Interim Results

RNS Number : 8392I

Record PLC

25 November 2008

 



Record plc

PRESS RELEASE

25 November 2008

INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008

Record plc, the specialist currency investment manager, today announces its first set of unaudited interim results, for the six months ended 30 September 2008, following its admission to trading on the London Stock Exchange's main market for listed securities in December 2007.

Financial and operating highlights:

·      Client numbers continued to grow - up to 150 (from 141 at 31 March 2008)

·      AuME (1) $47.8bn down 14% during the six months to 30 September 2008

      (67% of the reduction due to expressing AuME in US$)

·      Profit before tax was £15.0m - down from £26.6m for the six months to 30 September 2007 due to a reduction in performance fees

·      Operating profit margin 57% for the six months 30 September 2008 (six months to 30 September 2007: 62%)

·      Management fee income for the six months to 30 September 2008 continued to grow to £24.6m (six months to 30 September 2007: £20.6m)

·      Average fee rates firmed to 17.8 bps for the six months to 30 September 2008 versus 16.7 bps for the six months to 30 September 2007

·      £14.9m of cash generated from operations during six months to 30 September 2008 (six months to 30 September 2007: £27.9m)

·      Proposed interim dividend of 2.43p/share (2.16p/share paid July 2008)

·      Shareholders’ equity increased to £24.0m (31 March 2008: £18.5m)

·      Cash retained post proposed dividend £22m – circa two years overhead cover

·      Basic EPS of 4.86 (six months to 30 September 2007: 8.33 pence) 

(1)As a currency manager Record manages only the impact of foreign exchange and not the underlying assets, therefore its 'assets under management' are notional rather than real. To distinguish this from the AUM of conventional asset managers, Record uses the concept of Assets under Management Equivalents (AuME) and by convention this is quoted in US dollars.

  Commenting on the results Neil Record, Chairman and Chief Executive Officer of Record plc, said: 

'The first six months of the financial year have been challenging for all participants in the financial services industry. Against this backdrop, I am pleased with the progress Record has made in attracting and retaining clients.'

'Investment performance of our Absolute Return products recovered in line with our long-term expectations for the first four months of the financial year, then deteriorated markedly in August, September and October as 'anti-carry' trends re-appeared. Whilst performance is undoubtedly disappointing, we remain confident in the principles underlying our Absolute Return products and from our proven ability to out-perform 'naïve' exploitation of the forward rate bias.'

'Since the end of September, dollar measured AuME's have continued to decline due to the continuing strengthening of the dollar against the pound. As the majority of mandates are sterling based, this will not adversely impact fee income. Similarly those programmes that hedge international equity portfolios have experienced a decline as the underlying assets continue to fall in line with world stock markets. As highlighted in the Interim Management Statement in October, we have seen modest outflows from the Absolute Return product.'

'We are seeing an increasing interest in passive and active hedging services and have been selected for a number of substantial mandates that should commence in the second half.'

Analyst briefing

There will be a presentation for analysts at 8.30am on Tuesday 25 November 2008 at the offices of JPMorgan Cazenove Limited at 20 Moorgate London EC2R 6DA. A copy of the presentation will be made available on the Group's website at www.recordcm.com.

For further information, please contact:

Record plc:

[phone]

    Neil Record   

    Chairman and Chief Executive Officer

    Mike Timmins      

    Chief Financial Officer

Hogarth Partnership

[phone]

    Nick Denton, Julian Walker, Vicky Watkins

  Chairman and Chief Executive Officer's statement

Introduction

I am pleased to present Record plc's first interim report since the Company was admitted to trading on the London Stock Exchange's main market for listed securities in December 2007.

Highlights of the period

The six months to 30 September 2008 have been varied and challenging. Investment performance of our Absolute Return products recovered in line with our long-term expectations for the first four months of the period, then deteriorated markedly in August and September as 'anti-carry' trends re-appeared. More strikingly still, serious concerns over the solvency and liquidity of many of the world's major banks have disrupted the operation of the forward foreign exchange market and hence to some extent the execution of our currency investment process.

