Interim results

RNS Number : 2563R

Polar Capital Holdings PLC

08 December 2016

 

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

Interim results for six months ended 30 September 2016

Summary of Results

Financial

·    Assets under Management ("AUM") at 30 September 2016 were £7.7bn/$9.9bn (31 March 2016: £7.3bn/$10.4bn) - fund outflows of £763m offset by market and currency movements of £1.1bn

·    Core operating profit, excluding performance fees, £9.2m (30 September 2015: £12.4m)

·    Operating profit before share-based payments £11.2m (30 September 2015: £13.3m)

·    Pre-tax profit £9.1m (30 September 2015: £11.7m)

·    Basic earnings per share 7.40p (30 September 2015: 10.44p) and adjusted* diluted earnings per share 9.33p (30 September 2015: 11.46p)

·    Interim dividend per ordinary share of 5.5p declared (2015: 5.5p) to be paid in January 2017

·    Shareholders' funds £65.4m (30 September 2015: £69.7m) including cash and investments of £71.8m (30 September 2015: £75.1m)

*    Adjusted to exclude cost of share-based payments

Corporate

·    Our UK Value long-only UCITS fund will be launched at the end of January

Current Trading

•   AUM at 30 November 2016 were £8.1bn/$10.2bn

Tim Woolley, Chief Executive Officer, commented:

"This was certainly a challenging period to navigate with considerable uncertainty leading up to the EU referendum and considerable volatility in markets after the result. Long-only equity funds in general experienced large net redemptions over the period and we were not immune from such industry conditions. Despite the overall challenging market conditions, a number of our funds including Biotechnology, Insurance, Global Alpha, European Income ex UK, Global Convertible Bond and UK Absolute did see net inflows over the period.

Our fund inflows have picked up markedly since the US election but it remains too early to suggest this is a reversal of the difficult industry conditions that we experienced through the first seven months of our financial year.

Overall we have become somewhat more positive on the outlook for our business over the second half of the financial year. We also expect to maintain the dividend for the current financial year."

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

Assets Under Management (AUM)

AUM split by strategy

	30 September 2016				31 March 2016
	$bn	£bn	%		$bn	£bn	%
Long only	8.84	6.81	88.9%	Long only	9.38	6.53	89.9%
Alternative	1.10	0.85	11.1%	Alternative	1.05	0.73	10.1%
	$9.94bn	£7.66bn			$10.43bn	£7.26bn

AUM split by Business Unit

(in chronological order)

	30 September 2016				31 March 2016
	$bn	£bn	%		$bn	£bn	%
Technology	2.31	1.78	23.2%	Technology	1.98	1.38	19.0%
Japan	1.40	1.09	14.2%	Japan	2.18	1.51	20.9%
European	0.44	0.34	4.4%	European	0.55	0.38	5.3%
Healthcare	1.34	1.03	13.5%	Healthcare	1.32	0.92	12.6%
Financials	1.12	0.86	11.3%	Financials	1.05	0.73	10.1%
Emerging Markets	0.54	0.41	5.4%	Emerging Markets	0.51	0.36	4.9%
Convertibles	0.57	0.44	5.7%	Convertibles	0.45	0.31	4.3%
North America	1.95	1.50	19.6%	North America	2.20	1.53	21.0%
Global Alpha	0.11	0.09	1.1%	Global Alpha	0.10	0.07	1.0%
UK Absolute Equity	0.09	0.07	0.9%	UK Absolute Equity	0.05	0.04	0.5%
European Income	0.07	0.05	0.7%	European Income	0.04	0.03	0.4%
	$9.94bn	£7.66bn			$10.43bn	£7.26bn

Chief Executive's Statement

Profit before tax fell 22% to £9.1m for the first six months of this financial year compared to the same period last year whilst adjusted diluted earnings per share fell 19% to 9.33p. The fall in profits reflects the fall in the average AUM over the period. The breakdown of the profit before tax figure is set out below.

	Six months to 30 September 2016	Six months to 30 September 2015
Net core operating profit	£9.2m	£12.4m
Finance income	£2.0m	£0.9m
Operating profit before share-based payments and tax	£11.2m	£13.3m
Share-based payments	£(2.1)m	£(1.6)m
Profit before tax	£9.1m	£11.7m
Adjusted diluted earnings per share (non-GAAP measure)	9.33p	11.46p

This was certainly a challenging period to navigate with considerable uncertainty leading up to the EU referendum and considerable volatility in markets after the result. Long-only equity funds in general experienced large net redemptions over the period and we were not immune from such industry conditions. We had significant redemptions from our Japan and North America UCITS funds and from our Forager hedge fund. Net outflows across all our funds for the six months totalled £763m. Although our AUM increased over the period in sterling terms from £7.26bn to £7.66bn, this was due to market and currency movements of £1.1bn more than offsetting the aforementioned outflows. In dollar terms our AUM fell over the period from $10.43bn to $9.94bn.

