Half Yearly Report

RNS Number : 7195I
Polar Capital Holdings PLC
11 December 2015
 



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

Interim results for six months ended 30 September 2015

 

11 December 2015

 

Financial Highlights

·    Assets under Management ("AUM") at 30 September 2015 were US$10.9bn (31 March 2015: US$12.3bn)

·    Core operating profit, excluding performance fees, £12.4m (30 September 2014: £13.9m)

·    Profit before share-based payments £13.3m (30 September 2014: £12.7m)

·    Pre-tax profit £11.7m (30 September 2014: £11.6m)

·    Basic earnings per share 10.44p (30 September 2014: 10.55p) and adjusted* diluted earnings per share 11.46p (30 September 2014: 10.75p)

·    Interim dividend per ordinary share of 5.5p declared (2014: 5.5p) to be paid in January 2016

·    Shareholders' funds £69.7m (31 March 2015: £75.2m and 30 September 2014: £65.5m) including cash and investments of £75.1m (31 March 2015: £93.1m and 30 September 2014: £63.4m)

*   Adjusted to exclude cost of share-based payments

 

Corporate Highlights

·    Long only European (ex-UK) Income UCITS Fund launched in June 2015

 

Current Trading

·    AUM at 30 November 2015 were US$12.0bn

 

Tim Woolley, Chief Executive Officer, commented:

"This proved another challenging half year for us.  During the last six months we saw a significant fall in global equity markets in late summer and further redemptions from our Japan Fund, although recent performance has improved markedly. These two headwinds more than offset some good inflows seen on Global Convertibles, Financials and Healthcare.

 

Our long-term fund performance remains strong, with our two new strategies of UK Absolute and European Income also delivering good performance in their first year. Whilst global stock markets are likely to be volatile in the face of near-term geopolitical concerns, we believe that we remain well positioned to resume growth again over the medium-term."

 

 

 

For further information please contact:


Polar Capital

+44 (0)20 7227 2700

Tim Woolley (CEO)


John Mansell (COO) 




Canaccord Genuity - Nomad and Joint Broker

+44 (0)20 7523 8000

Simon Bridges (QE)


Roger Lambert


Kit Stephenson




Peel Hunt - Joint Broker

+44 (0) 20 7418 8893

Guy Wiehahn




Camarco

+44 (0)20 3757 4984

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 24 funds and 4 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. 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, 34% of the equity is held by directors, founders and staff. Polar Capital Holdings plc has two key corporate investors: Caledonia Investments plc, a London-listed investment trust with a notable track record of backing emerging companies in the financial sector, owns 9% and XL Group plc, an Irish-domiciled NYSE-listed company, which through its subsidiaries and under the XL Catlin brand, provides insurance and re-insurance worldwide and has a proven pedigree of taking minority interests in alternative asset managers, holds 8%. 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)

*Including managed accounts run off the same strategy

 

Assets Under Management

30 September 2015

US$m

31 March

2015 

US$m

30 September 2014

US$m

Technology

1,866

2,037

1,898

Technology Trust plc

1,121

1,199

1,128

Global Technology UCITS Fund

745

838

770

Japan

3,033

3,743

5,301

Japan UCITS Fund*

2,927

3,612

5,158

Japan Alpha UCITS Fund

106

131

143

Europe

679

747

771

European Forager Alternative Fund

658

672

613

European Conviction Alternative Fund

21

75

158

Healthcare

1,452

1,503

1,170

Global Healthcare Growth & Income Trust plc

318

349

324

Healthcare Opportunities UCITS Fund

1,027

1,052

804

Biotechnology UCITS Fund

55

49

15

Healthcare Blue Chip UCITS Fund

52

53

27

Financials

1,032

1,035

979

Asian Financials UCITS Fund

37

53

48

Global Insurance UCITS Fund

527

526

471

Income Opportunities UCITS Fund

153

135

131

Financial Opportunities UCITS Fund

34

27

28

Global Financials Trust plc

281

294

301

Global Emerging Markets

504

783

972

Emerging Markets Growth UCITS Fund*

188

250

243

Emerging Markets Income UCITS Fund

316

533

729

Global Convertibles

436

313

202

ALVA Global Convertible Fund*

87

81

87

Global Convertible UCITS Fund

349

232

115

North American UCITS Fund

1,761

1,972

2,024

Global Alpha UCITS Fund

101

100

95

UK Absolute Equity UCITS Fund

22

11

10

European Income

44

12

-

European Income UCITS Fund

14

12

-

European (ex-UK) Income UCITS Fund

30

-

-

Total

10,930

12,256

13,422

 