Notwithstanding these challenging market conditions, the business has performed well. Assets under management equivalents ('AuME') totalled $47.8bn at 30 September 2008, compared to $55.7bn at 31 March 2008. The largest component of the decline in AuME was the foreign exchange impact of expressing non-US Dollar AuME in US Dollars, which accounted for $5.3bn of the $7.9bn reduction. Net client outflows contributed only $1.0bn to the net reduction over the six-month period, which we regard as a testament to our strong client and investment consultant relationships.

The non-US Dollar AuME exchange rate impact has no implications for fee income in Sterling. Management fees increased to £24.6m for the six months to 30 September 2008, an increase of 19.9% compared to the six months to 30 September 2007. Given investment performance in the period, and prior valuation levels (or 'high water marks') achieved, performance fees earned in the period were modest. Hence profit before tax for the period was significantly (43.7%) less than for the equivalent period in the prior year.

The operating margin, at 57.0%, was also less than that achieved in the six months to 30 September 2007 (61.5%) although the decline was less marked than that in revenues. This reflects the flexibility in our cost base, not least due to Record's group bonus scheme which sets aggregate bonuses at 30% of pre-bonus operating profit for each six-month period.

We have declared an interim dividend for the period of 2.43p per share. This is at the top of our payout range, i.e. at the lower end of the two- to four-times cover of our dividend policy. It is consistent with our approach of targeting higher dividend payout ratios for periods of low performance fees, and vice versa. After paying the dividend we will have approximately £22m in cash on the balance sheet, or over twice the current annual overhead run rate excluding group profit bonus.

Further and more detailed analysis of the results for the period can be found in the Interim Management Review.

Investment performance

As noted above, investment performance of our Absolute Return products varied dramatically between the first four months of the period and the last two. By way of background, and as reported previously, July 2007 to March 2008 saw a marked decline as widespread risk aversion triggered by the 'credit crunch' was transmitted into currency markets through absolute return investors unwinding 'carry trade' positions. The resultant selling of higher interest rate 'investment' currencies and buying of lower interest rate 'funding' currencies caused many currency pairs to move in directions opposite (i.e. 'anti-carry') to those indicated by our forward rate bias selection process.

April to July 2008 saw four months of steady investment returns as this contagion abated and the currency trends we anticipate re-asserted themselves. Over this four-month period Record's Currency Alpha Composite (the aggregate of individual mandate track records for the Absolute Return product, on an ungeared basis) generated an absolute return of 1.3%. Over the same period, Record's Cash Plus fund, which operates with maximum gearing of seven times, generated an absolute return of 11.8%.

August and September 2008 saw considerable underperformance: -2.9% in the case of the Currency Alpha Composite and -20.1% in the case of the Cash Plus fund. The catalyst for the re-appearance of adverse trends was events in early August: a simultaneous loss of confidence in the inflation-fighting credibility of both the Bank of England and the European Central Bank, and stronger than expected growth data from the US economy. Taken together, these had the effect of causing Sterling and the Euro to weaken and the US Dollar to strengthen, which brought about currency moves contrary to those anticipated in our process.

Although these central bank and economic factors appear to have catalysed the recent bout of 'anti-carry' trends, these trends have been exacerbated by the unprecedented concerns over bank solvency and liquidity that arose following the announcement by Lehman Brothers Holdings Inc. of its Chapter 11 bankruptcy filing. In the wake of these concerns, 'anti-carry' trends continued through September, with higher interest rate currencies (Sterling, Australian Dollar and Euro) weakening, and lower interest rate currencies (Yen and US Dollar) strengthening. Furthermore, in these exceptional conditions the operation of the forward foreign exchange market has been disrupted, and it has been a major challenge for us to find creditworthy counterparties with whom we (on behalf of our clients) are able to conduct currency trades at market prices - although a challenge in which we have been successful.

The recent bout of 'anti-carry' trends in a period of equity market declines has caused the positive correlation between the returns of high interest rate currencies and global equities to return. This correlation, unwelcome to our Absolute Return clients, was first observed in the period from July 2007 to March 2008 and had subsided from April to July 2008. We remain confident in our view that this correlation is a temporary aberration resulting from the credit crunch, and not a new feature of the currency investment market.

