Final Results

Record PLC
30 June 2023
 

PRESS RELEASE

Record plc

 

30 June 2023

 

FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2023

Strong performance across the Group

Growth in revenue, operating margin, profit and earnings

Continued momentum behind revised strategy

Record plc, the specialist currency and asset manager, today announces its audited results for the year ended 31 March 2023 ("FY-23").

Financial headlines:

·      Revenue growth of 27% to £44.7m (FY-22: £35.1m)

·      AUME1 in USD terms up by 6% to $87.7bn (FY-22: $83.1bn)

·      Profit before tax increase of 34% to £14.6m (FY-22: £10.9m)

·      36% increase in proposed final ordinary dividend to 2.45p per share (FY-22: 1.80p); 25% increase in total ordinary dividend for the year to 4.50p per share (FY-22: 3.60p)

·      Increased operating profit margin of 32% (FY-22: 31%)

·      Basic EPS growth of 32% to 5.95 pence (FY-22: 4.52 pence)

·      Performance fees increased by £5.3m to £5.8m (FY-22: £0.5m)

·      Strong and liquid financial position with shareholders' equity of £28.3m (FY-22: £25.9m) and assets managed as cash of £14.5m (FY-22: £17.3m)

Key developments:

·      Strong momentum in AUME growth (+6%) driven by net inflows of $9.1bn to close the year at $87.7bn, the highest ever level of AUME to date.

 

·      Regulatory approval received from the German financial regulator (BaFin) during the year, approving the Group's asset management activity and increasing the Group's geographical reach into the EU.

 

·      Material increase in revenue for FY-23 driven by growth in both management and performances fees linked to core currency management products, with new revenue streams from the launch of asset management products expected for FY-24.

 

·      Continued progress in modernisation, as evidenced by launch of Record-Platform and enhanced reporting suite.

 

·      Collaborative partnerships developed in FY-23 with a range of high-quality, expert partners expected to lead to new product launches and higher-margin revenue streams from FY-24.

 

·      David Morrison announced as an independent Non-executive Director and Chair-elect following Neil Record's stepping down at AGM in July 2023, after 40 years of leadership.

1.     For the majority of its Currency Management and Derivative overlay products, Record manages only the impact of foreign exchange and not the underlying assets, therefore its "assets under management" are notional rather than real. Conversely, for its Asset Management products, Record's role as investment manager includes managing the underlying assets in the more conventional sense of managing AUM. Consequently, when combined, to distinguish this form 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, Leslie Hill, CEO of Record plc, said:

"I am pleased to report a strong set of results for FY-23, reflected by the growth in revenues, pre-tax profit, operating margin and earnings as well as progress in each of our three strategic priorities of modernisation, diversification and succession. 

"A year ago we set out ambitious targets of reaching £60m in revenue and an operating margin of c. 40% by FY-25 and we continue to see a clear path to achieving those targets. Our traditional currency revenues remain fundamental to our business and continue to grow, and we expect the effort taken over the last two years in developing our new partnerships and asset management products to start delivering diversified revenue streams in the current financial year (FY-24).

"We remain confident that our current strategy is pointing the business in the right direction, firmly underpinned by our highly cash-generative business model, strong core of currency management business, and increased focus on more diversified and higher revenue-margin products. I look forward to updating our shareholders on progress, not only with the core business but with the new opportunities provided through both Record Asset Management and Record Digital as we grow these business segments."

Analyst presentation

There will be a presentation for analysts at 9.30am on Friday, 30 June 2023 held via a Zoom call. Please contact the team at Buchanan via record@buchanan.uk.com for further details. A copy of the presentation will be made available on the Group's website at www.recordcm.com.

For further information:

Record plc

+44 (0) 1753 852222

Leslie Hill - Chief Executive Officer


Steve Cullen - Chief Financial Officer


 


Buchanan

+44 (0) 20 7466 5000

Simon Compton

record@buchanan.uk.com

Henry Wilson

 

George Beale

 

 

 

 



 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 MARCH 2023



2023

2022



£'000

£'000

Revenue


44,689

35,152

Cost of sales


(37)

(219)

Gross profit


44,652

34,933

Administrative expenses


(29,888)

(23,726)

Other expense


(293)

(372)

Operating profit


14,471

10,835

Finance income


182

44

Finance expense


(55)

(23)

Profit before tax


14,598

10,856

Taxation


(3,259)

(2,225)

Profit after tax


11,339

8,631

Total comprehensive income for the year


11,339

8,631

Profit and total comprehensive income for the year attributable to


 


Owners of the parent


11,339

8,631

Total comprehensive income for the year


11,339

8,631

Earnings per share for profit attributable to the equity holders of the parent during the year


 


Basic earnings per share (pence per share)


5.95

4.52

Diluted earnings per share (pence per share)


5.81

4.37

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2023


2023

2022



£'000

£'000

Noncurrent assets


 


Intangible assets


1,390

562

Rightofuse assets


1,011

1,421

Property, plant and equipment


377

401

Investments


4,901

3,447

Deferred tax assets


134

253

Total noncurrent assets


7,813

6,084

Current assets


 


Trade and other receivables


14,373

9,883

Derivative financial assets


54

-

Money market instruments with maturities > 3 months


4,549

13,913

Cash and cash equivalents


9,948

3,345

Total current assets


28,924

27,141

Total assets


36,737

33,225

Current liabilities


 


Trade and other payables


(6,011)

(4,721)

Corporation tax liabilities


(1,329)

(924)

Provisions


-

(75)

Lease liabilities


(285)

(366)

Derivative financial liabilities


(5)

(124)

Total current liabilities


(7,630)

(6,210)

Non-current liabilities


 


Provisions


(122)

(125)

Lease liabilities


(694)

(960)

Total non-current liabilities


(816)

(1,085)

Total net assets


28,291

25,930

Equity


 


Issued share capital


50

50

Share premium account


1,809

1,809

Capital redemption reserve


26

26

Retained earnings


26,406

24,045

Total equity


28,291

25,930

 



 

CHAIRMAN'S STATEMENT

 

"This past year ending 31 March 2023 ("FY-23") has been another year of change and growth at Record. The business which I founded 40 years ago is beginning to look fundamentally different from its founding conception."

 

Neil Record

Chairman

 

For most of the past four decades, that conception - of our specialising solely in the management of currencies and currency risk - held sway.

 

In the last three years, the firm has chosen, and is now executing, an enhanced business strategy rooted in our core strengths and values. We are using technology to strengthen and modernise our systems across the whole business, providing efficiency of delivery and an enhanced user experience for clients of our core traditional currency management services, whilst enabling new opportunities for offering a more scalable and diversified suite of asset management products and services to both existing and potential clients.

 

In FY-23, we received regulatory approval from the German financial regulator, BaFin, for our subsidiary Record Asset Management GmbH ("RAM") as an asset manager, and are now starting to manage funds. We are developing an infrastructure fund business which will be managed by RAM, and which we hope will grow to provide a material diversification strand. We are engaged in agreeing partnerships with a range of high-quality asset and fund managers, for whom we will offer distribution services in Europe and the UK.

 

Despite our historic experience of low growth in the currency management sector, FY-23 has, somewhat surprisingly, proved to be showing interesting signs of a new type of growth. We have for many years now been providing passive currency hedging services to institutional investors, mainly pension funds. While these mandates can sometimes be large (>$10 billion), we have experienced steady fee compression over the past decade, only now levelling out at very low levels. But a different client type - international asset managers - have begun to recognise that large-scale passive currency hedging is a specialist activity, where scale and technology infrastructure means that outsourcing to a firm like Record is a cost-effective choice.