Despite the overall challenging market conditions, a number of our funds did see inflows over the period. On the UCITS long only funds side we had net inflows into Biotechnology, Insurance, Global Alpha and European Income ex UK. On the Alternative side we actually experienced overall net inflows, with flows into our two absolute UCITS funds, Global Convertible Bond and UK Absolute, more than offsetting outflows on the Cayman hedge funds.

Since the end of our financial half-year the US presidential election has been decided and, as with Brexit, the pollsters were surprised and the intelligentsia were shocked at the outcome. It is too early to understand fully the implications of a Trump presidency but it would appear to be more positive for equities than bonds, with lower taxes and less regulation benefitting business. The bond market though will have to accommodate a potentially large increase in US government borrowing which will be required to fund the substantial increase in infrastructure spending Trump seems genuinely committed to delivering. The main concern now though is whether Trump's pre-election rhetoric on trade and protectionism will be enacted or, as seems more likely, will prove to have been 'election rhetoric' and his administration will in reality take a more pragmatic approach.

Our fund inflows have picked up markedly since the US election with inflows into a wide range of funds but notably Healthcare Opportunities, Biotechnology, Healthcare Blue Chip, North America, Insurance and Income Opportunities. It is though too early to suggest this is a reversal of the difficult industry conditions that we experienced through the first seven months of our financial year.

There remains the possibility of further redemptions on our Japan fund although performance has picked up markedly over the last three months and market conditions are turning decidedly more favourable to the team's style.

We will have further redemptions of around $62m on the hedge fund side this quarter as we have decided to close our ALVA hedge fund strategy at the end of December. The Global Convertible team wishes to focus on its successful UCITS product, the Global Convertible Bond fund, which has grown rapidly over the last eighteen months.

Our UK Value long only UCITS fund will be launched at the end of January. The fund will be managed by Georgina Hamilton and she will be joined by George Godber in April. Whilst the fund will not materially impact results for the current financial year, we believe the team has the potential to make a significant contribution in fiscal 2018 and beyond.

Overall we have become somewhat more positive on the outlook for our business over the second half of the financial year. We also expect to maintain the dividend for the current financial year.

Tim Woolley

Chief Executive                                                                                                7 December 2016

Interim Consolidated Statement of Profit or Loss

For the six months to 30 September 2016

	(Unaudited) Six months to 30 September 2016 £'000	(Unaudited) Six months to 30 September 2015 £'000
Revenue	33,637	39,862
Finance income/ (expense)	2,068	879
Gross income	35,705	40,741
Commissions and fees payable	(2,999)	(3,971)
Net income	32,706	36,770
Operating costs before share-based payments	(21,462)	(23,481)
Operating profit before share-based payments and tax	11,244	13,289
Share-based payments	(2,107)	(1,597)
Profit for the period before tax	9,137	11,692
Taxation	(2,460)	(2,474)
Profit for the period attributable to ordinary shareholders	6,677	9,218
Basic earnings per ordinary share	7.40p	10.44p
Diluted basic earnings per ordinary share	7.09p	9.77p
Adjusted basic earnings per ordinary share (Non GAAP measure)	9.74p	12.25p
Adjusted diluted earnings per ordinary share (Non GAAP measure)	9.33p	11.46p

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

Interim Consolidated Statement of Other Comprehensive Income

For the six months to 30 September 2016

	(Unaudited) Six months to 30 September 2016 £'000	(Unaudited) Six months to 30 September 2015 £'000
Profit for the period attributable to ordinary shareholders	6,677	9,218
Other comprehensive income - items that may be reclassified to income statement in subsequent periods (net of tax):
Net movement on the fair valuation of cash flow hedges	(582)	650
Exchange differences on translation of foreign operations	30	(3)
Other comprehensive income for the period, net of tax	(552)	647
Total comprehensive income for the period,  net of tax, attributable to ordinary shareholders	6,125	9,865