Our Absolute Return investment process has two mechanisms at its centre: selection of currency pairs based on the forward rate bias and risk management of open investment positions through the exploitation of 'trend' or 'momentum' behaviour. The recent 'anti-carry' trends have reduced our pair selection success rate from its historic average of approximately 60% to less than 20%. Such reductions have been seen before and have historically been followed by strong periods of recovery to 60% or higher.

Our risk management mechanism by contrast has worked entirely as envisaged throughout this period. This can be seen in the contrast between the weighted average spot movement of six currency pairs typically selected in our Absolute Return products without risk management, and the performance of our Absolute Return products, over the period from 30 June 2007 to 30 September 2008 (i.e. covering both the recent periods of underperformance). The weighted average spot movement was -17.6% whereas the Currency Alpha Composite return was -7.3%.

Recent investment performance is undoubtedly disappointing. Despite this, we take comfort from our continued confidence in the principles underlying our Absolute Return products and from our proven ability to out-perform 'naive' exploitation of the forward rate bias. We have no intention of making any fundamental changes to our investment process in response to these set-backs. We remain convinced, based on our understanding of the currency markets and our thirty years of experience, that investment returns in the long-term will match our own and our clients' expectation and indeed that the large adverse currency movements seen recently will allow our clients to start to benefit from our investment process from more advantageous levels.

Strategy, growth plans and outlook

The disappointing investment performance brought about by the recent unprecedented turmoil has not caused us to re-assess our medium- to long-term strategy. On the contrary, we are planning an initiative to encourage the recognition of the currency forward rate bias as a manager-independent asset class (the 'asset class project'). We hope this will help establish currency forward rate bias as a standard allocation in diversified portfolios, thereby enlarging the potential size of the currency asset management market. 

In addition to the asset class project, we continue to pursue the other projects and developments set out in our annual report - namely a rewrite of our dealing program, increased focus on the US pension, foundation and endowment sectors, and signing third-party marketing agreements with selected intermediaries. In addition, we continue to explore new products in related areas, such as emerging market currencies, although with an appropriate degree of caution in a period of pronounced market dislocation.

We continue to believe in the tremendous opportunity for Record to lead, and to benefit from, the continued adoption of Absolute Return currency investment management and Active Hedging in the global investment community.  Recent net client outflows have been modest, although since much of the recent underperformance occurred in August and (to a lesser degree) September, and given the considered decision-making processes of our overwhelmingly institutional client base, we would not be surprised to experience further Absolute Return outflows in the coming months.

We continue to enjoy good levels of new client enquiries, in particular for Active and Passive Hedging, and are continuing to win mandates.  In part this reflects our maintenance of strong relationships with key investment consultants, who continue to support us and our investment process and philosophy, despite the exceptionally difficult environment and poor recent investment performance.

When investors choose to allocate new money to currency management, or to reduce risk from existing currency exposures, we continue to believe that Record is exceptionally well-placed to win a significant proportion of this business.

Neil Record

Chairman and Chief Executive Officer

Interim Management Review

In view of the recent challenging market conditions we are pleased to report that client numbers have continued to grow, although the rate of growth has slowed.  At 30 September 2008 Record had 150 clients which compares with 141 clients at 31 March 2008.  The Group's core distribution strategy is to continue to focus on its investment consultant relationships, supplemented by direct marketing by the in-house client team.

AuME Analysis

As previously noted, the Group's assets under management equivalents ('AuME') at 30 September 2008 totalled $47.8bn (30 March 2008: $ 55.7bn). There were four primary factors contributing to the $7.9bn decline in reported AuME during the six months to 30 September 2008.

AuME Movement during Six months to 30 September 2008
	$ bn
AuME 31st March 2008	55.7
Exchange Rate Impact on US$ AuME	(5.3)
Investment Performance on Pooled Funds	(1.4)
Global Stock & Other Mkt movements	(0.2)
Net Client Flows	(1.0)
AuME 30 September 2008	47.8

Exchange Rate Impact

The foreign exchange impact of expressing non-US$ AuME in US$ was the most significant factor.  87% of the Group's AuME is non-US$ denominated and expressing this in US$ accounted for $5.3bn (67%) of the reduction in AuME reported for the period.  