 

While we had previously seen a small cadre of our existing asset manager clients continually increase their mandate size as they added funds and expanded their businesses, we are now seeing incoming enquiries from new, large international managers. Asset manager Passive Hedging mandates are often technically challenging, but also offer much better fee rates than institutional clients' mandates. We have not seen significant fee compression in this sector, and so these mandates offer an attractive risk-adjusted return, and a new source of potential growth. Some of these asset managers operate in the private debt sector; this sector is experiencing strong growth in the wake of the 2008/09 global financial crisis, supplanting banks as a significant source of loan capital. Passive Hedging mandates for this sub-sector therefore represent a substitution for one aspect of the old bank treasury function; and one we are well-positioned to take advantage of.

 

Financial overview

For the second successive year, the Group has delivered an exceptional set of results, reflected by material growth in both revenue and earnings. As stated above, the opportunities for further growth are significant and diversified across both new and traditional products and services, supported by a strong leadership team and a robust succession plan.

 

I am confident that our strategy of modernisation and diversification is the right direction for the Group, firmly supported by the Group's highly cash-generative business model accompanied by its robust and liquid balance sheet, with total equity of £28.3 million.

 

Further information on financial results can be found in the Financial review section.

 

Capital and dividend

The change in the firm's strategy, decided and executed in FY-21, is continuing to flow through to the financial performance of the business.

 

Our capital policy aims to ensure retention of capital assessed as required for regulatory purposes, for working capital purposes and for investing in new opportunities for the business. Our dividend policy targets a level of ordinary dividend within the range of 70% to 90% of annual earnings, and which allows for progressive and sustainable dividend growth in line with the trend in profitability. It is also the Board's intention, subject to financial performance and market conditions at the time, to return excess earnings over ordinary dividends for the financial year and adjusted for changes in capital requirements, to shareholders, normally in the form of special dividends.

 

 

The Board is recommending a final ordinary dividend of 2.45 pence per share (FY-22: 1.80 pence) with the full-year ordinary dividend at 4.50 pence per share (FY-22: 3.60 pence), representing a 25% increase in the ordinary dividend and an ordinary payout ratio of 76% of earnings. The interim dividend of 2.05 pence was paid on 30 December 2022, and the final ordinary dividend of 2.45 pence will be paid on 9 August 2023 to shareholders on the register at 14 July 2023, subject to shareholder approval.

 

Having carefully reviewed the current level of Group capital against its ongoing requirements for regulatory and investment purposes and to support its continued growth, the Board is announcing a special dividend of 0.68 pence per share to be paid simultaneously with the final ordinary dividend. Total proposed dividends per share for the year are 5.18 pence per share (2022: 4.52 pence) compared to earnings per share of 5.95 pence (2022: 4.52 pence).

 

The Board

On 1 March 2023 I announced that I would be retiring from the Chairmanship and the Board after 40 years at the helm. We announced at the same time the appointment of David Morrison as independent Non-executive Director, and Chairelect.

 

David is very well known to Record. In 1985, his then employer, Abingworth, at the time a venture Investment Trust, acquired 24.5% of Record from a start-up angel investor. Abingworth also became a client at the same time. David sat on the firm's Board until 1992, when Abingworth sold its stake. Then again, in 2009, David re-joined the newly IPO'd firm as an independent Non-executive Director ("NED"), sitting until 2018, when he reached his term limit. In his third term as a NED, and, from July 2023, Record's Chairman, he will preside over a much-changed firm, with multiple developing strands and a new background of growth. I am confident his deep understanding of Record, and his own long experience in asset management, will serve our shareholders well.

 

I am leaving Record's Board with mixed emotions. Record has been my life for 40 years. I founded the firm when I had just turned 30, and I will leave it when I will have just turned 70. It has been the most rewarding career imaginable, meeting fascinating individuals from all walks of life, building teams of colleagues over multiple years, and most importantly building a business which I believe is capable of becoming multigenerational. I have the highest confidence in the current management under our CEO Leslie Hill and her senior team, and I plan to remain a significant shareholder for many years to come.

 

Outlook

In contrast with the optimistic tone with which I feel I can talk about Record, I see many serious and deep challenges ahead for the global economy in general, and for the developed West in particular.

 

Across the board, Western governments have arguably over-extended themselves both in the scope and scale of public expenditure, and in their method of financing this expenditure - namely through debt. Much of this debt is, in practice, monetary financing via "Quantitative Easing". Central banks, and their sponsoring governments, may find this financing becoming increasingly onerous as short rates rise. The same issue has already hit some regional banks in the US, and may hit more. This monetary dislocation is running concurrently with very low or zero productivity growth in much of the global economy. It remains to be seen whether Western democracies can find policies to re-establish low-inflation growth.

 

Record is not immune from these challenges, but structurally we are positioned to be nimble and adaptable to client demand as it develops and changes. While cost pressures (particularly labour costs) will undoubtedly impact the business, the current pace of growth and change should allow the revenue to grow sufficiently to more than compensate for the cost-base growth.

 

I leave the business in good health; vibrant, enthusiastic and looking for new opportunities. I couldn't have wished for more.

 

Neil Record

Chairman

 

29 June 2023

 

 

 



 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

"I have now been CEO for three years and am happy to report encouraging progress in each of the three pillars of the revitalising strategy I set out for the business when I took on the role."

 

Leslie Hill

Chief Executive Officer

 

Most of you will I hope remember the threeyear target I set out last year which aims for revenue of £60 million by this time in 2025, while improving margins and increasing profits. We are on target to achieve this, with revenues of £44.7 million and pre-tax profits of 14.6 million reported for the financial year (FY-23). Let me explain in more detail what we have been doing and what plans we have for this coming year (FY-24).

 

Our three pillars are diversification, modernisation and succession planning.

 

Diversification

There are some key strands to this - diversifying our product offering, our client base and our activities. To achieve this we have now created a number of subsidiaries whose leaders report to me as CEO of the parent company, Record plc, but who have their own budgets and aspirations for the future. More details are set out below in our Succession section, but the subsidiaries are Record Currency Management Limited, Record Asset Management GmbH ("RAM"), Record Currency Management (US) Inc., Record Group Services Limited and Record Digital Asset Ventures Ltd ("Record Digital"). This structure is not there simply to complicate things, but to give regulatory support and oversight and create efficiency, while allowing for agency and autonomy for each of the subsidiary CEOs.

 

Modernisation

After a few years of using a "renovating the house while we are living in it" analogy it now feels the right time to retire that rather tired phrase, as the house is now open for new guests and looking very much more attractive and modern than it did previously. We see IT under the leadership of our CTO as central to our shared services concept and indeed to our whole business, and will continue to develop and invest in this area. It has been a complex journey but I am happy, indeed amazed, to say we managed to stay on budget and on target for deliverables, which is a real tribute to the whole team. This is a significant achievement which has been marked by the recent launch of our new Record platform ("R-Platform") which went live post year-end and the rollout of our new Reporting suite, as well as significant enhancements to the scope of our trading activities. With this we can unlock scale, efficiency and ensure happy clients going forward. I am thrilled with it.

 

Succession

New subsidiary CEOs - as my focus shifts to working closely with our new Chairman in further building and leading the Record Financial Group from the top, our new subsidiary CEOs, Dr Jan Witte and Rebecca Venis, are already heading up Record Currency Management and Record Digital respectively and our investors will see more of them this year. I'm also excited by the future plans we have for new leadership of our Emerging Market Sustainable Finance family, upon which we hope to give further information in FY-24. These changes are a testament, not only to the talents of these individuals, but also to my commitment with the Board to promoting, training and offering opportunities for leadership and share ownership to more and more of our colleagues as we build this 40-year-old stable and experienced currency manager into a real multi-asset manager for the 21st century.

 

Financial performance

We continue our focus on growing the business through diversification and modernisation, and it's testament to the hard work of the management team and all of our colleagues that we are reporting impressive growth again this year in both revenue and profit, of 27% and 34% respectively.

