Half Yearly Report

RNS Number : 4279Z

Polar Capital Holdings PLC

11 December 2014

 



Polar Capital Holdings plc ("Polar Capital" or "the Group")

Interim results for six months ended 30 September 2014

11 December 2014

Financial Highlights

·    Assets under Management ("AUM") at 30 September 2014 up 1% to US$13.4bn (31 March 2014: US$13.2bn)

·    Core operating profit, excluding performance fees, up 34% to £13.9m (30 September 2013: £10.4m)

·    Profit before share-based payments of £12.7m (30 September 2013: £10.6m)

·    Pre-tax profit of £11.6m (30 September 2013: £10.1m)

·    Basic earnings per share 10.55p (30 September 2013: 9.53p) and adjusted* diluted earnings per share 10.75p (30 September 2013: 8.77p)

·    Interim dividend per ordinary share of 5.5p declared (2013: 4.0p) to be paid in January 2015 (see comment in CEO's report on dividends)

·    Shareholders' funds of £65.5m (31 March 2014: £74.2m and 30 September 2013:£56.8m) including cash and investments of £63.4m (31 March 2014: £90.9m and 30 September 2013:£56.7m)

*   Adjusted to exclude cost of share-based payments

Corporate Highlights

·    Launch of three new funds since 31 March 2014

o Long only Healthcare Blue Chip UCITS Fund launched in September 2014

o UK Absolute Equity UCITS fund launched in September 2014

o Long only European Income UCITS fund launched in October 2014

Current Trading

·    AUM at 30 November 2014 were US$13.2bn

·    Accrued performance fee profits (marked to market) at 30 November 2014 were £4.2m

Tim Woolley, Chief Executive Officer, commented:

"The first six months of our financial year have been challenging.  Since 31 March 2014 we have seen growth in Assets under Management across most portfolios but this has been offset by outflows from Japan. The success of our Japan team over recent years has led in the short-term to our AUM being unusually sensitive to the direction of and allocations to the Japanese market which suffered a reversal in the first six months of our new financial year.

Over the shorter term our results will continue to be influenced by events in Japan and allocations to or away from our Japanese funds. However, we continue to invest in the business for the longer term and have added two new teams during our first half.  We remain optimistic on the longer term opportunities for the business and see considerable scope for many of the other strategies beyond Japan to grow substantially in time."

For further information please contact:

Polar Capital [phone] Tim Woolley (CEO) John Mansell (CFO)  Canaccord Genuity - Nomad and Broker [phone] Martin Green Lucy Tilley Cameron Duncan Camarco [phone] Ed Gascoigne-Pees Georgia Mann

Polar Capital Holdings plc is a specialist investment management company offering professional and institutional investors a range of fundamentally research-driven funds diversified by asset class, geographical and sectoral specialisation. Since its foundation in 2001, the Group has steadily grown and currently supports 11 investment teams managing 22 funds (23 funds at the end of November 2014) and six managed accounts across a range of long-only and alternative products.

Polar Capital Holdings plc was listed in London on the Alternative Investment Market in February 2007 and it trades under the ticker 'POLR.LN'.

Consistent with Polar Capital's founding strategy of fostering an equity culture amongst its staff and providing a high level of transparency to clients, 36% of the equity is held by directors, founders and staff. Polar Capital is principally located in London and maintains offices with investment staff in Edinburgh, Tokyo, Connecticut, Jersey and Geneva.

Our Funds/Strategies

(In chronological order)

