turbulent markets with Assets under Management ("AUM") at 31 March 2013 up 42% to US$7.2bn (2012: US$5.08bn)

·     Core operating profit excluding performance fees up 41% to £10m (2012: £7.1m)

·     Profit before share-based payments and amortisation of intangibles of £16.8m (2012: £11.3m)

·     Pre-tax profit £15.3m (2012: £9.6m)

·     Basic earnings per share up 58% to 14.95p (2012: 9.48p) and adjusted* diluted earnings per share up 47% to 14.77p (2012: 10.06p)

·     Dividends for the year up 44.4% to 13.0p per share (2012: 9.0p), including a second interim dividend of 11.0p per ordinary share to be paid on 9 August 2013 to shareholders on the register on 12 July 2013.

·     Shareholders' funds £53.8m (2012: £46.6m) including cash and investments of £62.1m (2012: £49m)

·     Current AUM as at 31 May 2013 of US$8.8bn

* Adjusted to exclude cost of share-based payments and intangible asset amortisation/impairment

Corporate Highlights

·     Two new funds launched during the period; the Global Alpha Fund and the Japan Alpha Fund further diversifying the number of strategies offered to investors

·     Intention to launch a Global Financials Investment Trust post year end, utilising the expertise gained through the acquisition of HIM Capital in 2010 

Tim Woolley, Chief Executive, commented:

"The Group has performed strongly over the financial year.  Our funds have generated over US$1.6bn of net inflows during the period and investment performance has remained strong across the Group.  We have continued to deliver on our strategy of diversifying our offering with seven out of our eleven investment teams now having assets over US $500m, compared to only three teams with over US$500m in 2010.  In addition, we have also further diversified our client base across the UK, Continental European and North American markets through our strengthened marketing team and third party distribution agreements.

We remain optimistic on the outlook for the Group, assuming market conditions do not deteriorate materially."

For further information please contact:

Polar Capital                                                  [phone] Tim Woolley (CEO) John Mansell (CFO)  Canaccord Genuity - Nomad and Broker    [phone] Martin Green Simon Bridges Cameron Duncan F T I Consulting                                              [phone] Ed Gascoigne-Pees Jack Hickey

About Polar Capital

Polar Capital Holdings plc is a specialist investment management company offering professional and institutional investors a range of geographical and sector funds. The Company's investment strategies have a fundamental research driven approach. The Company has long-only and absolute return funds in its product range.

Founded in 2001, Polar Capital currently has 85 employees of whom 43 are investment professionals managing 20 funds and 7 managed accounts.

The Company is AIM quoted following its Initial Public Offering in February 2007. Consistent with the Company's founding strategy of fostering an equity culture amongst its employees and providing high levels of transparency to clients, 37% of the equity is currently held by Directors, founders and employees.

Our funds/strategies at a glance (Assets under Management)	As at 31 March 2013 $m	As at 31 March 2012 $m
Technology	1,255	1,481
Technology Trust plc	823	837
Global Technology UCITS Fund	432	644
Japan	2,389	1,517
Japan UCITS Fund (including managed accounts run off the same strategy)	2,375	1,517
Japan Alpha UCITS Fund A	14	-
UK	261	282
UK Hedge Fund	-	9
UK Absolute Return UCITS Fund	36	35
UK Managed Accounts	225	238
Europe	700	618
European Forager Hedge Fund	528	499
European Conviction Hedge Fund	172	119
Healthcare	616	347
Global Healthcare Growth & Income Trust plc	228	180
Healthcare Opportunities UCITS Fund	388	167
Financials	669	497
Asian Financials UCITS Fund	73	57
Global Insurance UCITS Fund	485	352
Financials Income UCITS Fund	89	73
Financial Opportunities UCITS Fund	22	15
Emerging Markets	571	149
Emerging Markets Growth UCITS Fund (including managed accounts run off the same strategy)	195	107
Emerging Markets Income UCITS Fund	376	42
ALVA Global Convertible Hedge Fund	40	39
North American UCITS Fund	637	137
European Market Neutral Fund	59	16
European Market Neutral Hedge Fund	18	11
European Market Neutral UCITS Fund	41	5
Global Alpha UCITS Fund B	11	-
Total	7,208	5,083

A:             Japan Alpha UCITS Fund was launched in November 2012
B:             Global Alpha UCITS Fund was launched in December 2012

Analysis of changes in asset types for the 12 months to 31 March 2013

AUM movement 12 months to 31 March 2013	Long $m	Hedge $m	Total $m
Total assets as at 31 March 2012	4,365	718	5,083
Net subscriptions/(redemptions)	1,533	85	1,618
Performance and currency movements	473	34	507
Total assets as at 31 March 2013	6,371	837	7,208

CHAIRMAN'S STATEMENT

I am pleased to report further significant progress by your Company in the financial year ended 31 March 2013. Assets under management (AUM) increased 42% over the year driven by strong inflows into a number of our funds and the improvement in most major markets in the latter half of our financial year.