 

The balance between maintaining good cost control and ensuring that the business has the appropriate level of resource to support its growth trajectory has proved even more challenging through this year due to the high inflationary environment and cost pressure seen across the whole of our business. Inevitably we have seen a consequent rise in our cost base for FY-23, which will be carried forward into the current financial year (FY-24), where we can expect to see the full-year impact. Whilst this may have inhibited growth in our operating margin somewhat this year, we remain confident that the current strong pipeline of opportunities in both our currency and higher revenue-margin and more scalable asset management products into FY-24 will serve to counter this impact over the next couple of years.

 



 

Outlook

The next phase of our development of Record is to reap some of the rewards of our modernisation and diversification. The soil has been fertilised over the last few years, and the new plants well heeled in. For quite some time they have been putting down roots and like any young tree more has been going on under the surface than on the top. As was clear at our Capital Markets day recently, the next phase should see some new revenue from our diversifying strands at RAM and Record Digital as well as continued work to scale our currency business. This continues our theme of diversification and modernisation, while our recent promotions carries on our theme of succession planning for the long-term future. We will continue to keep a close watch on costs but drive forward with our threeyear plan.

 

Leslie Hill

Chief Executive Officer

 

29 June 2023

 



 

KEY PERFORMANCE INDICATORS

Measuring our performance against our strategy.

 

The Board uses both financial and nonfinancial key performance indicators ("KPIs") to monitor and measure the performance of the Group against its strategic priorities.

 

Some KPIs link to specific strategic areas as noted below, whilst others represent higher-level key metrics in terms of the Group's business and financial performance.

 

Financial KPIs

 

Revenue (£m)

For the financial years up to and including FY-23, revenue has been earned predominantly from the provision of currency management services in the form of management fees and performance fees. From FY-24 onwards, revenue will include the new revenue streams arising as part of the diversification into asset management products and services.

 

Revenue

£ million

2023

44.7

2022

35.1

2021

25.4

2020

25.6

2019

25.0

 

Why this is important

Revenue is a key indicator of client experience, growth and a key driver of profitability. Growth in AUME, especially into Record's higher revenue-margin products, resulted in a 12% increase in management fees. Revenue also includes performance fees, which increased by £5.3 million to £5.8 million (2022: £0.5 million).

 

Link to strategy

Diversification

Modernisation

 

Operating profit margin (%)

Operating profit margin is an alternative performance measure, calculated by dividing operating profit by revenue.

 

Operating profit margin

%

2023

32

2022

31

2021

24

2020

30

2019

32

 

Why this is important

Operating profit margin is an indicator of the efficiency of the business in turning revenue into profit. Inflows into higher revenue-margin products in addition to efficiencies seen from the adoption of technology in operational areas both contributed to the increase in operating margin to 32% for the year.

 

The Group aims to increase the operating profit margin over time through investment in resources and technology to maintain its premium products and services, whilst increasing operating efficiency and developing more diversified revenue streams in higher-margin products.

 

Link to strategy

Diversification

Modernisation

 



 

Basic earnings per share ("EPS") (pence per share)

The Group aims to create shareholder value over the long term, delivered through progressive and sustainable growth in EPS.

 

EPS

pence

2023

5.95

2022

4.52

2021

2.75

2020

3.26

2019

3.27

 

Why this is important

EPS measures the overall effectiveness of the business model and drives both our dividend policy and the value generated for shareholders. Similarly to operating profit, EPS has increased this year as the benefits from the implementation of the new strategy begin to deliver results in financial terms.

 

Link to strategy

Diversification

Modernisation

Succession

 

Dividends per share ("DPS") (pence per share)

Our dividend policy targets a level of ordinary dividend within the range of 70% to 90% of annual earnings, and which allows for progressive and sustainable dividend growth in line with the trend in profitability.

 

DPS

Ordinary dividend per share

pence

Special dividend per share

pence

2023

4.50

0.68

2022

3.60

0.92

2021

2.30

0.45

2020

2.30

0.41

2019

2.30

0.69

 

Why this is important

Progressive and sustainable dividends illustrate the cash-generative nature of Record's business, and its strength in converting profits into cash and providing a suitable return to shareholders. The ordinary dividend per share has increased by 25%, reflecting the Board's confidence in the ability of the business to deliver its strategy and to achieve sustainable growth. The special dividend per share of 0.68 pence, results in a 15% increase in total dividends to 5.18 pence per share (2022: 4.52 pence per share).

 

Link to strategy

Diversification

Modernisation

Succession

 

Non-financial KPIs

 

AUME ($ billion)

As a currency and derivatives 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.

 

AUME

$ billion

2023

87.7

2022

83.1

2021

80.1

2020

58.6

2019

 57.3

 



 

Why this is important

 

AUME is a key driver of future revenue and an indicator of business growth. AUME increased by 5.5% for the year, including net inflows of $9.1 billion diversified across product lines.

 

Link to strategy

Diversification

Modernisation

Succession

 

Client longevity (%)

Client longevity measures how long Record has been providing either currency and derivative, or asset management, services to each client with a mandate active as at 31 March 2023.

 

Client longevity

%

>10 years:

20

6-10 years:

11

3-6 years:

22

1-3 years:

23

0-1 years:

24

 

Why this is important

Client longevity is both an indicator of recent client growth, and also of the Group's success in sustaining quality client relationships through investment cycles. Building long-standing and trusted adviser relationships with clients provides opportunities for collaboration and partnerships on new and innovative investment products.

 

Link to strategy

Diversification

 

Average number of employees

The average number of employees through the year includes Nonexecutive Directors.

 

Average number of employees

Number

2023

88

2022

82

2021

83

2020

82

2019

85

 

Why this is important

Average employee numbers is an indicator of business growth and also of how effectively the Group is using technology to make processes more efficient. Implementing the new strategy has necessitated new skill sets in the business, which has brought additional knowledge and experience into the Group required to drive innovation and the diversification into new products and technology.

 

Link to strategy

Diversification

Modernisation

Succession

 

Staff retention (%)

Staff retention is calculated as the number of employees who were employed by Record throughout the period as a percentage of the number of employees at the beginning of the period.

 

Staff retention

%

2023

90

2022

74

2021

90

2020

81

2019

 84

 

Why this is important

Planning for generational change is key to the Group's strategy. A decrease in staff retention in the prior year reflects the focus on rebalancing the skill sets required by the business to drive the innovation and growth required to deliver the strategy. FY-23 has seen a return to retention more aligned with historical trends, reflecting the successful restructure as part of the Group's succession plans. The Group remains cognisant of ensuring the retention and development of key talent as well as the factors affecting all of our employees' wellbeing.

 

Link to strategy

Diversification

Modernisation

Succession

 

Employees with equity interest (%)

The percentage of employees who own shares in Record plc at year end.

 

Employees with equity interest

%

2023

63

2022

61

2021

68

2020

69

2019

70

 

Why this is important

The alignment of employee interests with those of our shareholders is an important factor in ensuring the longerterm success of our business and is an important tool in managing generational change. The decrease last year was linked to changes made under the new strategy resulting in a higher turnover of staff and consequently a short-term decrease in employees holding shares. The Group's remuneration structure includes schemes with both mandatory and voluntary equity participation, reflecting the importance the Group places on alignment.

 

Link to strategy

Succession

 

 



 

Operating review

 

AUME closed the year at its highest ever level of $87.7 billion, including net inflows of $9.1 billion for the year.

 

Product investment performance

Hedging

Our hedging products are predominantly systematic in nature. The effectiveness of each client mandate is assessed regularly and adjustments are made when necessary in order to respond to changing market conditions or to bring the risk profile of the hedging mandate in line with the client's risk tolerance.