Investment Performance    

Negative investment performance during the period contributed $1.4bn (18%) of the reduction in AuME since investment returns are compounded on a geared basis into the AuME of the pooled funds managed by Record.  

Stock and Other Market Performance

Record's AuME is also affected by movements in stock and other market levels because substantially all the Passive and Active Hedging, and some of the Absolute Return mandates are linked to stock and other market levels.  Negative market performance had a negative impact, reducing AuME in the six months to 30 September 2008 by $0.2bn.

Net Client Flow

The fourth element of AuME movement was net client flows. During the six months to 30 September 2008 net client outflows were $1.0bn, with gains in Pooled Absolute Return and Active Hedging being offset by reductions in Segregated Absolute Return and Passive Hedging. 

The factors determining the movements in AuME also impact its composition. At 30 September 2008 Absolute Return AuME represented 50.4% of total AuME which was equally split between segregated and pooled mandates. This is down from 52.1% at both 30 September 2007 and 31 March 2008. The corresponding gain was in Active Hedging which increased in absolute and relative terms to $5.9bn and 12.3% of total AuME at 30 September 2008.

Composition of AuME
	As at 30 Sept 08		As at 30 Sept 07		As at 31Mar 08
	US$bn		US$bn		US$bn
Absolute Return - segregated	12.0	25.1%	15.9	29.1%	14.1	25.3%
Absolute Return - pooled	12.1	25.3%	12.6	23.0%	14.9	26.8%
Sub-total Absolute Return	24.1	50.4%	28.5	52.1%	29.0	52.1%
Active Hedging	5.9	12.3%	4.2	7.7%	5.0	9.0%
Passive Hedging	15.1	31.7%	18.6	34.0%	18.3	32.8%
Cash	2.7	5.6%	3.4	6.2%	3.4	6.1%
Total AuME	47.8	100.0%	54.7	100.0%	55.7	100.0%

Revenue Analysis

Management fee income for the six months to 30 September 2008 was £24.6m which was 19.9% higher than for the six months to 30 September 2007 (2007: £20.6m). All product groups generated higher management fees than during the six months to 30 September 2007 with Absolute Return representing the largest absolute and relative growth rates. In the six months to 30 September 2008 Absolute Return generated 86.5% of the management fee income from 50.4% of the AuME. Active Hedging generated 11.0% of the management fee income from 12.3% of the AuME.  

Management fees by product
	Six months ended	Six months ended	Change	Change	Year ended
	30-Sep-08	30-Sep-07			31-Mar-08
	£m	£m	£m	%	£m
Absolute Return - segregated	9.2	7.5	1.7	23%	15.9
Absolute Return - pooled	12.1	10.3	1.8	17%	22.1
Sub-total Absolute Return	21.3	17.8	3.5	20%	38.0
Active Hedging	2.7	2.4	0.3	13%	4.8
Passive Hedging	0.6	0.4	0.2	50%	1.2
Total Management Fee Income	24.6	20.6	4.0	20%	44.0

A significant factor in the increased management fee income reported for the six months to 30 September 2008, is that average management fee rate achieved during the six months to September 2008 were marginally firmer than for the same six month period in 2007. The average for Absolute Return management fee rates in part reflects the proportion of clients that elect to have a hybrid fee structures comprising management and performance fees elements rather than pure management fee structures.  The average fee rates achieved for both segregated and pooled Absolute Return mandates improved to 26.3 bps and 31.4bps respectively (25.1bps and 29.0 bps respectively for the six months to 30 September 2007).  The average Active Hedging management fee rate for 30 September 2008 of 20.6bps is lower than the average for the six months 30 September 2007 (2007: 22.7bps) .

Achieved average management fee rates by product 

	Six months ended	Six months ended	Year ended
	30-Sep-08	30-Sep-07	31-Mar-08
	bps	bps	bps
Absolute Return - segregated	26.3	25.1	25.3
Absolute Return - pooled	31.4	29.0	30.0
Sub-total Absolute Return	29.0	27.2	27.9
Active Hedging	20.6	22.7	22.5
Passive Hedging	1.4	1.1	1.3
Average management fee rate	17.8	16.7	16.3

*bps = basis point = 1/100th of one percentage point.

(Achieved average management fee rate = fees earned in period/average AuME during period).