Results

Pre-tax profits before share based payments and intangible asset amortisation/impairment increased from £11.3m to £16.8m with core pre-tax profit increasing from £7.1m to £10.0m. Net performance fees increased from £4.1m to £5.5m, our twelfth successive year of generating such fees.

Our balance sheet remains strong with gross cash and investments of £62.1m.

Market Background

In my outlook last year I expected another turbulent year and so it proved!

The opening months of our financial year saw markets fall sharply as the Euro saga came back to centre stage with renewed worries over the debt levels and economic contraction of the southern European countries with Greece in particular causing renewed alarm.

Markets recovered some ground over the summer months with the US Federal Reserve continuing with its aggressive program of quantative easing, the global economic news outside of Europe proving more encouraging than investors had thought and corporate earnings showing surprising resilience.

The recovery in markets was underwritten by the President of the European Central Bank, Mario Draghi, with his unprecedented statement on the 26 July that his institution would do "whatever it takes" to preserve the Euro, adding: "believe me, it will be enough." This led to a rally in the troubled bond markets of the key southern European states and encouraged further advances in the equity markets.

Apart from a few wobbles in the autumn ahead of the US Presidential election and the once in a decade change of leadership in China, many of the major equity markets continued to climb through the end of our financial year.

Over the twelve months the FTSE All Share Index increased 16.8% and the Morgan Stanley World Index increased 12.5%.

The most spectacular change in fortunes though came in Japan, where the newly elected Prime Minister Mr Abe embarked on an ambitious and radical three point strategy to reverse two decades of stagnation and deflation. The three 'arrows', as Mr Abe terms his plan, are fiscal expansion, monetary supply expansion and supply side reforms. The most striking of the three 'arrows', and the one that has had an instant impact on the stock market, has been the adoption by the Bank of Japan of a 2% inflation target and a commitment to double the monetary base to achieve this objective. This extreme increase in liquidity has weakened the Yen, a key objective of the plan, and has ignited the stock market on which many investors both domestically and international had given up hope.

The size of the move has been quite breathtaking, with the Nikkei 225 Index increasing over 45% from a recent low on the 12 October to the close of our financial year and has continued to make further significant gains in the opening months of our new financial year. Even allowing for the weakness of the Yen, the strength of the Japanese market has had a significant impact on the assets of our Japanese team and our overall AUM level.

Funds and Performance

We enjoyed another year of strong net inflows into our funds with net subscriptions of $1,618m, of which $1,553m was into our long-only products.

Interest in Japan picked up markedly after the changes in policy there and we saw significant inflows into our award winning Japanese fund. Flows have continued to be strong in the opening months of our new financial year. We are also starting to see some inflows into our Japan Alpha fund which we launched in November.

Although Japan has been the 'stand out' in terms of inflows, we also saw strong flows into a good number of our other long-only funds including North America, Global Emerging Markets Income, Healthcare Opportunities and Global Insurance.

The performance of our long-only funds remains strong as summarised in the table below:

Fund	1 Year	3 Years	5 Years
	Quartile	Quartile	Quartile
Japan Fund	4	1	1
Healthcare Opportunities	1	1	2
Emerging Markets Growth	3	-	-
Emerging Markets Income	1	-	-
Asian Financial	1	1	1
Financial Opportunities	2	-	-
Financials Income	1	1	-
Global Insurance	1	1	1
Global Technology	3	2	1
North America	2	-	-
Global Alpha	-	-	-

Source Lipper

On the alternative side, performance remained somewhat mixed with good returns being delivered by our two long/short European products, further building on their long term track record. Our Global Convertibles fund also had another solid year and has got off to a strong start in 2013.

The UK fund had another indifferent year and our European Market Neutral funds were also disappointing.