 

 

 

 

Analysis of Changes in Asset Types for the six months to 30 September 2015


Long only

Funds

US$m

Alternative Funds

US$m

Total

US$m

Total assets as at 31 March 2015

11,185

1,071

12,256

Net subscriptions/ (redemptions) from ongoing business

(783)

73

(710)

Market movements and performance

(609)

(7)

(616)

Total assets at 30 September 2015

9,793

1,137

10,930

 

Analysis of AUM by Business Unit and Type of Funds as at 30 September 2015

Technology

17%


Long only funds

93%

Japan

28%


Alternative funds

7%

Europe

6%



100%

Healthcare

13%




Financials

10%




Global Emerging Markets

5%




Global Convertibles

4%




North American

16%




Global Alpha

1%




UK Absolute Equity

-




European Income

-





100%






Chief Executive's Statement

 

This proved another challenging half year for us with assets under management (AUM) falling 11% over the six months from our financial year end in March 2015 and 19% from the AUM level twelve months ago. Core operating profit, excluding performance fees, fell 11% in comparison with the same period last year.


Six months to

30 September 2015

Six months to

30 September 2014

Core operating profit

£12.4m

£13.9m

Finance income/ (expense)

£0.9m

£(1.2)m

Profit before share based payments and tax

£13.3m

£12.7m

Share-based payments

£(1.6)m

£(1.1)m

Profit before tax

£11.7m

£11.6m

Adjusted diluted earnings per share (non GAAP measure)

11.47p

10.75p

 

Profit before share-based payments and tax increased marginally to £13.3m over the period, compared with £12.7m in the six months to September 2014, and adjusted diluted earnings per share increased 7% over the comparable six months, helped by an improvement in the net returns from our investment and seeding program and related hedging strategies resulting in higher finance income over the period.

The Company continues to be comfortable with its policy of the first interim dividend for any year being predicated on half of the first half year's core earnings and in light of this position the interim dividend payment in January 2016 will be 5.5p (2014: 5.5p). In addition the Board wish to take the opportunity to advise shareholders that in 2016 it is considering bringing forward the second interim dividend from July to March.

As I cautioned in my outlook at the financial year end, our short term results would remain heavily influenced by the direction of our Japanese assets and the direction of overall global equity markets given that over 90% of our AUM is in long only products. During the last six months we saw a significant fall in global equity markets in late summer and further redemptions from our Japan Fund. These two headwinds more than offset some good inflows seen on Global Convertibles, Financials and Healthcare.

It is worth noting that the bulk of the redemptions from the Japan Fund occurred in the first quarter and there are encouraging signs that the worst may now be behind us as performance on the Fund has improved markedly. On a rolling twelve months to the end of October, the Fund is again top quartile in the Lipper peer rankings. The long-term performance of the Fund remains exceptional with the Fund ranking 9th out of 193 funds over ten years in its Lipper peer group.

The two new legs that we added last year, UK Absolute and European Income have delivered good performance in their first year and we are optimistic that both strategies will start to raise assets in the coming twelve months.  The UK Absolute Equity UCITS Fund was up an exceptional 27% in its first year whilst the European Income UCITS Fund outperformed its index by just over 4%. The European Income team had a further boost during this half-year with a number of clients seeding the launch of a second fund for the team, a European ex-UK Income UCITS Fund which we launched in June.

Since the end of September markets have recovered some of their summer losses, the pace of redemptions on our Japan Fund has slowed compared with the nadir of earlier in the year and we have seen good inflows elsewhere. This positive combination of factors has allowed AUM at the end of November to bounce back to US$12.0bn, although performance fee profits remain unpredictable until the end of December when the majority of the Group's performance fees are due.

Whilst global stock markets are likely to be volatile in the face of near-term geopolitical concerns, the long-term performance across our funds remains strong and we believe that we remain well positioned to resume growth again over the medium-term.