Interim Consolidated Balance Sheet

As at 30 September 2016

	(Unaudited) 30 September 2016 £'000	(Audited) 31 March 2016 £'000
Non-current assets
Property, plant and equipment	2,637	2,862
Deferred tax assets	2,700	3,654
Total non-current assets	5,337	6,516
Current assets
Assets at fair value through profit or loss	27,943	33,293
Assets held for sale	11,626	6,835
Trade and other receivables	9,338	7,984
Cash and cash equivalents	32,181	48,762
Total current assets	81,088	96,874
Total assets	86,425	103,390
Non-current liabilities
Provisions and other liabilities	2,248	2,132
Deferred tax liabilities	112	124
Total non-current liabilities	2,360	2,256
Current liabilities
Trade and other payables	12,761	21,235
Other financial liabilities	3,782	2,966
Current tax liabilities	2,136	1,332
Total current liabilities	18,679	25,533
Total liabilities	21,039	27,789
Net assets	65,386	75,601
Capital and reserves
Issued share capital	2,283	2,280
Share premium	18,657	18,509
Investment in own shares	(878)	(878)
Capital and other reserves	5,434	6,897
Retained earnings	39,890	48,793
Total equity - attributable to ordinary shareholders	65,386	75,601

Interim Consolidated Statement of Changes in Equity

For the six months to 30 September 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 31 March 2016 (audited)	2,280	18,509	(878)	123	6,774	48,793	75,601
Profit for the period	-	-	-	-	-	6,677	6,677
Other comprehensive income	-	-	-	-	(552)	-	(552)
Total comprehensive income	-	-	-	-	(552)	6,677	6,125
Issue of shares against options	3	148	-	-	-	(104)	47
Dividends paid	-	-	-	-	-	(17,583)	(17,583)
Share-based payment	-	-	-	-	-	2,107	2,107
Current tax in respect of employee share options	-	-	-	-	45	-	45
Deferred tax in respect of employee share options	-	-	-	-	(956)	-	(956)
As at 30 September 2016 (unaudited)	2,283	18,657	(878)	123	5,311	39,890	65,386

As at 31 March 2015 (audited)	2,232	16,715	(962)	133	6,532	50,581	75,231
Profit for the period	-	-	-	-	-	9,218	9,218
Other comprehensive income	-	-	-	-	647	-	647
Total comprehensive income	-	-	-	-	647	9,218	9,865
Issue of shares against options	15	-	72	-	-	(15)	72
Dividends paid	-	-	-	-	-	(17,188)	(17,188)
Share-based payment	-	-	-	-	-	1,597	1,597
Current tax in respect of employee share options	-	-	-	-	-	-	-
Deferred tax in respect of employee share options	-	-	-	-	95	-	95
As at 30 September 2015 (unaudited)	2,247	16,715	(890)	133	7,274	44,193	69,672

Interim Consolidated Cash Flow Statement

For the six months to 30 September 2016

	(Unaudited) Six months to 30 September 2016 £'000	(Unaudited) Six months to 30 September 2015 £'000
Operating activities
Cash (used) /generated from operations	(449)	2,282
Tax paid	(1,447)	(2,576)
Net cash flow from operating activities	(1,896)	(294)
Investing activities
Interest received and similar income	19	9
Purchase of property, plant and equipment	(28)	(322)
Purchase of assets at fair value through profit or loss	-	(9)
Disposal of assets at fair value through profit or loss	9,975	-
Purchase of assets held for sale	(3,836)	(6)
Cash flows related to derivatives	(3,277)	1,483
Net cash flow from investing activities	2,853	1,155
Financing activities
Dividends paid	(17,583)	(17,188)
Issue of ordinary shares	45	-
Receipts in relation to investments in own shares	-	72
Net cash flow from financing activities	(17,538)	(17,116)
Net decrease in cash and cash equivalents	(16,581)	(16,255)
Cash and cash equivalents at start of period	48,762	41,385
Cash and cash equivalents at end of period	32,181	25,130

Notes to the Unaudited Interim Consolidated Financial Statements

For the six months to 30 September 2016

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 2016 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 2016 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 2016.