Assets Under Management	30 September 2014 US$m	31 March 2014   US$m	30 September 2013 US$m
Technology	1,898	1,793	1,488
Technology Trust plc	1,128	1,043	923
Global Technology UCITS Fund	770	750	565
Japan	5,301	5,629	4,914
Japan UCITS Fund*	5,158	5,478	4,861
Japan Alpha UCITS Fund	143	151	53
Europe	771	761	704
European Forager Alternative Fund	613	602	548
European Conviction Alternative Fund	158	159	156
Healthcare	1,170	1,184	794
Global Healthcare Growth & Income Trust plc	324	321	252
Healthcare Opportunities UCITS Fund	804	854	542
Biotechnology UCITS Fund	15	9	-
Healthcare Blue Chip UCITS Fund	27	-	-
Financials	979	1,063	975
Asian Financials UCITS Fund	48	46	55
Global Insurance UCITS Fund	471	582	559
Income Opportunities UCITS Fundj	131	106	90
Financial Opportunities UCITS Fund	28	27	24
Global Financials Trust plc	301	302	247
Global Emerging Markets	972	832	749
Emerging Markets Growth UCITS Fund*	243	303	291
Emerging Markets Income UCITS Fund	729	529	458
Global Convertibles	202	103	73
ALVA Global Convertible Fund*	87	73	68
Global Convertible UCITS Fund	115	30	5
North American UCITS Fund	2,024	1,729	1,321
Global Alpha UCITS Fund	95	85	33
UK Absolute Equity UCITS Fund	10	-	-
Closed Strategies	-	70	357
Total	13,422	13,249	11,408

j Previously Financials Income UCITS Fund, name changed in June 2014

*Including managed accounts run off the same strategy

Analysis of Changes in Asset Types for the six months to 30 September 2014

	Long only Funds US$m	Alternative Funds US$m	Total US$m
Total assets as at 31 March 2014	12,315	934	13,249
Net subscriptions/(redemptions) from ongoing business	(425)	117	(308)
Closure of European Market Neutral team	Nil	(67)	(67)
Performance and currency movements	549	(1)	548
Total assets at 30 September 2014	12,439	983	13,422

Analysis of AUM by Business Unit and Type of Funds as at 30 September 2014

Technology	14%		Long only funds	93%
Japan	39%		Alternative funds	7%
Europe	6%			100%
Healthcare	9%
Financials	7%
Global Emerging Markets	7%
Global Convertibles	2%
North American	15%
Global Alpha	1%
UK Absolute Equity	-
	100%

Chief Executive's Statement

The first six months of our financial year have been challenging.   Although our assets under management (AUM) at 30 September 2014 were 17.5% above the level at 30 September 2013, the increase in AUM since 31 March 2014 has been just 1% with growth seen across most portfolios but offset by outflows from Japan.  Consequently core profits of £13.9m for the six months to 30 September 2014, although a 34% increase over the comparable period in 2013 and derived from a relatively stable total AUM, are marginally below those for the six months to 31 March 2014 due to the mix of our business and the costs of ongoing investment in the Group.

	Six months to 30 September 2014	Six months to 30 September 2013
Core operating profit	£13.9m	£10.4m
Performance fee profit	-	-
Finance expense/(income)	£(1.2)m	£0.2m
Profit before share based payments and tax	£12.7m	£10.6m
Adjusted diluted earnings per share (non GAAP measure)	10.75p	8.77p

The majority of the Group's performance fees fall due at the end of December, so the lack of such fees at the half year is unsurprising. Whilst it is not possible to predict year end performance fee profits at both the half year point and 30 November 2014, on a mark to market basis, there were £4.2m of performance fee profits due to the Group.

The half year results include a finance expense of £1.2m. This revenue line is the sum of revenues/costs generated from balance sheet cash and investments and related hedging strategies. The investments are seed monies to support the Group's smaller and more recently launched funds. In the six month period £1.2m of mark to market losses were booked from hedging strategies taken out to reduce the market exposure on the long only investments. At 30 September 2014 there were £1.0m of matching unrealised profits on the same seed investments.

In the annual report the Board provided guidance to assist shareholders in forecasting and understanding the size of the Group's first interim dividend, paid in January. The Board confirmed that going forward the first dividend would be predicated on half of the first half year's core earnings.  On this basis the dividend payment in January 2015 will be 5.5p (2014: 4p).

Investors should note that the increase in the January 2015 first interim dividend compared to 2014 should not be taken as any indication of the size of the final dividend that will be paid in July 2015. The Board will base its decision for the year's total dividend, and hence the level of the second dividend, on the core and performance fee earnings for the full year.

I cautioned at this stage last year that our growth rate would be likely to slow after the exceptional pace of previous years and so it has proved. The success of our Japan team over recent years has led in the short-term to our AUM being unusually sensitive to the direction of and allocations to the Japanese market which suffered a reversal in the first six months of our new financial year.