We did record net positive inflows for the twelve months on our hedge funds although nothing like the magnitude of our long-only business. We are though encouraged by the improvement in flows on this side of our business and are hopeful further flows will be seen in our new financial year for the European Conviction fund and the ALVA Global Convertibles fund.

Awards

We received a good number of awards at the fund level during the year. We were also delighted to be awarded the Specialist Fund Group of the Year at the inaugural S&P IQ Awards in the summer.

Developments

We launched our first fund specifically targeted at the institutional market with the launch of the Global Alpha fund in November. Given the long lead times in developing business in the institutional market we would not expect any significant inflows for the fund until late 2015/early 2016, although over the medium term this represents another exciting initiative for the Company.

Post our year end we have announced the intention to launch a Global Financials Investment Trust utilising the expertise we gained through the acquisition of HIM Capital in 2010. As with our Healthcare Investment Trust launch in 2010, we see an interesting investment opportunity in a sector that has fallen out of favour with investors but where we see tangible signs of improvement in the fundamentals.

Dividend

The Board believes that the level of cash dividend should reflect the Company's trading results, its cash resources and also its future prospects. In light of results to 31 March 2013 and the continued confidence in the future of the business the Board has declared a second interim dividend of 11.0p (2012: 7.5p) to be paid in August 2013. Together with the interim dividend of 2p paid in January 2013 the total dividend for the year amounts to 13.0p.

Outlook

One would expect the equity markets to consolidate near term given the extent of recent gains.  The inflation outlook for now appears subdued, interest rates are unlikely to rise for some considerable time yet and whilst the European economic issues remain severe, continued steady growth in the rest of the world economy looks set to continue, with the USA in particular set to benefit enormously from its rapid shift from the world's largest energy importer to a potential energy net exporter over the coming years as shale gas developments expand rapidly.

With bond markets looking fully valued unless we again enter into another global recession, equities look set to continue to attract further flows given the enormous injections of liquidity by the Bank of Japan and the continued accommodative stance of both the US Federal Reserve and the European Central Bank.

While the outlook for equity markets appears benign the continued recovery is still relatively fragile and dependent on continuing QE and no major political or economic shocks to upset their progress.  Should there be any meaningful shift in these benign conditions then we could see a reversal of the recent growth. 

We have entered the new financial year with continued strong growth in AUM which rose from US$7.2bn to US$8.8bn at the end of May and have a wider selection of funds and a broader client base. We regard the sequential growth in AUM over the recent quarters as quite exceptional and should caution against expecting the same rate of growth to continue.  We however are optimistic on the outlook for our business and the achievement of further growth in AUM and profits in the current financial year and, assuming our strong investment performance can be maintained, we believe we are well positioned to benefit from any further gains in global equity markets.

Annual General Meeting

The Annual General Meeting will again this year be held at Cayzer House, 30 Buckingham Gate, London SW1E 6NN at 2.30pm on Tuesday 23 July 2013 and I would encourage shareholders to attend to meet the Directors. Full details of the meeting are given in the separate Notice of Annual General Meeting.

Tom Bartlam

Chairman

CHIEF EXECUTIVE'S REPORT

This is now my fourth year of writing to you since I took over as Chief Executive in November 2009 and we continue to execute on the strategy that I set out at that time and despite having travelled a long way since then I see no reason to change course.

We remain committed to fundamentally researched active management believing that done well it produces far superior investment outcomes for clients than the increasing array of  'cheap' passive strategies. We take a somewhat Germanic view of life in our role as a 'manufacturer of investment product' - we do not seek to make the cheapest product but rather a premium product whose performance more than compensates for the higher initial price.

It is encouraging that as our Chairman's review of the year's results has shown, we are finding an increasing number of clients both in the UK and overseas whose primary focus is to identify products that provide the best investment outcomes for their clients. Where there are such variations in the performance of products or services as in investment management, it is unusual to find that the cheapest product or service delivers the best long term outcome to the client.

We will continue to focus on the premium end of the market where our interests are aligned with our clients and continue to deliver investment products that deliver differentiated and superior returns over the medium and longer term. It is encouraging to note that ten out of our twelve long only funds have outperformed their index net of all charges since launch and all of the funds that have been open three years or more have outperformed their benchmarks net of all charges, most by a significant margin.

Returning to our strategy for further growth it remains centred on the following four initiatives:

1) Further increase the assets in our existing funds to their investment capacity limit.

2) Launch additional investment driven products from existing teams.