Tim Woolley

Chief Executive                                                                      10 December 2015



Interim Consolidated Income Statement for the six months to 30 September 2015


(Unaudited)

Six months to 30 September 2015

£'000

(Unaudited)

Six months to 30 September 2014

£'000

Revenue

39,862

41,803

Finance income/ (expense)

879

(1,202)

Gross income

40,741

40,601

Commissions and fees payable

(3,971)

(4,633)

Net income

36,770

35,968

Operating costs before share-based payments

(23,481)

(23,254)

Operating profit before share-based payments and tax

13,289

12,714

Share-based payments

(1,597)

(1,122)

Profit for the period before tax

11,692

11,592

Taxation

(2,474)

(2,513)

Profit for the period attributable to ordinary shareholders

9,218

9,079

Basic earnings per ordinary share

10.44p

10.55p

Diluted earnings per ordinary share

9.77p

9.56p

Adjusted diluted earnings per ordinary share (Non GAAP measure)

11.46p

10.75p

 

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 2015

 


(Unaudited)

Six months to 30 September 2015

£'000

(Unaudited)

Six months to 30 September 2014

£'000

Profit for the period attributable to ordinary shareholders

9,218

9,079

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

Deferred tax effect

-

(133)


-

530

Net movement on the fair valuation of cash flow hedges

901

(1,277)

Deferred tax effect

(251)

427


650

(850)

Exchange differences on translation of foreign operations

(3)

-

Other comprehensive income

647

(320)

Total comprehensive income for the period,  net of tax, attributable to ordinary shareholders

9,865

8,759

 



Interim Consolidated Balance Sheet as at 30 September 2015


(Unaudited)

30 September 2015

£'000

(Audited)

31 March

2015

£'000

Non-current assets



Property, plant and equipment

2,133

2,007

Deferred tax assets

4,476

5,136

Total non-current assets

6,609

7,143

Current assets



Assets at fair value through profit or loss

35,600

38,071

Assets held for sale

14,399

13,614

Trade and other receivables

9,631

9,334

Cash and cash equivalents

25,130

41,385

Total current assets

84,760

102,404

Total assets

91,369

109,547

Non-current liabilities



Deferred tax liabilities

105

102

Current liabilities



Trade and other payables

16,631

26,276

Other financial liabilities

2,986

5,357

Current tax liabilities

1,975

2,581

Total current liabilities

21,592

34,214

Total liabilities

21,697

34,316

Net assets

69,672

75,231

Capital and reserves



Issued share capital

2,247

2,232

Share premium

16,715

16,715

Investment in own shares

(890)

(962)

Capital and other reserves

7,407

6,665

Retained earnings

44,193

50,581

Total equity - attributable to ordinary shareholders

69,672

75,231



 

Interim Consolidated Statement of Changes in Equity for the six months to 30 September 2015


 

Issued

share capital £'000

Share premium £'000

Investment

in own shares

£'000

Capital reserves £'000

Other reserves £'000

Retained earnings £'000

Total equity £'000

As at 1 April 2015

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









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

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

 



 

Interim Consolidated Statement of Cash Flow for the six months to 30 September 2015


(Unaudited)

Six months to 30 September

2015

£'000

(Unaudited)

Six months to 30 September

2014

£'000

Operating activities



Cash generated/ (used) from operations

2,282

(8,021)

Tax paid

(2,576)

(3,010)

Net cash flow from operating activities

(294)

(11,031)

Investing activities



Interest received and similar income

9

8

Purchase of property, plant and equipment

(322)

(33)

Purchase of assets at fair value through profit or loss

(9)

-

Purchase of assets held for sale

(6)

-

Proceeds from sale of available-for-sale financial assets

-

10,271

Purchase of available-for-sale financial assets

-

(6,212)

Cash flows related to derivatives

1,483

613

Net cash flow from investing activities

1,155

4,647

Financing activities



Dividends paid

(17,188)

(18,100)

Issue of ordinary shares

72

405

Net cash flow from financing activities

(17,116)

(17,695)

Net decrease in cash and cash equivalents

(16,255)

(24,079)

Cash and cash equivalents at start of period

41,385

47,041

Cash and cash equivalents at end of period

25,130

22,962

 



 

Notes to the Unaudited Interim Consolidated Financial Statements

For the six months to 30 September 2015

 

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 2015 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 2015 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 2015.