The strong inflows we had into a number of our other products including North America, Emerging Markets Income and Global Convertibles were insufficient to offset the outflows and market falls in Japan.

We continue to invest in the business and added two new teams during our first half - a UK Absolute team headed by Guy Rushton and a Pan European Income team headed by Nick Davis. Neither of these initiatives will have a material impact on our outlook in the near future although both have significant potential for growth over the medium and longer term.

In September, our award winning Healthcare team launched their fourth product the Healthcare Blue Chip Fund. This is a large cap healthcare fund and provides another outlet for the broad based capability of the team.

Since the end of our first half year, markets have been extremely volatile and we have seen a sharp recovery in the Japanese market following renewed and aggressive monetary stimulus from the Bank of Japan. This took many people by surprise but was consistent with the expectation of our Japan team. It is too early to predict the impact this will have on allocations to the Japanese market and our own fund offerings.

We remain optimistic on the longer term opportunities for the business and see considerable scope for many of the other strategies beyond Japan to grow substantially in time. However, over the shorter term our results will continue to be influenced by events in Japan and allocations to or away from our Japanese funds.

Tim Woolley

Chief Executive                                                                      10 December 2014

Interim Consolidated Income Statement for the six months to 30 September 2014

	(Unaudited) Six months to 30 September 2014 £'000	(Unaudited) Six months to 30 September 2013 £'000
Revenue	41,803	31,646
Finance (expense)/income	(1,202)	231
Gross income	40,601	31,877
Commissions and fees payable	(4,633)	(2,363)
Net income	35,968	29,514
Operating costs before share-based payments	(23,254)	(18,878)
Operating profit before share-based payments,  amortisation/impairment and tax	12,714		10,636
Share-based payments	(1,122)	(551)
Profit for the period before tax	11,592	10,085
Taxation	(2,513)	(2,365)
Profit for the period attributable to ordinary shareholders	9,079	7,720
Basic earnings per ordinary share	10.55p	9.53p
Diluted earnings per ordinary share	9.56p	8.19p
Adjusted diluted earnings per ordinary share (Non GAAP measure)	10.75p	8.77p

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

Interim Consolidated Statement of Comprehensive Income for the six months to 30 September 2014

	(Unaudited) Six months to 30 September 2014 £'000		(Unaudited) Six months to 30 September 2013 £'000
Profit for the period attributable to ordinary shareholders	9,079		7,720
Other comprehensive income - items that may be reclassified to income statement in subsequent periods:
Net gain on the revaluation of available-for-sale financial assets	663		16
Deferred tax effect	(133)		-
	530		16
Net movement on the fair valuation of cash flow hedges	(1,277)		1,397
Deferred tax effect	427		(354)
	(850)		1,043
Other comprehensive income		(320)		1,059
Total comprehensive income for the period,  net of tax, attributable to ordinary shareholders		8,759		8,779

Interim Consolidated Balance Sheet as at 30 September 2014

	(Unaudited) 30 September 2014 £'000		(Audited) 31 March 2014 £'000
Non-current assets
Property, plant and equipment	91		94
Deferred tax assets	5,984		7,472
Total non-current assets	6,075		7,566
Current assets
Available-for-sale financial assets	40,484		43,912
Trade and other receivables		16,607		9,675
Cash at bank		22,962		47,041
Other financial assets	-		654
Total current assets	80,053		101,282
Total assets		86,128		108,848
Non-current liabilities
Deferred tax Liabilities	-		221
Current liabilities
Trade and other payables		14,947		29,484
Other financial liabilities		3,873		1,965
Current tax liabilities	1,823		3,008
Total current liabilities	20,643		34,457
Total liabilities		20,643		34,678
Net assets		65,485		74,170
Capital and reserves
Issued share capital	2,207		2,184
Share premium		16,656		16,288
Investment in own shares		(992)		(1,017)
Capital and other reserves		8,459		9,650
Retained earnings	39,155		47,065
Total equity - attributable to ordinary shareholders	65,485		74,170

Interim Consolidated Statement of Changes in Equity for the six months to 30 September 2014