3) Seek to recruit or acquire high quality active investment managers and teams either as additions to existing teams or through the establishment of additional strategies.

4) Invest further in our distribution capability both in our home market of the UK and our targeted overseas markets of Europe and North America.

I am encouraged by the progress we have made not just over the last twelve months but over the last three and half years and despite the significant growth we have achieved, I believe our opportunity today is greater than at any point in our twelve year history.

When I first wrote to you in March 2010 we had six investment teams, today we have eleven. Of the six teams we had in 2010 only three had assets in their strategy of $500m or over whilst today we have seven strategies with assets over $500m and all seven have the capacity to run several billion dollars.

Our original goal was to have ten to twelve world class investment teams all making a significant contribution to the Company. Today we have eleven teams but only seven of the teams are currently making a contribution to corporate profitability.

I think we have certainly demonstrated we are prepared to take the long term view when choosing and backing our investment teams. The Japanese team has been with us almost since the founding days of Polar, joining us in April 2001. The team has always made a significant contribution to corporate profitability although Japan has never enjoyed much popularity with investors until recently.

We added our Healthcare team over five years ago when the sector was very much out of favour and we added our Financials team during the depths of the financial crisis. We are certainly prepared to weather losses on those teams we continue to believe in for the longer term but we do expect over time all of our investment teams to deliver superior performing products to our clients and make a significant contribution to corporate profitability. The upside for shareholders therefore remains substantial if we are able to increase the number of teams making a significant contribution from the current seven to our long term goal of twelve.

We continue to invest in our distribution capability and in client service. Back in November 2009 we had just seven people in distribution and client service, today we have fifteen plus two third party distribution agreements and this number will grow again in this financial year. Our geographic focus remains our home market of the UK, Continental Europe where we have been making significant strides over the last twelve months and the North American market where we have had a long term commitment and focus on our hedge fund side. These three markets will remain our geographic focus for the foreseeable future as there remains substantial opportunity in each of them to grow our client base and assets further.

Finally I would like to thank all our clients for their trust in us and their ongoing support, to thank our shareholders for their loyalty and enthusiasm for what we are trying to achieve and to thank all our Polar people whose skill, dedication, commitment, hard work and enthusiasm has produced such an excellent year. The ongoing commitment and enthusiasm of such an outstanding group of people gives me optimism that we will be able to achieve further success in the years ahead.

Tim Woolley

Chief Executive

FINANCIAL REVIEW

Profit and Loss account

The Group made a profit (pre tax, pre share-based payments and pre intangible asset amortisation) for the year of £16.8m (2012: £11.3m). The table below summarises the break down of the source of the profits:

	31 March 2013 £'m	31 March 2012 £'m
Core operating profit	10.0	7.1
Performance fee profit	5.5	4.1
Interest and similar income	1.3	0.1
Profit before tax and before share-based payments	16.8	11.3
Share-based payments	(1.0)	(0.6)
Amortisation of intangible assets	(0.5)	(1.1)
Profit before tax	15.3	9.6

The rise in core operating profitability by £2.9m to £10.0m is simply a product of the increase in Assets Under Management. The year saw net core revenues rise by £7.0m and core costs only rise by £4.1m.

The rise in total core operating costs by £4.1m from £21.2m to £25.3m is explained by a number of factors that are tabulated below. Total operating costs include an amount of £7.9m (2012: £5.2m) payable to staff from the Group's gross performance fee receipts. This explains how total operating costs have risen to £33.2m (2012: £26.4m).

The table below summarises the break down of costs as referred to above:

	31 March 2013 £'m	31 March 2012 £'m
Salaries and bonuses	13.5	11.0
Core distributions	4.8	3.3
Core compensation costs	18.3	14.3
Other operating costs	7.0	6.9
Total core operating costs	25.3	21.2
Performance fee costs	7.9	5.2
Total operating costs	33.2	26.4

Core distributions are formulaically linked to the profitability of the investment teams and it is therefore unsurprising that this cost has increased as profits have risen. The relatively static level of other operating costs provides some confidence in the potential operating leverage of the Group as core management fee revenues rise

Share-based payments

The face of the consolidated income statement includes a line titled "share-based payments" which accounts for a charge of £1.0m (2012: £0.6m). The figures are broken down as follows:

Analysis of the cost of share-based payments:

	31 March 2013 £'m	31 March 2012 £'m
Cost attributed  to preference shares	0.3	-
Cost attributed  to conventional options	0.7	0.6
Total cost  of share-based payments	1.0	0.6