2.    Revenue    


(Unaudited)

Six months to 30 September 2015

£'000

(Unaudited)

Six months to 30 September 2014

£'000

Investment management fees

40,374

41,287

Investment performance fees

42

-

(Loss)/ gain on hedging

(554)

516


39,862

41,803

 

3     Profit on Ordinary Activities Before Taxation


(Unaudited)

Six months to 30 September 2015

£'000

(Unaudited)

Six months to 30 September 2014

£'000

a) This is stated after charging:



Staff costs

17,405

18,082

Depreciation

197

36

Operating lease rentals - land & buildings

637

483

Operating lease rentals - other

642

606

 

b) Auditors' remuneration:

Audit of group financial statements

24

20

Other fees



- local statutory audits of subsidiaries

18

15

- GIPS Review

11

-

- internal controls review

24

22

- tax advisory services

2

-

 

4.    Dividends   


(Unaudited)

Six months to 30 September 2015

£'000

(Unaudited)

Six months to 30 September 2014

£'000

Dividend paid

17,188

18,100

 

5.    Earnings Per Ordinary Share

The calculation of basic earnings per ordinary share is based on the profit for the period of £9,217,800 (September 2014: profit £9,078,624); and on 88,255,362 (September 2014: 86,077,915) 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 £9,217,800 (September 2014: profit £9,078,624) and 94,356,332 (September 2014: 94,919,336) ordinary shares, being the weighted average number of ordinary shares allowing for all options of 5,683,882 (September 2014: 8,007,244) which are dilutive as well as shares granted under a crystallisation event but not yet issued of 417,088 (September 2014: 834,177).

The calculation of adjusted earnings per ordinary share is based on a profit for the period of £9,217,800 (September 2014: profit of £9,078,624) but adjusted for the share-based payments charge of £1,597,500, (September 2014: share base payments charge of £1,121,755) and 94,356,332 (September 2014: 94,919,336) 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.            Assets at fair value through profit or loss


(Unaudited)

Six months to 30 September 2015

£'000

(Audited)

Year to

31 March

2015

£'000

At beginning of period

38,071

43,912

Additions

9

13

Redemptions

_

(10,384)

Net (loss)/ gain on movement in fair value

(2,480)

4,530

At end of period

35,600

38,071

 

7.    Assets held for sale


(Unaudited)

Six months to 30 September 2015

£'000

(Audited)

Year to

31 March

2015

£'000

At beginning of period

13,614

_

Additions

6

12,470

Redemptions

_

_

Net gain on movement in fair value

779

1,144

At end of period

14,399

13,614

 

8.    Notes to the Cash Flow Statement

Reconciliation of profit before taxation to cash generated from operations


(Unaudited)

Six months to 30 September 2015

£'000

(Unaudited)

Six months to 30 September 2014

£'000

Cash flows from operating activities



Profit on ordinary activities before tax

11,692

11,592

Interest received

(9)

(7)

Depreciation of property, plant and equipment

197

36

Increase in trade and other receivables

(297)

(6,932)

Decrease in trade and other payables

(9,645)

(14,537)

(Gain)/ loss on revaluation of instruments at fair value through profit or loss

(2,680)

875

Loss on disposal of available-for-sale financial assets

_

33

Loss on revaluation of financial assets at fair value through profit or loss

2,480

_

Gain on revaluation of assets held for sale

(779)

_

Gain on derivatives

(274)

(203)

Share-based payment

1,597

1,122

Cash generated/ (used) from operations

2,282

(8,021)

 

9.    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 £3,912,500 (September 2014: £3,237,883). The amounts receivable at period end in this respect were £1,284,900 (March 2015: £1,289,200).

At the end of the period, the Group had an outstanding loan due of £890,500 (March 2015: £961,735) 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.

10.  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 2015 and 2014 has not been audited. The information for the year ended 31 March 2015 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 2015. 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 2016. This will be paid on 15 January 2016 to shareholders on the register on 29 December 2015. The shares will trade ex-dividend from 24 December 2015.

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

Nominated Advisor

Canaccord Genuity

Joint Corporate Brokers

Canaccord Genuity

Peel Hunt

Half Year Report 

The Half Year report will be posted to shareholders in late December 2015. 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

 


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The company news service from the London Stock Exchange
 
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