Performance fees earned during the six months to 30 September 2008 were just £0.7m compared with £22.0m during the same period to 30 September 2007. A fuller explanation of the market conditions and the implication for the investment performance of our Absolute Returns product is given in the Chairman & CEO's statement. A further factor in explaining the difference in performance fees between the two periods is that our performance fee structures are subject to a 'high water mark' clause that states that cumulative performance, typically since inception of the mandate, must be above the previous high point on which performance fees were charged before performance fees are charged again. 

Operating Margins

The operating profit for the six months to 30 September 2008 of £14.4m reflects the lack of performance fees in 2008 and compares with the operating profit of £26.2m for the same period in 2007.  The reduction in performance fees of £21.3m compares with the reduction of £11.8m in operating profit. Expenditure in the six months to 30 September 2008 fell £5.3m to £10.9m from £16.2m in the six months to 30 September 2007. The reduction was primarily in the Group Profit Bonus which is 30% of pre-bonus operating profit. The resulting operating profit margin for the period to 30 September 2008 was 57.0% compared with 61.5% for the six months to 30 September 2007.  

Operating Cash flow

The Group generated £14.9m of net cash flow from operating activities during the six months ended 30 September 2008 (2007: £27.9m). Taxation paid during the period was £6.3m compared with £2.6m for the six months to 30 September 2007.  On 28 July 2008 the Group paid a final dividend of 2.160p per share in respect of the six month period ended 31 March 2008.  This equated to a distribution to shareholders of £4.8m.  

The Board's intention is to retain sufficient capital within the business to meet continuing obligations, sustain future growth and to provide a buffer against adverse market conditions. It is the Group's stated policy that any accumulated capital surplus to its identified capital requirement will be returned to shareholders in an appropriate manner. The Group has no debt to repay or service. Shareholders funds were £24.0m at 30 September 2008 (2007: £29.3m).

The Group will pay an interim dividend of 2.43p per share in respect of the six months ended 30 September 2008. The dividend is in accordance with its stated progressive dividend policy and will be paid in December 2008.  The dividend payment will equate to a distribution of £5.4m and will leave approximately £22m of cash on the balance sheet which is significantly higher than necessary to satisfy the financial resources and liquidity requirements of the FSA and represents over two years of current overhead cover.

GROUP INCOME STATEMENT FOR THE HALF YEAR ENDED 30 SEPTEMBER 2008 

UNAUDITED

		Unaudited	Audited	Audited
		Six months ended	Six months ended	Year ended
		30-Sep-08	30-Sep-07	31-Mar-08
	Note	£'000	£'000	£'000
Revenue
Management fees		24,638	20,557	43,987
Performance fees		664	22,030	22,160
Other income		(4)	(30)	82
Total revenue	3	25,298	42,557	66,229
Cost of sales		(10)	(226)	(296)
Gross profit		25,288	42,331	65,933
Administrative expenses*		(10,873)	(16,152)	(26,667)
Operating profit		14,415	26,179	39,266
Finance income		562	430	1,134
Finance costs		(4)	(6)	(7)
Profit before tax		14,973	26,603	40,393
Taxation		(4,240)	(8,254)	(12,480)
Profit after tax		10,733	18,349	27,913
Basic earnings per share	6	4.86p	8.33p	12.65p
Diluted earnings per share	6	4.85p	8.30p	12.62p
Dividends paid (£'000)	7	4,778	4,151	24,151

GROUP BALANCE SHEET AS AT 30 SEPTEMBER 2008

UNAUDITED

		Unaudited	Audited	Audited
		As at	As at	As at
		30-Sep-08	30-Sep-07	31-Mar-08
	Note	£'000	£'000	£'000
Non-current assets
Property, plant and equipment		518	683	611
Deferred tax assets		78	-	46
		596	683	657
Current assets
Trade and other receivables		9,705	9,344	8,917
Cash and cash equivalents		26,824	34,173	22,545
		36,529	43,517	31,462
Current liabilities
Trade and other payables		(7,979)	(6,624)	(7,191)
Corporation tax liabilities		(5,075)	(8,256)	(6,356)
Derivative financial liabilities		(69)	(18)	(23)
		(13,123)	(14,898)	(13,570)
Net current assets		23,406	28,619	17,892
Non-current liabilities
Deferred tax liabilities		-	(48)	-
Total net assets		24,002	29,254	18,549
Equity
Issued share capital	8	55	55	55
Share premium account		1,809	1,809	1,809
Capital redemption reserve		20	20	20
Retained earnings		22,118	27,370	16,665
Total equity		24,002	29,254	18,549