The effect that the charge for share-based payments and the charge for amortisation of intangible assets (see below) has on the EPS figures of the Group are as follows:

	31 March 2013	31 March 2012
Diluted earnings per share	13.1p	8.1p
Impact of share-based payments	1.0p	0.7p
Impact of intangible asset amortisation	0.6p	1.2p
Adjusted diluted earnings per share	14.7p	10.0p

Preference shares

A separate class of preference shares is issued by Polar Capital Partners Limited to each of the leading fund managers. These shares provide each manager with an economic interest in the funds that they run and ultimately enable the manager 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 economic interest and vests 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 2013 no set of preference shares converted into Polar equity (one in 2012). The product of the 2012 event is that a total of 8.2m shares are to be issued of which 5.75m have been issued as at 31 March 2013. The remaining 2.45m shares will be issued on 31 March 2014. Simultaneous to the initial commitment from 1 April 2011 to issue these new shares in Polar Capital Holdings plc the recipient of the shares forfeited a fixed economic interest in the business unit to which the shares were associated amounting to a value of £2.0m per annum.

As at 31 March 2013 two further sets of preference shares have the ability to call for a conversion. The call has to be made on or before 30 November 2013 if any conversion is to take place with effect from 31 March 2013.

Amortisation of intangible assets

On 21 September 2010, the Group acquired 100% of the voting shares of HIM Capital Holdings Limited ("HIM"), a specialist fund manager with an established track record of managing financial funds and with approximately $245m of assets under management, thereby establishing a strong financials sector franchise for the Group. The product of the acquisition was that intangible assets of £1.7m representing the acquired investment management contracts were taken onto the Group's balance sheet (i.e. the consideration above the value of tangible assets purchased). These intangible assets and the associated deferred tax liability / goodwill of £0.4m is being amortised / impaired over a period of two years. This resulted in a charge of £0.5m in this year's accounts (2012: £1.1m). At the 31 March 2013 the intangible asset and the associated deferred tax liability / goodwill sums had been fully amortised so recording a nil value in the year-end balance sheet. 

Balance Sheet and cash

At the year end the cash balances of the Group had increased by £8.3m to £30.9m (2012: £22.6m). The increase was a product of the £20.7m of cash generated from the Group's operating activities (2012: £9.0m), the payment of £7.3m of dividends and £2.2m of tax, and the net investment of £2.9m of cash into investments and investment hedging.

At the balance sheet date the Group held £31.2m of investments in its funds (2012: £26.4m).

At the year end the sum of available for sale investments plus cash was £62.1m (2012: £49.0m).

Business Risk

There is a range of risks and uncertainties faced by the Group which are more fully described in the Directors' 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 to 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 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

Consolidated Income Statement For the year ended 31 March 2013

	Note	31 March 2013 £'000	31 March 2012 £'000
Revenue	2	51,691	39,940
Finance income	3	1,299	72
Gross income		52,990	40,012
Commissions and fees payable		(2,919)	(2,228)
Net income		50,071	37,784
Operating costs before share-based payments		(33,242)	(26,494)
Operating profit before share-based payments, amortisation/impairment and tax		16,829	11,290
Share-based payments		(941)	(594)
Amortisation/impairment of intangible assets	23	(540)	(1,080)
Profit for the year before tax	4	15,348	9,616
Taxation	7	(3,707)	(2,568)
Profit for the year attributable to ordinary shareholders		11,641	7,048
Basic earnings per ordinary share	9	14.95p	9.48p
Diluted earnings per ordinary share	9	13.11p	8.13p
Adjusted earnings per ordinary share (Non GAAP measure)	9	14.77p	10.06p

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

Consolidated Statement of Comprehensive Income For the year ended 31 March 2013

	Note	March 2013 £'000	31 March 2012 £'000
Profit for the year attributable to ordinary shareholders		11,641	7,048
Other comprehensive income
Net gain/(loss) on the revaluation of available-for-sale financial assets	3.2	6	(124)
Deferred tax effect		(1)	34
		5	(90)
Net movement on cash flow hedges	3.2	(1,009)	(22)
Current tax effect		55	72
Deferred tax effect		204	(78)
		(750)	(28)
Total comprehensive income for the year, net of tax, attributable to ordinary shareholders		10,896	6,930

The notes on pages 32 to 55 form part of these financial statements.