2.    Revenue    

	(Unaudited) Six months to 30 September 2016 £'000	(Unaudited) Six months to 30 September 2015 £'000
Investment management fees	34,609	40,374
Investment advisory fees	42	-
Investment performance fees	-	42
Loss on hedging	(1,014)	(554)
	33,637	39,862

3     Profit on Ordinary Activities Before Taxation

3.1) This is stated after charging:

	(Unaudited) Six months to 30 September 2016 £'000	(Unaudited) Six months to 30 September 2015 £'000
Staff costs	15,075	17,405
Depreciation	253	197
Operating lease rentals - land & buildings	654	637
Operating lease rentals - other	860	642

3.2) Auditors' remuneration:

Audit of group financial statements	27	24
Other fees
- local statutory audits of subsidiaries	20	18
- GIPS Review	11	11
- internal controls review	25	24
- tax advisory services	17	2

4.    Taxation      

The tax charge for the six months ended 30 September 2016 includes a charge for share-based payment costs of £440,000 (September 2015: £160,000) that were not deductible for tax purposes. Under UK tax legislation the Group is only allowed a deduction for share-based payment costs when options are exercised by employees. When compared to the comparative period, the smaller number of option exercises in 2016 and the lower Group share price has resulted in a higher proportion of the accounting share-based payment cost being disallowed for tax purposes during the current period.

5.    Dividends   

	(Unaudited) Six months to 30 September 2016 £'000	(Unaudited) Six months to 30 September 2015 £'000
Dividend paid	17,583	17,188

6.    Earnings Per Ordinary Share

The calculation of basic earnings per ordinary share is based on the profit for the period of £6,676,500 (September 2015: profit £9,217,800) and on 90,177,700 (September 2015: 88,255,362) ordinary shares, being the weighted number of ordinary shares.

The calculation of diluted basic earnings per ordinary share is based on the profit for the period of £6,676,500 (September 2015: profit £9,217,800) and 94,180,600 (September 2015: 94,356,332) ordinary shares, being the weighted average number of ordinary shares allowing for all options of 4,002,900 (September 2015: 5,683,882) which are dilutive as well as shares granted under a crystallisation event but not yet issued of nil (September 2015: 417,088).

The calculation of adjusted basic earnings per ordinary share is based on a profit for the period of £6,676,500 (September 2015: profit of £9,217,800) but adjusted for the share-based payments charge of £2,107,700, (September 2015: share base payments charge of £1,597,500) and on 90,177,700 (September 2015: 88,255,362) ordinary shares, being the weighted number of ordinary shares.

The calculation of adjusted diluted earnings per ordinary share is based on a profit for the period of £6,676,500 (September 2015: £9,217,800)  but adjusted for the share-based payments charge of £2,107,700, (September 2015: share base payments charge of: £1,597,500) and 94,180,600 (September 2015: 94,356,332) ordinary shares being the weighted average number of ordinary shares allowing for all options of 4,002,900 (September 2015: 5,683,882 ) which are dilutive as well as shares granted under a crystallisation event but not yet issued of nil (September 2015: 417,088).

7.    Notes to the Cash Flow Statement

Reconciliation of profit before taxation to cash generated from operations

	(Unaudited) Six months to 30 September 2016 £'000	(Unaudited) Six months to 30 September 2015 £'000
Cash flows from operating activities
Profit on ordinary activities before tax	9,137	11,692
Adjustments for:
Interest received	(19)	(9)
Depreciation of property, plant and equipment	253	197
Increase in trade and other receivables	(1,354)	(297)
Decrease in trade and other payables	(8,474)	(9,645)
(Gain)/ loss on financial assets at fair value through profit or loss	(4,624)	2,480
Increase in non-current provisions and other liabilities	116	-
Loss/ (gain) on financial instruments at fair value through profit or loss	3,364	(2,954)
Gain on assets held for sale	(955)	(779)
Share-based payment	2,107	1,597
Cash (used)/ generated from operations	(449)	2,282

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 £4,290,300 (September 2015: £3,912,500). The amounts receivable at period end in this respect were £1,628,000 (March 2016: £1,319,000).

At the end of the period, the Group had an outstanding loan due of £877,700 (March 2016: £877,700) 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 2016 and 2015 has not been audited. The information for the year ended 31 March 2016 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 23 June 2016. 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, Finance Director
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

Company No.

4235369

Registered Office

16 Palace Street

London, SW1E 5JD

Tel: [phone]

Company Secretary

Neil Taylor

Dividend

A first interim dividend of 5.5p per share has been declared for the year to 31 March 2017. This will be paid on 13 January 2017 to shareholders on the register on 30 December 2016. The shares will trade ex-dividend from 29 December 2016.

Remuneration Code

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

Half Year Report 

The Half Year report will be posted to shareholders in late December 2016. Copies of this announcement and of the Half Year report will be available from the Secretary at the Registered Office, 16 Palace Street, London SW1E 5JD 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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