	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 2014	2,184	16,288	(1,017)	143	9,507	47,065	74,170
Profit for the period	-	-	-	-	-	9,079	9,079
Other comprehensive income	-	-	-	-	(320)	-	(320)
Total comprehensive income	-	-	-	-	(320)	9,079	8,759
Issue of shares against options	23	368	25	-	-	(11)	405
Issue of shares on crystallisation event	-	-	-	-	-	-	-
Dividends paid	-	-	-	-	-	(18,100)	(18,100)
Share based payment	-	-	-	-	-	1,122	1,122
Current tax in respect of employee share options	-	-	-	-	836	-	836
Deferred tax in respect of employee share options	-	-	-	-	(1,707)	-	(1,707)
As at 30 September 2014 (unaudited)	2,207	16,656	(992)	143	8,316	39,155	65,485
As at 1 April 2013	2,062	16,094	(1,017)	219	3,629	32,776	53,763
Profit for the period	-	-	-	-	-	7,720	7,720
Other comprehensive income	-	-	-	-	1,059	-	1,059
Total comprehensive income	-	-	-	-	1,059	7,720	8,779
Issue of shares against options	16	58	-	-	-	(14)	60
Issue of shares on crystallisation event	3	-	-	(3)	-	-	-
Dividends paid	-	-	-	-	-	(8,913)	(8,913)
Share based payment	-	-	-	-	-	551	551
Deferred tax in respect of employee share options	-	-	-	-	2,584	-	2,584
As at 30 September 2013 (unaudited)	2,081	16,152	(1,017)	216	7,272	32,120	56,824

Interim Consolidated Statement of Cash Flow for the six months to 30 September 2014

	(Unaudited) Six months to 30 September 2014 £'000		(Unaudited) Six months to 30 September 2013 £'000
Operating activities
Cash (used)/generated from operations	(8,021)		5,073
Tax paid	(3,010)		(2,784)
Net cash flow from operating activities	(11,031)		2,289
Investing activities
Interest received and similar income	8		8
Purchase of property, plant and equipment		(33)		(41)
Proceeds from sale of available-for-sale financial assets		10,271		21,226
Purchase of available-for-sale financial assets		(6,212)		(23,279)
Cash flows related to derivatives		613		(28)
Net cash flow from investing activities		4,647		(2,114)
Financing activities
Dividends paid		(18,100)		(8,913)
Issue of ordinary shares	405		74
Net cash flow from financing activities	(17,695)		(8,839)
Net decrease in cash and cash equivalents	(24,079)		(8,664)
Cash and cash equivalents at start of period	47,041		30,940
Cash and cash equivalents at end of period	22,962		22,276

Notes to the Unaudited Interim Consolidated Financial Statements

For the six months to 30 September 2014

1.    General Information, Basis of Preparation and Accounting Policies

Polar Capital Holdings plc ("the Company") is a public limited Company registered in England and Wales.

The unaudited interim condensed consolidated financial statements to 30 September 2014 have been prepared in accordance with IAS 34: Interim Financial Reporting.

The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 March 2014 which 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 accounting policies adopted in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those used in the preparation of the Group's annual financial statements for the year ended 31 March 2014.

2.    Revenue    

	(Unaudited) Six months to 30 September 2014 £'000	(Unaudited) Six months to 30 September 2013 £'000
Investment management fees	41,287	31,675
Investment performance fees	-	-
Profit/(loss) on hedging	516	(29)
	41,803	31,646

3     Profit on Ordinary Activities Before Taxation

		(Unaudited) Six months to 30 September 2014 £'000		(Unaudited) Six months to 30 September 2013 £'000
a. Profit on ordinary activities before taxation is stated after charging:
Staff costs		18,082		14,783
Depreciation of tangible fixed assets			36	29
Operating lease rentals - land & buildings			483	392
Operating lease rentals - other			606	190
b. Auditors' remuneration:
Audit of group financial statements			20	20
Other fees
	- local statutory audits of subsidiaries	15		15
	- tax services		-	-
	- internal controls review	22		22

4.    Dividends   

	(Unaudited) Six months to 30 September 2014 £'000	(Unaudited) Six months to 30 September 2013 £'000
Dividend paid	18,100	8,913

5.    Earnings Per Ordinary Share

The calculation of basic earnings per ordinary share is based on the profit for the period of £9,078,624 (September 2013: profit £7,719,758); and on 86,077,915 (September 2013:80,975,377) ordinary shares, being the weighted number of ordinary shares.