Consolidated Balance Sheet As at 31 March 2013	Note	31 March 2013 £'000	31 March 2012 £'000
Non-current assets
Property, plant and equipment	10	85	71
Intangible assets	23	-	540
Deferred tax assets	15	4,140	1,711
Total non-current assets		4,255	2,322
Current assets
Available-for-sale financial assets	11	31,246	26,426
Trade and other receivables	13	7,216	5,107
Cash and cash equivalents	14	30,940	22,583
Other financial assets	11	-	158
Total current assets		69,402	54,2748
Total assets		73,627	56,596
Non-current liabilities
Deferred tax liabilities	15	24	206
Current liabilities
Trade and other payables	16	16,113	8,493
Other financial liabilities	11	1,068	-
Current tax liabilities		2,659	1,299
Total current liabilities		19,840	9,792
Total liabilities		19,864	9,998
Net assets		53,763	46,598
Capital and reserves
Issued share capital	17	2,062	1,983
Share premium		16,094	16,010
Investment in own shares		(1,017)	(1,107)
Capital and other reserves		3,848	2,135
Retained earnings		32,776	27,577
Total equity - attributable to ordinary shareholders		53,763	46,598

The notes on pages 32 to 55 form part of these financial statements.

The financial statements were approved and authorised for issue by the Board of Directors on 13 June 2013

Hugh Aldous	John Mansell
Chairman of the Audit Committee	Finance Director

Consolidated Statement of Changes in Equity - For the year ended 31 March 2013

	Share capital £'000	Share premium £'000	Own shares £'000	Capital reserves £'000	Other reserves £'000	Retained earnings £'000	Total equity £'000
As at 1 April 2011	1,895	15,905	(1,167)	363	880	25,476	43,352
Profit for the year	-	-	-	-	-	7,048	7,048
Other comprehensive income	-	-	-	-	(118)	-	(118)
Total comprehensive income	-	-	-	-	(118)	7,048	6,930
Dividends	-	-	-	-	-	(5,541)	(5,541)
Issue of shares	6	105	60	-	-	-	171
Issue of share capital against preference shares	82	-	-	(82)	-	-	-
Share-based payment	-	-	-	-	-	594	594
Current tax in respect of employee share options	-	-	-	-	129	-	129
Deferred tax in respect of employee share options	-	-	-	-	963	-	963
As at 1 April 2012	1,983	16,010	(1,107)	281	1,854	27,577	46,598
Profit for the year	-	-	-	-	-	11,641	11,641
Other comprehensive income	-	-	-	-	(745)	-	(745)
Total comprehensive income	-	-	-	-	(745)	11,641	(10,896)
Dividends	-	-	-	-	-	(7,372)	(7,372)
Issue of shares	17	84	90	-	-	(11)	180
Issue of share capital against preference shares	62	-	-	(62)	-	-	-
Share-based payment	-	-	-	-	-	941	941
Current tax in respect of employee share options	-	-	-	-	311	-	311
Deferred tax in respect of employee share options	-	-	-	-	2,209	-	2,209
As at 31 March 2013	2,062	16,094	(1,017)	219	3,629	32,776	53,763

The notes on pages 32 to 55 form part of these financial statements.

Consolidated Cash Flow Statement For the year ended 31 March 2013

	Notes	31 March 2013 £'000	31 March 2012 £'000
Cash flows generated from operating activities
Cash generated from operations	20	20,665	8,985
Tax paid		(2,172)	(3,083)
Net cash inflow generated from operating activities		18,493	5,902
Investing activities
Interest received and similar income		(123)	12
Purchase of property, plant and equipment		(60)	(49)
Proceeds from sale of available-for-sale financial assets		30,915	24,745
Purchase of available-for-sale financial assets	11	(33,676)	(21,851)
Net cash outflow used in investing activities		(2,944)	2,857
Financing activities
Equity dividends paid	18	(7,372)	(5,541)
Issue of share capital		90	111
Receipts in relation to investment in own shares		90	60
Net cash outflow from financing activities		(7,192)	(5,370)
Net increase/(decrease) in cash and cash equivalents		8,357	3,389
Cash and cash equivalents at start of the year		22,583	19,194
Cash and cash equivalents at end of the year		30,940	22,583

The notes on pages 32 to 55 form part of these financial statements.

SELECTED NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 March 2013

1 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 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, except for available-for-sale financial assets, assets at fair value through profit or loss and derivative financial instruments that have been measured at fair value.