GROUP STATEMENT OF CHANGE IN EQUITY FOR THE HALF YEAR ENDED 

30 SEPTEMBER 2008

UNAUDITED

	Share capital	Share premium	Capital redemption reserve	Retained earnings	Total shareholder's equity
	£'000	£'000	£'000	£'000	£'000
Balance at 1 April 2007	55	1,636	20	13,172	14,883
Profit for the period	-	-	-	18,349	18,349
Dividends paid	-	-	-	(4,151)	(4,151)
Issue of shares	-	173	-	-	173
Balance at 30 September 2007	55	1,809	20	27,370	29,254
Profit for the period	-	-	-	9,564	9,564
Employee share options	-	-	-	1	1
Dividends paid	-	-	-	(20,000)	(20,000)
Own shares held by EBT	-	-	-	(270)	(270)
Balance at 31 March 2008	55	1,809	20	16,665	18,549
Profit for the period	-	-	-	10,733	10,733
Dividends paid	-	-	-	(4,778)	(4,778)
Own shares held by EBT	-	-	-	(502)	(502)
Balance at 30 September 2008	55	1,809	20	22,118	24,002

GROUP CASH FLOW STATEMENT FOR THE HALF YEAR ENDED 30 SEPTEMBER 2008

UNAUDITED

	Unaudited	Audited	Audited
	Six months ended	Six months ended	Year ended
	30-Sep-08	30-Sep-07	31-Mar-08
	£'000	£'000	£'000
Profit after tax	10,733	18,349	27,913
Adjustments for:
Corporation tax	4,240	8,254	12,480
Finance income	(562)	(430)	(1,134)
Finance expense	4	6	7
Loss on disposal of property, plant and equipment	-	1	1
Depreciation of property, plant and equipment	178	146	313
Share-based payments expense	-	-	1
	14,593	26,326	39,581
Changes in working capital
(Increase) in receivables	(820)	(1,292)	(754)
Increase in payables	1,070	2,875	3,173
Increase/(decrease) in other financial liabilities	46	18	23
Cash flows from operating activities	14,889	27,927	42,023
Interest paid	(4)	(6)	(6)
Income tax paid	(6,337)	(2,595)	(8,815)
Net cash inflow from operating activities	8,548	25,326	33,202
Cash flows from investing activities
Purchase of property, plant and equipment	(85)	(124)	(219)
Interest received	594	431	1,022
Net cash flows from investing activities	509	307	803
Cash outflow from financing activities
Cash inflow from issue of shares	-	173	173
Dividends paid to equity shareholders	(4,778)	(4,151)	(24,151)
Net cash outflow from financing activities	(4,778)	(3,978)	(23,978)
Net increase in cash and cash equivalents	4,279	21,655	10,027
Cash and cash equivalents at beginning of period	22,545	12,518	12,518
Cash and cash equivalents at the period end	26,824	34,173	22,545

Notes to the accounts

For the year ended 30 September 2008

1 Basis of preparation

The information for the year ended 30 September 2008 does not constitute statutory accounts as defined in Section 240 of the United Kingdom Companies Act 1985. Comparative figures for 31 March 2008 are taken from the full accounts, which have been delivered to the Registrar of Companies and contain an unqualified audit report and did not contain a statement under Section 237(2) or Section 237(3) of the Companies Act 1985. The condensed financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and IAS 34 'Interim Financial Reporting' as adopted by the European Union. The condensed financial statements should be read in conjunction with the Group's Annual Report for the year ended 31 March 2008, which have been prepared in accordance with IFRSs as adopted by the European Union. The Annual Report for the year ended 31 March 2008 is available on the Group's website.

2 Significant accounting policies

The condensed financial statements have been prepared under the historical cost convention modified to include fair valuation of derivative financial instruments. 