 

Passive Hedging

Record's enhanced Passive Hedging service aims to reduce the cost of hedging by introducing flexibility into the implementation of currency hedges without changing the hedge ratio. The episodic nature of many opportunities exploited by the strategy means it requires a higher level of discretionary oversight than has historically been associated with Passive Hedging. Global markets have seen steepening interest rate curves from the end of 2021, which stems from central banks being forced to engage in more hawkish monetary policy in an attempt to keep inflationary pressures under control. This has had the effect of introducing a high degree of volatility into short-term interest rate markets, from which FX forward pricing is determined. The heightened volatility has increased the opportunity set for our clients' portfolios, and as such, we had positioned client portfolios appropriately to add value from this volatility, achieving positive performance. Additionally, the team's management of the portfolio around key market events such as the collapse of Silicon Valley Bank, and the UK government's "mini-budget", have minimised downside risks versus the fixed-tenor benchmark.

 

The table below shows the total value added relative to a fixed-tenor benchmark for an enhanced Passive Hedging programme for a representative account. The base currency used is Swiss francs.


Return for

year to

31 March 2023

Return

since

inception

Value added by enhanced Passive Hedging programme relative to a fixedtenor benchmark

0.18%

0.10% p.a.

 

Dynamic Hedging

The performance of our Dynamic Hedging product is a function of foreign currency fluctuations relative to the base currency of specific clients. For US-based investors, Dynamic Hedging produced gains in the first half of the period, as the dollar appreciated against all exposure currencies and hedge ratios rose, helping to protect against underlying currency losses. The second half of the period saw some retracement in the US dollar, which coupled with risk management interventions, resulted in a reduction in hedge ratios limiting the product's impact in clients' portfolios. Overall, Dynamic Hedging performance was positive for the year, partially offsetting currency losses on the underlying international exposures of our US clients.

 

 

For non-US accounts, i.e. those where US exposures were hedged to other base currencies, the performance of Dynamic Hedging was opposing over the period given broad US dollar strength and reflected the mandates' specific objectives and/or benchmarks.

 


Return for

year to

31 March 2023

Return

since

inception

Value added by Dynamic Hedging programme for a representative US-based account

3.46%

0.67% p.a.

 

Currency for Return

Sustainable investing

Record EM Sustainable Finance ("EMSF") Fund

The Record EMSF Fund USD class A returned 4.65% from inception (28 June 2021) to 31 March 2023, outperforming the relevant emerging market local debt benchmark by 17.35%.

 

The currency portfolio delivered positive returns in the period following improved risk sentiment over the last two quarters as oversold and high-yielding currencies in emerging markets recovered from depreciated levels. Sentiment was supported by the reopening of the Chinese economy, milder weather conditions in Europe and elevated carry in developing economies as central banks continued to deliver rate hikes to curb domestic inflationary pressures. The positive performance of the currency overlay also benefited from gains in the diversified hard currency funding basket. The topping out of rates in developed markets provided further support to local assets in emerging markets and at the same time contributed to improving returns in bond markets. The performance of the US dollar bond underlay in the strategy benefited from its highly rated credit quality as well as duration exposure following lower long-dated yields in the US over Q1 2023 as the FED neared the end of the tightening cycle and recent turmoil in the banking sector sparked global recessionary fears.

 

The table below shows the performance of the EMSF Fund USD class A and the relevant benchmark, being the JP Morgan GBI-EM Global Diversified. The performance is since inception of the EMSF Fund on 28 June 2021 to 31 March 2023.

 


Return for

year to

31 March 2023

Return since

inception

EMSF Fund USD Share Class A

5.64%

4.65%

JP Morgan GBI-EM Global Diversified

(0.72%)

(12.70%)

 

Currency Multi-Strategy

Record's Currency Multi-Strategy product combines a number of diversified return streams, which include:

 

·      Forward Rate Bias ("FRB", also known as Carry) and Emerging Market strategies which are founded on market risk premia and as such perform more strongly in "risk on" environments.

·      Momentum, Value, Range Trading and Developed Market Classification ("DMC") strategies which are more behavioural in nature, and as a result are less risksensitive.

 

Record's Multi-Strategy mandates delivered positive overall performance over the year which was driven by the outperformance in Value, Momentum, Range Trading and EM strategies. Value benefited from a significant reduction in euro area risk premia. Momentum performed positively on the back of the US dollar cycle and desynchronised rate expectations. Range Trading accrued gains mostly in commodity currency pairs due to the absence of major trends in these pairs. Positive news surrounding China's reopening, a compression in Russia-Ukraine geopolitical risk premia, and topping out of US rate expectations, which enticed flows back into Emerging Market currencies, led to outperformance in the Emerging Markets strand. For Carry, underperformance was mainly driven by short positions in low-yielding Developed Market currencies, which appreciated due to the perceived narrowing of interest rate differentials. During the reporting period, DMC was introduced to some mandates, and underperformed during the period due to a long position in the US dollar.

 


Return for

12 months to

31 March 2023

%

Return since

inception

% p.a.

Volatility since

inception

% p.a.

Record MultiStrategy composite

0.78%

0.82%

3.16%

 

Scaling

The Multi-Strategy product allows clients to select the level of exposure they desire in their currency programmes by selecting the required level of scaling and/or the volatility target.

 

It should be emphasised that in this case "scaling" refers to the multiple of the aggregate notional value of forward contracts in the currency programme to the mandate size. This is limited by the willingness of counterparty banks to take exposure to the client. The AUME of those mandates where scaling or a volatility target is selected is represented in Record's AUME at the scaled value of the mandate, as opposed to the mandate size.

 

AUME development

AUME expressed in US dollar terms finished the year at $87.7 billion, an increase of 6% (2022: $83.1 billion). When expressed in sterling, AUME increased by 13% to £71.0 billion (2022: £63.1 billion).

 

AUME movements

Passive Hedging AUME increased by 2% to $63.8 billion (2022: $62.8 billion) driven by net inflows of $4.9 billion for the year from new and existing clients. The impact from both market movements and exchange rates was negative, at $3.3 billion and $0.6 billion respectively.

 

Dynamic Hedging AUME increased by 39%, ending the year at $14.7 billion (2022: $10.6 billion). The majority of the $4.1 billion increase is attributable to net inflows ($4.2 billion), offset slightly by negative market movements of $0.1 billion.

 

Currency for Return AUME decreased to $3.9 billion (2022: $5.0 billion) by the end of the year, represented by net outflows of $0.6 billion and negative market movements and exchange rates of $0.4 billion and $0.1 billion respectively.

 

Multi-product AUME increased to $5.2 billion (2022: $4.5 billion). Net inflows of $0.6 billion accounted for the majority of the movement in addition to positive market movements ($0.1 billion).

 

Market performance

Record's AUME is affected by movements in market levels because substantially all the Passive and Dynamic Hedging, and some of the Multi-product mandates, are linked to equity, fixed income and other market levels. Market movements decreased AUME by $3.8 billion in the year ended 31 March 2023 (2022: increase of $0.3 billion).

 

Further detail on the composition of assets underlying our Hedging and Multi-product mandates is provided in the following table in an attempt to illustrate more clearly the impact of equity and fixed income market movements on these mandate sizes.

 

AUME composition by underlying asset class as at 31 March 2023

 


Equity

%

Fixed

income

%

Other

%

Passive Hedging

23%

31%

46%

Dynamic Hedging

84%

0%

16%

Multi-product

0%

0%

100%

 

Forex

Approximately 76% of the Group's AUME is nonUS dollar denominated. Therefore, foreign exchange movements may have an impact on AUME when expressing non-US dollar denominated AUME in US dollars. Foreign exchange movements decreased AUME by $0.7 billion over the year. This movement does not have an equivalent impact on the sterling value of fee income.

 

At 31 March 2023, the split of AUME by base currency was 10% in sterling, 47% in Swiss francs, 24% in US dollars, 14% in euros and 5% in other currencies.