The calculation of diluted earnings per ordinary share is based on the profit for the period of £9,078,624 (September 2013: profit £7,719,758) and 94,919,336 (September 2013: 94,298,538) ordinary shares, being the weighted average number of ordinary shares allowing for all options of 8,007,244 (September 2013: 9,602,935) which are dilutive as well as shares granted under a crystallisation event but not yet issued of 834,177 (September 2013: 3,720,227).

The calculation of adjusted earnings per ordinary share is based on a profit for the period of £9,078,624 (September 2013: profit of £7,719,758) but adjusted for the share-based payments charge of £1,121,755, (September 2013: share base payments charge of £550,900) and 94,919,336 (September 2013: 94,298,538) ordinary shares being the weighted average number of ordinary shares allowing for all dilutive options and as well as shares granted during the period under a crystallisation event but not yet issued.

6.    Available-for-sale Financial Assets

	(Unaudited) Six months to 30 September 2014 £'000	(Audited) Year to 31 March 2014 £'000
At beginning of period	43,912	31,246
Additions	6,212	65,730
Redemptions	(10,303)	(52,680)
Net gain on movement in fair value	663	(384)
At end of period	40,484	43,912

7.    Notes to the Cash Flow Statement

Reconciliation of profit before taxation to cash generated from operations

		(Unaudited) Six months to 30 September 2014 £'000			(Unaudited) Six months to 30 September 2013 £'000
Cash flows from operating activities
Profit on ordinary activities before tax		11,592			10,085
Interest received		(7)		(8)
Depreciation of tangible fixed assets		36		29
Increase in trade and other receivables		(6,932)		(420)
Decrease in trade and other payables		(14,537)		(4,751)
Loss/(gain) on disposal of available-for-sale financial assets		33		(850)
Loss on instruments at fair value through profit or loss		875		637
Gain on derivatives		(203)		(200)
Share-based payment		1,122	551
	Cash (used)/generated from operations	(8,021)	5,073

8.    Related Party Transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not included in this note.

B J D Ashford-Russell is a member of Polar Capital LLP and a director of the Polar Capital Technology Trust plc (the Trust). Polar Capital LLP is the appointed investment manager of the Trust. The total fees received by the Group as investment manager of the Trust were £3,237,883 (September 2013: £2,816,851). The amounts receivable at period end in this respect were £1,127,841 (March 2014: £1,072,600).

At the end of the period, the Group had an outstanding loan due of £992,251 (March 2014: £1,017,131) from the Polar Capital Employee Benefit Trust, which was set up in 2002 to hold ordinary shares in Polar Capital Holdings plc for the benefit of employees.

9.    The Publication of Non-Statutory Accounts

The financial information contained in this unaudited half year report does not constitute statutory accounts as defined in S434 of the Companies Act 2006. The financial information for the six months ended 30 September 2014 and 2013 has not been audited. The information for the year ended 31 March 2014 has been extracted from the latest published audited accounts, which have been filed with the Registrar of Companies. The audited accounts filed with the Registrar of Companies contain a report of the independent auditor dated 19 June 2014. The report of the independent auditor on those financial statements contained no qualification or statement under S498 of the Companies Act 2006.

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
B J D Ashford-Russell	Non-executive Director
G V Bumeder	Non-executive Director
J M B Cayzer-Colvin	Non-executive Director
M W Thomas	Non-executive Director, Chairman of Remuneration Committee

Dividend

A first interim dividend of 5.5p per share has been declared for the year to 31 March 2015. This will be paid on 16 January 2015 to shareholders on the register on 30 December 2014. The shares will trade ex-dividend from 29 December 2014.

Remuneration Code

Disclosure of the group's Remuneration Code will be made along side its Pillar 3 disclosure which is available on the Company's website

Nominated Advisor and Corporate Broker to the Company

Canaccord Genuity

Half Year Report 

The Half Year report will be posted to shareholders in late December 2014. Copies of this announcement and of the Half Year report will be available from the Secretary at the Registered Office, 4 Matthew Parker Street, London SW1H 9NP and from the Company's website at www.polarcapital.co.uk 

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.

ENDS

 

END

 

 

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