The Company financial statements have been prepared in accordance with UK GAAP and under the historical cost convention. No profit and 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. Subsidiaries are fully consolidated from the date of acquisition, being 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.

Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value. Acquisition costs incurred are expensed.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with contractual terms and economic circumstances as at the acquisition date.

Goodwill is initially measured at cost being the excess of the consideration transferred over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment on an annual basis and any impairment losses are charged to the income statement.

Intangible assets

The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses.

Intangible assets are amortised over the useful economic life of the assets, which continues to be estimated at two years, and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation expense on intangible assets is recognised in the income statement.

2. 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.

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

	31 March 2013 £'000	31 March 2012 £'000
UK	6,281	9,145
Ireland	24,686	19,103
Cayman	18,968	10,221
Europe	1,798	1,332
Loss/(profit) on forward currency contracts	(42)	139
	51,691	39,940

2.2 Analysis of income by type of fees

	31 March 2013 £'000	31 March 2012 £'000
Investment management fees	38,122	30,284
Investment advisory fees	150	200
Investment performance fees	13,461	9,317
Loss/(profit) on forward currency contracts	(42)	139
	51,691	39,940

3. Earnings per ordinary share

The calculation of basic earnings per ordinary share is based on the profit for the year of £11,640,700 (2012: £7,047,837) and 77,847,031 (2012: 74,379,559) 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 £11,640,700 (2012: £7,047,837) and 88,823,800 (2012: 86,653,207) ordinary shares, being the weighted average number of ordinary shares allowing for all options of 8,507,871 (2012: 7,335,892) which are dilutive.

The calculation of adjusted earnings per ordinary share is based on profit for the year of £11,640,700 but adjusted for the cost of share-based payments of £940,800, amortisation of intangibles of £428,000 and impairment of goodwill of £111,410 (2012: profit of £7,047,837 adjusted for the cost of share-based payments of £593,800, amortisation of intangibles of £857,000 and impairment of goodwill of £222,820) and 88,823,800 (2012: 86,653,207) ordinary shares being the weighted average number of ordinary shares allowing for all dilutive options.

As at 31 March 2013, the fully diluted number of ordinary shares which would be in issue is 91,718,200 shares, if all outstanding options were exercised.

5. Intangible assets             

The Group's intangible assets comprise investment management contracts that have been identified as separately identifiable intangible assets arising on the acquisition of HIM Capital Holdings Limited on 21 September 2010, as well as goodwill attributable to the recording of deferred tax liabilities under IAS 12 against the initial recognition, on acquisition date, of the investment management contracts at fair value.

The investment management contracts are being amortised over a period of approximately two years from the date of acquisition. Goodwill is allocated fully to the investment management contracts acquired and is reviewed for impairment on an annual basis. For the years ended 31 March 2013 and 2012 an impairment has arisen as a consequence of the amortisation of the investment management contracts and the release of the corresponding deferred tax liability.

Cost	Goodwill £'000	Investment management contracts £'000	Total £'000
As at 1 April 2011	446	1,714	2,160
Additions/acquisitions	-	-	-
As at 31 March 2012	446	1,714	2,160
Additions/acquisitions	-	-	-
As at 31 March 2013	446	1,714	2,160
Amortisation and impairment
As at 1 April 2011	111	429	540
Impairment/amortisation charge	223	857	1,080
As at 31 March 2012	334	1,286	1,620
Impairment/amortisation charge	112	428	540
As at 31 March 2013	446	1,714	2,160
Net book value
At 31 March 2012	112	428	540
At 31 March 2013	-	-	-

Status of preliminary announcement

The Board of Directors approved this preliminary announcement on 13 June 2013. Whilst the financial information included in this preliminary 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 2013 or 31 March 2012.

The financial information has been extracted from the statutory accounts of the Company for the years ended 31 March 2013 and 31 March 2012. 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 2012 have been delivered to the Registrar of Companies, whereas those for the year ended 31 March 2013 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

Copies of Report and Accounts

The full annual report and accounts will be posted to shareholders in June 2013 and copies will be available thereafter from the Company Secretary at the Company's Registered Office, 4 Matthew Parker Street, London SW1H 9NP (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 2.30pm on 23 July 2013 at Cayzer House, 30 Buckingham Gate, London SW1E 6NN

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.

 

END

 

 

FR GGUGUQUPWGQW