 

AUME composition by base currency

Base currency       

31 March 2023

31 March 2022

Sterling

GBP 7.4bn

GBP 7.6bn

US dollar

USD 20.8bn

USD 17.6bn

Swiss franc

CHF 38.3bn

CHF 33.1bn

Euro

EUR 11.7bn

EUR 11.4bn

Australian dollar

AUD 3.0bn

AUD 2.9bn

Canadian dollar

CAD 3.3bn

CAD 6.1bn

Japanese yen

JPY 27.2bn

JPY 0.0bn

 

Product mix

 

AUME composition by product

 


31 March 2023

31 March 2022


US $bn

%

US $bn

%

Passive Hedging

63.8

73%

62.8

76%

Dynamic Hedging

14.7

17%

10.6

13%

Currency for Return

3.9

4%

5.0

6%

Multi-product

5.2

6%

4.5

5%

Cash

0.1

-%

0.2

-%

Total

87.7

100%

83.1

100%

 

Notwithstanding hedging AUME continuing to represent approximately 90% of the total AUME, the product mix within this figure has shifted towards the higher revenue-margin Dynamic Hedging product due primarily to net inflows of $4.2 billion during the year. This has diversified the Group's hedging revenue streams and further diluted the historical concentration on the lower revenue-margin Passive Hedging product.

 

 

 

 

 



 

FINANCIAL REVIEW

 

"Our second successive year of material revenue growth since our change in strategy has been driven by increases in both management and performance fees, resulting in a 34% increase to operating profit."

 

Steve Cullen

Chief Financial Officer

 

Overview

The implementation of the Group's change in strategy continues, focused on the diversification of its products and services and the modernisation of its systems and processes. The pipeline of new product launches and new revenue streams in asset management remains strong, and we expect to see the culmination of our work over the last three years to start making a material difference to revenues in FY-24, the current financial year. Our existing strong core of hedging products remains fundamental to our growth plans, underscored by net inflows of $9.1 billion for the year in addition to the $2.4 billion in FY-22. As expected, and somewhat inevitably, our cost base has risen over the year, linked both to our continued investment in the modernisation of our business, and to the exceptional levels of inflationary pressure seen at both a personnel and non-personnel level.

 

The Group remains independent, cash generative and profitable, supported by its strong and liquid balance sheet.

 

Revenues grew 27% to £44.7 million (2022: £35.1 million) supported by a 12% increase in management fees and an increase in performance fees of £5.3 million (2022: £0.5 million). Operating profit for the year increased by 34% to £14.5 million (2022: £10.8 million) and the operating profit margin increased to 32% (2022: 31%) with a 34% increase in profit before tax to £14.6 million (2022: £10.9 million).

 

Profit and loss (£m)


2023

2022

Revenue

44.7

35.1

Cost of sales

-

(0.2)

Gross profit

44.7

34.9

Personnel (excluding bonus)

(12.8)

(10.8)

Nonpersonnel costs

(9.5)

(7.2)

Other income or expense

(0.3)

(0.4)

Total expenditure (excluding bonus)

(22.6)

(18.4)

Group Bonus Scheme

(7.6)

(5.7)

Operating profit

14.5

10.8

Operating profit margin

32%

31%

Net interest received

0.1

0.1

Profit before tax

14.6

10.9

Tax

(3.3)

(2.3)

Profit after tax

11.3

8.6

 

Revenue - Currency Management

Record's traditional core currency management revenue derives from the provision of currency and derivative management services, fees for which can be charged through management fee only or management plus performance fee structures, which are available across Record's product range. Management fee only mandates are charged based upon the AUME of the product, and management plus performance fee structures include a lower percentage fee applied to AUME, and a proportional share of the specific product performance measured over a defined period.

 

Management fees are typically charged on a quarterly basis, although Record may charge fees monthly for some of its larger clients. Performance fees can be charged on quarterly, six-monthly or annual performance periods on the basis agreed with the particular client.

 

Revenue - Asset Management

Asset management did not generate any material revenue reportable for FY-23. Material new revenue streams derived from Record's diversification into asset management products and services will be reported separately from the current financial year (FY-24) onwards.

 



 

Revenue - FY-23

Management fees earned during the year increased by 12% to £38.3 million (2022: £34.1 million) driven by net inflows of $9.1 billion into Record's core currency hedging products, and the full-year revenue impact on Currency for Return from the Record EM Sustainable Finance Fund, launched in June 2021.  Performance fees increased by £5.3 million to £5.8 million for the year (2022: £0.5 million), linked to positive performance from certain Enhanced Passive Hedging mandates.

 

Revenue analysis (£m)


Year ended

31 March 2023

Year ended

31 March 2022

Management fees

 


Passive Hedging

12.9

11.8

Dynamic Hedging

12.0

10.0

Currency for Return

6.8

5.5

Multi-product

6.6

6.8

Total management fees

38.3

34.1

Performance fees

5.8

0.5

Other income

0.6

0.5

Total revenue

44.7

35.1

 

Management fees

Passive Hedging management fees increased by 9% to £12.9 million (2022: £11.8 million) predominantly driven by the net inflows of $4.9 billion in the year. Whilst Passive Hedging commands a significantly lower average fee rate than Record's other products, it continues to provide a robust and valuable revenue stream from a long-standing, institutional client base, which itself provides potential synergies to the Group in the form of future partnerships and product innovation. More recently, the extension of our core Passive Hedging product for Asset Managers, which provides programmes designed to fit specific liquidity and reporting requirements, has seen growth which we expect to continue in the current financial year (FY-24).

 

Dynamic Hedging management fees increased by 20% to £12.0 million (2022: £10.0 million) as a result of the fullyear impact of the $0.8 billion of net inflows seen in the second half of FY-22, combined with the total net inflows of $4.2 billion in FY-23 from new and existing clients.

 

Management fees from Currency for Return mandates increased 24% to £6.8 million (2022: £5.5 million). The increase has been driven predominantly by the full-year impact of revenue from the Record EM Sustainable Finance Fund, launched in June 2021. The net outflow of $0.6 billion announced in the final quarter of the financial year will partially offset this increase in the current financial year (FY24).

 

Multi-product management fees decreased marginally by 3% to £6.6 million (2022: £6.8 million). However, net inflows of $0.6 billion in the second half of FY-23 are expected to increase revenues in the current financial year (FY-24).

 

Performance fees

Performance fees can be derived from a combination of hedging and returnseeking products. Our enhanced Passive Hedging products continued the rebound seen towards the end of FY-22 in making up lost ground versus previous high water marks. This was accelerated during the year by the opportunities arising to add value linked to increases in interest rate differentials, which helped to deliver an exceptional level of performance fees of £5.8 million (2022: £0.5 million). Such opportunities for added value on this product are, to a certain extent, market dependent and can therefore be episodic in nature. Consequently, the occurrence and scale of future performance fees is dependent on market developments through the current financial year (FY-24).

 

Other income

Other income totalled £0.6 million (2022: £0.5million) and consists predominantly of fees from ancillary currency management services including collateral management, signal hedging and tactical execution services. Fees charged for these ancillary services are not linked to AUME.

 

Expenditure

Cost of sales

Cost of sales previously comprised of referral fees and costs in relation to the Record Umbrella Fund, which was closed during the previous financial year (2022: £0.2 million).

 

Operating expenditure

The Group operating expenditure (excluding variable remuneration and other expenses) increased by 24% to £22.3 million for the year (2022: £18.0 million).

 

As expected, the Group has seen increases in personnel costs (excluding bonuses) for the year of approximately 19%. Average headcount increased by 7%, and the exceptional inflationary environment over the year continued to erode the purchasing power of our employees' pay, adding pressure for the business to provide support against the resultant increase to the general cost of living. Consequently, in order to avoid adding to recurring fixed costs in future, it was decided to award one-off cost-of-living allowances of £3,000 per employee (excluding Executive Directors and Board members), amounting to a total cost of approximately £0.3 million. The Group continues to monitor the situation closely and to provide support to ensure the continued wellbeing of employees, and in April 2023 it was decided to make a further cost-of-living payment to employees of £2,000 per employee during FY-24.