The accounting policies presentation and methods of computation applied in the interim financial statements are consistent with those applied in the financial statements for the year ended 31 March 2008.

3 Segmental analysis

The Directors consider that its services comprise one business segment (being the provision of currency management services) and that it operates in a market that is not bound by geographical constraints.

For management purposes, the Group sub-divides the single business segment into two currency management products being 'Hedging' and 'Absolute Return' and reports its performance between two fee structures being 'management fees' and 'performance fees'. Revenue information analysing the aforementioned products is presented below:

(a) Product class

The Group's main trading activities can be split between investment management and other Group activities including consultancy.

	Six months ended	Six months ended	Year ended
	30-Sep-08	30-Sep-07	31-Mar-08
	£'000	£'000	£'000
Currency management income
Active hedging
Management fees	2,687	2,404	4,785
Performance fees	60	7	142
Passive hedging
Management fees	616	386	1,144
Absolute Return segregated funds
Management fees	9,175	7,481	15,941
Performance fees	0	7,408	7,419
Absolute Return pooled funds
Management fees	12,160	10,286	22,117
Performance fees	604	14,615	14,599
	25,302	42,587	66,147
Other revenues	-4	-30	82
	25,298	42,557	66,229

 (b) Geographical regions served

The geographical analysis of turnover is based on the domicile of client. All turnover originated in the UK. All assets of the Group are located in the UK.

Other group activities form less than 1% of the total Group income. This is not considered significant and they are not analysed by geographical region.

	Six months ended	Six months ended	Year ended
	30-Sep-08	30-Sep-07	31-Mar-08
	£'000	£'000	£'000
Currency management income
US and Canada	2,447	2,870	5,102
UK	16,028	32,885	48,840
Other European	4,584	5,422	8,995
ROW	2,243	1,410	3,210
	25,302	42,587	66,147
Other activities	(4)	(30)	82
	25,298	42,557	66,229

4 Share-based payments

The Group issues share awards to employees. Share options issued under the Flotation Bonus Scheme and the Group bonus scheme are classified as share-based payments with cash alternatives under IFRS 2. The fair value of the debt component of the amounts payable to the employee is calculated as the cash amount offered to the employee at grant date and the fair value of the equity component of the amounts payable to the employee is calculated as the market value of the share options at grant date less the cash forfeited in order to receive the share options. The debt component is charged to the income statement over the period in which the bonus is earned, the equity component is charged to the income statement over the vesting period of the option.

During the period, the Group issued nil cost options over a total of £400,000 worth of issued shares to two senior employees. The fair value of these options will be charged to the income statement over the vesting period of the options.

All other awards have been classified as equity-settled under IFRS 2. The fair value of the amounts payable to employees under these awards is recognised as an expense with a corresponding increase in equity. 

The fair value of options granted is measured at grant date using an appropriate valuation model, taking into account the terms and conditions upon which the instruments were granted. 

5 Own shares

Own shares were held during the six months ended 30 September 2007 by an Employee Share Option Trust (ESOT) for the purpose of the Group bonus scheme. The holding of the ESOT comprised own shares that had been allocated against a share award not vested. All share awards under the ESOT were exercised in the period and consequently no shares were held at 30 September 2007 or in any later period under the ESOT. 

The Record plc Employee Benefit Trust (EBT) was formed under a Trust Deed dated 19 December 2007 to hold shares acquired under share awards made to employees. A total of 168,287 ordinary shares were acquired on 21 December 2007 under the Record plc Flotation Bonus Scheme by the Trust, a further 96,797 shares were purchased under the Record plc Group Bonus Scheme and 383,531 shares were purchased in respect of nil cost options awarded to two senior employees in the period. The EBT continues to hold all of these shares at 30 September 2008. The holding of the EBT comprises own shares that have not vested unconditionally to employees of the Group. Own shares are recorded at cost and are deducted from retained earnings. The EBT is consolidated in the Group Financial statements.

Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the Group income statement.

6 Earnings per share

Basic earnings per share is calculated by dividing the profit for the financial period attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share is calculated as for the basic earnings per share with a further adjustment to the weighted average number of ordinary shares to reflect the effects of all potential dilution.