 

Against this backdrop, salaries and related on-costs (including pensions) increased by 14%, whilst other employment-related costs associated with the Group's share schemes, including the new LTIP scheme launched in the year, increased by just over 60%. Commission paid under the scheme aimed at generating new business rose by approximately 35%, linked to the increase in revenue.

 

Similarly, and also as expected, non-personnel costs include rises linked to inflation as well as those associated with continued investment by the Group into IT resources in the key strategic area of modernisation, and those costs linked with increases in both growth, and ultimately complexity, of the Group structure and of its products and services.

 

Consequently, non-personnel costs increased by 32% during the year to £9.5 million (2022: £7.2 million). Increases in professional fees of one third, including both legal and audit fees, reflect the set-up costs and growing footprint of the Group abroad, including expansion and regulatory approval in Germany. As the Group's growth plans and diversification progress, so does the requirement for additional market data consumed via platforms and other data sources, plus additional software and IT-consultant resource, leading to an increase in related costs of approximately 40% for the year.

 

The new office location in London was expanded halfway through the year to accommodate growth in employee numbers and to enable the Group to maintain its strong culture and focus on collaborative working, regarded as key for future growth and employee retention and wellbeing. Whilst the increase in cost was slightly offset by downsizing of the Windsor-based office, occupancy costs increased by approximately 20% in the year. Alongside the increase in new business, costs associated with travel and accommodation doubled, linked to the resumption of more client meetings in person as opposed to virtually.

 

The Group remains conscious of the need for good cost control balanced with ensuring the business is appropriately resourced to achieve its strategic goals of diversification, modernisation and succession. However, it is anticipated that the continuation of inflationary pressures in the current environment, as well as the full-year impact of associated rises seen in the year, will inevitably lead to an increase in its cost base in the current year (FY-24), albeit at more muted levels versus FY-23.

 

Other expenses were £0.3 million for the year (2022: £0.4 million) and represent net losses/gains made on derivative financial instruments employed by the Group's hedging activities and other FX adjustments or revaluations.

 

Group Bonus Scheme

The bonus pool has increased by 33% to £7.6 million (2022: £5.7 million), broadly in line with, and reflecting, the 34% increase in operating profit for the year, and has been calculated at 34.8% of prebonus operating profit.

 

Operating profit and margin

Group operating profit increased by 34% to £14.5 million (2022: £10.8 million) with the Group operating margin increasing marginally to 32% (2022: 31%). The Group continues its programme of investment to modernise systems and processes and has seen increases in costs as described further above. Alongside minor delays in the launch of new, higher revenue-margin products this has impacted the Group's operating margin for the year. The Group remains confident that new product launches in the current financial year (FY-24), alongside careful cost control, albeit still challenging in a high inflationary environment, will deliver increases in the operating margin over the medium term.

 

Cash flow

The Group consolidated statement of cash flows is shown in the financial statements.

 

The Group's yearend cash and cash equivalents stood at £9.9 million (2022: £3.3 million) and the total assets managed as cash were £14.5 million (2022: £17.3 million). The cash generated from operating activities before tax increased by 16% to £14.7 million (2022: £12.7 million). During the year, taxation of £2.4 million was paid (2022: £1.4 million) and £9.1 million was paid in dividends (2022: £6.5 million). The Group spent £3.6 million (2022: £4.5 million) on the purchase of its own shares for the EBT to set against the future vesting of share options, and spent £3.6 million on investments (2022: £1.8 million).

 

At the year end, the Group held money market instruments with maturities between three and twelve months worth £4.5 million (2022: £13.9 million). These instruments are managed as cash by the Group but are not classified as cash under IFRS rules (see note 18 of the financial statements for more details).

 

Dividends

An interim ordinary dividend of 2.05 pence per share (2022: 1.80 pence) was paid to shareholders on 30 December 2022, equivalent to £3.9 million.

 

As disclosed in the Chairman's statement, the Board is recommending a final ordinary dividend of 2.45 pence per share, equivalent to approximately £4.7 million, taking the overall ordinary dividend for the financial year to 4.50 pence per share. Simultaneously, the Board is also paying a special dividend of 0.68 pence equivalent to approximately £1.3 million, making the total dividend in respect of the year ended 31 March 2023 of £9.9 million equivalent to 87% of total earnings.

 

The total ordinary and special dividends paid per share in respect of the prior year ended 31 March 2022 were 3.60 pence and 0.92 pence respectively, equivalent to total dividends of £8.6 million and representing 100% of total earnings per share of 4.52 pence.

 

Financial stability and capital management

The Group's balance sheet is strong and liquid with total net assets of £28.3 million (2022: £25.9 million) at the end of the financial year, including current assets managed as cash totalling £14.5 million (2022: £17.3 million). The cash generated by the business has increased in line with the rise in profitability, with net cash inflows from operating activities after tax of £12.3 million for the year (2022: £11.4 million). For further information on cash flows, see the consolidated statement of cash flows in the financial statements.

 

Under the Board's capital and dividend policies, the Group can pay up to a maximum of 100% of earnings for each financial year, thereby ensuring distributions do not erode the continued strength of its balance sheet.

 

To this end, the Group maintains a financial model to assist it in forecasting future capital requirements over a three-year cycle under various scenarios and monitors the capital and liquidity positions of the Group on an ongoing basis. The Group has no debt.

 

Record Currency Management Limited ("RCML") is a UK MiFID investment firm authorised and regulated by the Financial Conduct Authority ("FCA") registered as an Investment Adviser with the SEC and as a Commodity Trading Adviser with the CFTC. Record Asset Management GmbH ("RAM") is authorised and regulated in Germany by BaFin. RCML, RAM and the Group submit regular capital adequacy returns to the respective regulators, and held significant surplus capital resources relative to the regulatory financial resource requirements throughout the year.

 

The Board has concluded that the Group is adequately capitalised both to continue its operations effectively and to meet regulatory requirements, due to the size and liquidity of balance sheet resources maintained by the Group.

 

Steve Cullen

Chief Financial Officer

 

29 June 2023

 

Cautionary statement

This Annual Report contains certain forwardlooking statements with respect to the financial condition, results, operations and business of Record. These statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied in this Annual Report. Nothing in this Annual Report should be construed as a profit forecast.

 

Directors' responsibility statement pursuant to DTR4

 

The Directors confirm to the best of their knowledge:

 

·      the financial statements have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group and Company; and

 

·      the Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and Company, together with a description of the principal risks and uncertainties that they face.

 



 

FINANCIAL STATEMENTS

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 March 2023


Note

2023

2022



£'000

£'000

Revenue

4

44,689

35,152

Cost of sales


(37)

(219)

Gross profit


44,652

34,933

Administrative expenses

5

(29,888)

(23,726)

Other expense

5

(293)

(372)

Operating profit

5

14,471

10,835

Finance income


182

44

Finance expense


(55)

(23)

Profit before tax


14,598

10,856

Taxation

7

(3,259)

(2,225)

Profit after tax


11,339

8,631

Total comprehensive income for the year


11,339

8,631

Profit and total comprehensive income for the year attributable to


 


Owners of the parent


11,339

8,631

Total comprehensive income for the year


11,339

8,631

Earnings per share for profit attributable to the equity holders of the parent during the year


 


Basic earnings per share (pence per share)

8

5.95

4.52

Diluted earnings per share (pence per share)

8

5.81

4.37

The notes below are an integral part of these consolidated financial statements.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2023



 

Restated1



2023

2022


Note

£'000

£'000

Noncurrent assets


 


Intangible assets

11

1,390

562

Rightofuse assets

12

1,011

1,421

Property, plant and equipment

13

377

401

Investments

14

4,901

3,447

Deferred tax assets

15

134

253

Total noncurrent assets


7,813

6,084

Current assets


 


Trade and other receivables

16

14,373

9,883

Derivative financial assets

17

54

-

Money market instruments with maturities > 3 months

18

4,549

13,913

Cash and cash equivalents

18

9,948

3,345

Total current assets


28,924

27,141

Total assets


36,737

33,225

Current liabilities


 


Trade and other payables

19

(6,011)

(4,721)

Corporation tax liabilities

19

(1,329)

(924)

Provisions


-

(75)

Lease liabilities

12

(285)

(366)

Derivative financial liabilities

17

(5)

(124)

Total current liabilities


(7,630)

(6,210)

Non-current liabilities


 


Provisions

20

(122)

(125)

Lease liabilities

12

(694)

(960)

Total non-current liabilities


(816)

(1,085)

Total net assets


28,291

25,930

Equity


 


Issued share capital

21

50

50

Share premium account


1,809

1,809

Capital redemption reserve


26

26

Retained earnings


26,406

24,045

Total equity


28,291

25,930

1.   See note 30 for details of the reclassification resulting in the restatement of prior year.

 

Approved by the Board on 29 June 2023. Company registered number: 1927640

 

The notes below are an integral part of these consolidated financial statements.



 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 March 2023







Equity





Share

Capital


attributable to




Calledup

premium

redemption

Retained

equity holders

Total



share capital

account

reserve

earnings

of the parent

equity


Note

£'000

£'000

£'000

£'000

£'000

£'000

As at 1 April 2022


50

1,809

26

24,045

25,930

25,930

Profit and total comprehensive income for the year

 

-

-

-

11,339

11,339

11,339

Dividends paid

9

-

-

-

(9,095)

(9,095)

(9,095)

Own shares acquired by EBT


-

-

-

(3,572)

(3,572)

(3,572)

Release of shares held by EBT


-

-

-

2,268

2,268

2,268

Tax on share-based payments


-

-

-

300

300

300

Share-based payment reserve movement


-

-

-

1,121

1,121

1,121

Transactions with shareholders


-

-

-

(8,978)

(8,978)

(8,978)

As at 31 March 2023


50

1,809

26

26,406

28,291

28,291

 

Year ended 31 March 2022  







Equity





Share

Capital


attributable to




Calledup

premium

redemption

Retained

equity holders

Total



share capital

account

reserve

earnings

of the parent

equity


Note

£'000

£'000

£'000

£'000

£'000

£'000

As at 1 April 2021


50

2,418

26

24,305

26,799

26,799

Restatement of release of shares held by EBT

30

-

(609)

-

609

-

-

Restated balance as at 1 April 2021


50

1,809

26

24,914

26,799

26,799

Profit and total comprehensive income for the year


-

-

-

8,631

8,631

8,631

Dividends paid

9

-

-

-

(6,512)

(6,512)

(6,512)

Own shares acquired by EBT


-

-

-

(5,807)

(5,807)

(5,807)

Restatement of release of shares held by EBT

30

-

-

-

1,838

1,838

1,838

Restatement of share-based payment reserve movement

30

-

-

-

981

981

981

Transactions with shareholders


-

-

-

(9,500)

(9,500)

(9,500)

Restated balance as at 31 March 2022


50

1,809

26

24,045

25,930

25,930

 

The notes below are an integral part of these consolidated financial statements.



 

CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended 31 March 2023


Note

2023

2022



£'000

£'000

Profit after tax


11,339

8,631

Adjustments for:


 


Depreciation of rightofuse assets

12

375

489

Depreciation of property, plant and equipment

13

285

357

Amortisation of intangible assets

11

135

192

Loss on asset disposals


11

-

Share-based payments


916

559

Decrease in other non-cash items1


1,780

877

Finance income


(181)

(44)

Finance expense


55

23

Tax expense

7

3,259

2,225

Changes in working capital


 


(Increase) in receivables


(4,490)

(1,877)

Increase in payables


1,290

1,296

(Decrease) in provisions


(78)

-

Cash inflow from operating activities


14,696

12,728

Corporation tax paid


(2,433)

(1,373)

Net cash inflow from operating activities


12,263

11,355

Purchase of intangible assets

11

(964)

(334)

Purchase of property, plant and equipment

13

(272)

(75)

Purchase of investments


(3,570)

(1,773)

Payment to seed fund holders


-

(1,808)

Redemption of bonds


1,607

1,462

Redemption of investments


881

-

Purchase/(disposal) of money market instruments with maturity > 3 months


9,363

(983)

Interest received


181

44

Net cash inflow/(outflow) from investing activities


7,226

(3,467)

Cash flow from financing activities


 


Lease principal payments

12

(315)

(540)

Lease interest payments

12

(55)

(17)

Purchase of own shares


(3,572)

(4,462)

Dividends paid to equity shareholders

9

(9,095)

(6,512)

Net cash outflow from financing activities


(13,037)

(11,531)

Net increase/(decrease) in cash and cash equivalents in the year


6,452

(3,643)

Exchange gains


151

141

Cash and cash equivalents at the beginning of the year


3,345

6,847

Cash and cash equivalents at the end of the year


9,948

3,345

Closing cash and cash equivalents consist of:


 


Cash


6,405

3,345

Cash equivalents


3,543

-

Cash and cash equivalents

18

9,948

3,345

1.   Other non-cash items include £2,473k release of shares held by Employee Benefit Trust and other share movements (2022: £624k), £175k unrealised gains in derivatives (2022: £340k loss), £147k foreign exchange gains (2022: £137k gain) and £371k unrealised gains in investments (2022: £50k loss).

 

The notes below are an integral part of these consolidated financial statements.

 

 

 



 

COMPANY STATEMENT OF FINANCIAL POSITION

As at 31 March 2023



2023

2022


Note

£'000

£'000

Noncurrent assets


 


Rightofuse assets

12

871

1,232

Property, plant and equipment


99

-

Investments

14

9,062

5,029

Deferred tax


-

1

Total noncurrent assets


10,032

6,262

Current assets


 


Corporation tax


16

3

Trade and other receivables

16

2,428

3,522

Cash and cash equivalents

18

213

43

Total current assets


2,657

3,568

Total assets


12,689

9,830

Current liabilities


 


Trade and other payables

19

(4,955)

(4,161)

Lease liabilities

12

(251)

(326)

Provisions


-

(75)

Total current liabilities


(5,206)

(4,562)

Non-current liabilities


 


Lease liabilities

12

(583)

(812)

Deferred tax liabilities


(11)

-

Provisions

20

(122)

(125)

Total non-current liabilities


(716)

(937)

Total net assets


6,767

4,331

Equity


 


Issued share capital

21

50

50

Share premium account


1,809

1,809

Capital redemption reserve


26

26

Retained earnings


4,882

2,446

Total equity


6,767

4,331

The Company's total comprehensive income for the year (which is principally derived from intra-group dividends) was £10,614,915 (2022: £4,558,705).

 

Approved by the Board on 29 June 2023. Company registered number: 1927640.

 

The notes below are an integral part of these consolidated financial statements.

 

COMPANY STATEMENT OF CHANGES IN EQUITY

Year ended 31 March 2023




Share

Capital


Total



Calledup

premium

redemption

Retained

shareholders'



Share capital

 account

reserve

earnings

equity


Note

£'000

£'000

£'000

£'000

£'000

As at 1 April 2022


50

1,809

26

2,446

4,331

Profit and total comprehensive income for the year


-

-

-

10,615

10,615

Dividends paid

9

-

-

-

(9,095)

(9,095)

Share option reserve movement


-

-

-

916

916

Transactions with shareholders


-

-

-

(8,179)

(8,179)

As at 31 March 2023


50

1,809

26

4,882

6,767

 

Year ended 31 March 2022




Share

Capital


Total



Calledup

premium

redemption

Retained

shareholders'



Share capital

 account

reserve

earnings

equity


Note

£'000

£'000

£'000

£'000

£'000

As at 1 April 2021


50

1,809

26

3,843

5,728

Profit and total comprehensive income for the year


-

-

4,559

4,559


Dividends paid

9

-

-

-

 (6,512)

 (6,512)

Share option reserve movement


-

-

-

556

556

Transactions with shareholders


-

-

-

(5,956)

(5,956)

As at 31 March 2022


50

1,809

26

2,446

4,331

 

The notes below are an integral part of these consolidated financial statements.