There is no difference between the profit for the financial year attributable to equity holders of the parent used in the basic and diluted earnings per share calculations.

	Six months ended	Six months ended	Year ended
	30-Sep-08	30-Sep-07	31-Mar-08
Weighted average number of shares used in calculation of basic earnings per share	221,069,397	220,263,600	220,739,001
Effect of potential dilution - share options	89,212	809,600	499,040
Weighted average number of shares used in calculation of diluted earnings per share	221,158,609	221,073,200	221,238,041
	pence	pence	pence
Basic earnings per share	4.86	8.33	12.65
Diluted earnings per share	4.85	8.30	12.62

The weighted average number of shares used in the calculation of basic and diluted earnings per share calculation reflects the number of shares that would have been in issue if the share split described in note 8 had occurred on 1 April 2007. 

7 Dividends

The dividends paid by the Group during the six months ended 30 September 2008 totalled £4,778,190 (2.160p per share). The dividends paid during the year ended 31 March 2008 were £24,150,890 (10.91p per share) this included a final dividend of £4,150,890 paid in respect of the year ended 31 March 2007 and a special dividend of £20,000,000 paid on 9 November 2007 prior to the IPO.

8 Called up share capital

	As at 30 September 2008    008
	£’000	Number
Authorised
Ordinary shares of 0.025p each	100	400,000,000
Called up, allotted and fully paid
Ordinary shares of 0.025p each	55	221,380,800
	As at 30 September 2007
	£’000	Number
Authorised
Ordinary shares of 10p each	100	1,000,000
Called up, allotted and fully paid
Ordinary shares of 10p each	55	553,452
	£’000	Number
Called up, allotted and fully paid
‘A’ ordinary shares of 10p each	40	402,967
Ordinary shares of 10p each	15	146,583
As at 1 April 2007	55	549,550
Exercise of share options
‘A’ ordinary shares of 10p each issued	–	3,902
Conversion of ‘A’ ordinary shares to ordinary shares
Ordinary shares of 10p each	15	150,485
‘A’ ordinary shares of 10p each	(15)	(150,485)
Ordinary shares of 10p each as at 30 September 2007	55	553,452
400 to 1 split of ordinary shares
Ordinary shares of 0.025p each	55	221,380,800
Adjustment for own shares held by EBT	–	(168,287)
As at 31 March 2008	55	221,212,513
Adjustment for additional own shares held by EBT	–	(480,328)
As at 30 September 2008	55	220,732,185

The two classes of share authorised as at 1 April 2007 ranked pari passu in all respects save that the 'A' ordinary shares were subject to a mandatory transfer upon the termination of the shareholder's employment. 

On 23 August 2007, a resolution was passed with the effect that all issued and unissued 'A' ordinary shares were converted to ordinary shares. On 15 November 2007, a resolution was passed with the effect that on admission to the London Stock Exchange's main market for listed securities, all issued and unissued ordinary shares of 10p were each split into 400 ordinary shares of 0.025p.

9 Related parties' transactions

The Group considers parties to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. 

The compensation for the key management personnel who are considered to be related parties is as follows:

	Six months ended	Six months ended	Year ended
	30-Sep-08	30-Sep-07	31-Mar-08
	£'000	£'000	£'000
Short-term employee benefits	5,457	9,844	15,315
Post-employment benefits	160	142	289
Share based benefits	-	-	1
	5,617	9,986	15,605

There has been no material change in the nature of related party transactions in the six months ended 30 September 2008.

10 Post balance sheet events

There are no post balance sheet events for the period ended 30 September 2008.

  Information for shareholders

Record plc

Registered in England and Wales

Company No. 1927640

Registered office

Morgan House

Madeira Walk
Windsor
Berkshire

SL4 1EP
United Kingdom

Tel: [phone] 

Fax: [phone]

Principal UK trading subsidiaries

Record Currency Management Limited

Registered in England and Wales

Company No. 1710736

Record Group Services Limited

Registered in England and Wales

Company No. 1927639

Further information on Record plc can be found on the Group's website: www.recordcm.com

Registrar

Capita Registrars Limited

Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire

HD8 0GA

Further information about the Registrar is available on their website www.capitaregistrars.com

 

END

 

 

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