 



 

COMPANY STATEMENT OF CASH FLOWS

Year ended 31 March 2023

 



 

Restated1



2023

2022


Note

£'000

£'000

Profit after tax


10,615

4,559

Adjustments for:


 


Depreciation of rightofuse assets

12

338

453

Depreciation of property, plant and equipment


17

-

Decrease/(Increase) in other non-cash items2


(155)

45

Finance income


(1)

-

Finance expense


43

16

Tax expense/(income)


5

(19)

Dividends received from subsidiaries


(10,500)

(4,600)

Changes in working capital


 


Decrease/(Increase) in receivables


1,094

(2,134)

Increase in payables


794

2,470

(Decrease) in provisions


(78)

-

Cash inflow from operating activities


2,172

790

Corporation taxes (paid)/received


(6)

37

Net cash inflow from operating activities


2,166

827

Cash flow from investing activities


 


Dividends received


10,500

4,600

Purchase of property, plant and equipment


(116)

-

Investment in subsidiaries


-

(325)

Investment in equity reserve of subsidiary


(1,095)

-

Purchase of investments


(1,869)

-

Payments to seed fund holders


-

1,798

Interest received


1

-

Net cash inflow from investing activities


7,421

6,073

Net cash flow from financing activities


 


Lease principal payments

12

(280)

(502)

Lease interest payments

12

(43)

(16)

Dividends paid to equity shareholders


(9,095)

(6,512)

Net cash outflow from financing activities


(9,418)

(7,030)

Net increase/(decrease) in cash and cash equivalents in the year


170

(130)

FX revaluation


-

-

Cash and cash equivalents at the beginning of the year


43

173

Cash and cash equivalents at the end of the year


213

43

Closing cash and cash equivalents consist of:


 


Cash


213

43

Cash and cash equivalents

18

213

43

1.   See note 31 for details of the presentational adjustment resulting in the restatement of prior year.

2.   Other non-cash items include unrealised movements in investments and other foreign exchange movements.

 

The notes below are an integral part of these consolidated financial statements.

 



 

Notes to the financial statements for the year ended 31 March 2023

 

These financial statements exclude disclosures that are both immaterial and judged to be unnecessary to understand our results and financial position.

 

1. Accounting policies

In order to provide more clarity to the notes to the financial statements, accounting policy descriptions appear at the beginning of the note to which they relate.

 

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out in the notes below. These policies have been consistently applied to all periods presented unless otherwise stated.

 

a. Accounting convention

Basis of preparation

The Group financial statements have been prepared in accordance with UK adopted international accounting standards and the Company and other Group entities' financial statements have also been prepared in accordance with UK adopted international accounting standards. The financial statements have been prepared on a historical cost basis, modified to include fair valuation of derivative financial instruments. Investments are measured at fair value through profit or loss.

 

The Directors are satisfied that the Company and the Group have adequate resources with which to continue to operate for the foreseeable future. In arriving at this conclusion, the Directors have considered various assessments including both the impact of the war in Ukraine, and that of the current high inflationary environment on the Group, the market it operates in and its stakeholders. These assessments show that the Group should be able to operate at adequate levels of both liquidity and capital for at least 12 months from the date of signing this report.

 

Consequently, the Directors have reasonable expectation that the Group has adequate financial resources to continue operations for at least 12 months from the date of signing the report, and therefore have continued to adopt the going concern basis in preparing the financial statements.

 

The preparation of financial statements in accordance with the recognition and measurement principles set out in IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The bases for management judgements, estimates and assumptions are discussed further in note 2.

 

Changes to international accounting policies

There were no new interpretations or standards which became applicable during the year that were adopted by the Group.

 

Additionally, the Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective at the year-end date.

 

b. Basis of consolidation

The consolidated financial information contained within the financial statements incorporates financial statements of the Company and its subsidiaries drawn up to 31 March 2023. Subsidiaries are entities controlled by the Company and are included from the date that control commences until the date that control ceases. Control is achieved where the Company is exposed to or has rights over variable returns from its involvement with the entity and it has the power to affect returns. The Group has applied UK adopted IFRSs for periods commencing on or after January 2022.

 

An Employee Benefit Trust has been established for the purposes of satisfying certain share-based awards. As the Group has "de facto" control over this special purpose entity, the trust is fully consolidated within the financial statements.

 

Where the Group controls an entity, but does not own all the share capital of that entity, the interest of the other shareholders' non-controlling interests is stated within equity at the non-controlling interests' proportion of the fair value of the recognised assets and liabilities. In the case of the funds controlled by the Group, the interests of any external investors in such funds are recognised as a financial liability as investments in the fund are not considered to be equity instruments.

 

The financial statements of subsidiary undertakings, which are prepared using uniform accounting policies, are coterminous with those of Record plc, referred to as the "Company".

 

The Company is taking advantage of the exemption under the Companies Act 2006 s408(1) not to present its individual statement of comprehensive income and related notes that form part of the financial statements. The Company and its subsidiaries are collectively referred to as the Group; the Group's total comprehensive income for the year includes a profit of £10,614,915 attributable to the Company (2022: £4,558,705). The Company's principal activity is that of a holding company.

 

All intragroup transactions, balances, income, expenses and dividends are eliminated on consolidation.

 

c. Foreign currencies

The financial statements are presented in sterling (£), which is the functional currency of the parent company. Foreign currency transactions are translated into the functional currency of the parent company using prevailing exchange rates which are updated on a monthly basis. Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at yearend exchange rates are recognised in the statement of comprehensive income under "other income or expense".

 

d. Administrative expenses

Administrative expense includes staff costs, marketing and IT costs, which are recognised on an accruals basis as services are provided to the Group.

 

e. Financial instruments

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

 

f. Impairment of assets

The Group assesses whether there is any indication that any of its assets have been impaired at least annually. If such an indication exists, the asset's recoverable amount is estimated and compared to its carrying value.

 

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

 

g. Provisions and contingent liabilities

Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events.

 

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision.

 

All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised.

 

h. Equity

Share capital represents the nominal (par) value of shares that have been issued. Share premium includes any premium received on issue of share capital. From time to time, the Group has bought in ordinary shares for cancellation. The cost of the buy-ins was taken directly to retained earnings. The nominal value of the shares was taken to a capital redemption reserve. Retained earnings includes all current and prior period retained profits and share-based employee remuneration. All transactions with owners of the parent are recorded separately within equity.

 

2. Critical accounting estimates and judgements

In order to prepare the financial statements in accordance with IFRS, management make certain critical accounting estimates. Management are also required to exercise judgement in the process of applying the Group's accounting policies and in determining the reported amount of certain assets and liabilities.

 

The estimates and associated assumptions are based on historical experience and various other factors including expectations of future events that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. As a consequence, actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

Sources of estimation uncertainty

Management recognise that the use of estimates is important in calculating both the fair value of share options offered by the Group to its employees (see note 22) and deferred tax (see note 15), however the sources of estimation uncertainty do not present a significant risk of material adjustment to the carrying amounts of assets or liabilities within the next financial year in either case.

 

Calculation of leased assets and liabilities requires the use of both estimation and judgement. The identification of an appropriate discount rate to use in the calculation of the lease liability involves both estimation and judgement. Where the lease's implicit rate is not readily determinable, an incremental borrowing rate must be calculated by the Group. The discount rate used has a direct effect on the size of the lease liability capitalised and although this has been included as an area where the use of estimation and judgement in note 12 is important, it is unlikely to materially impact the Group. Intangible assets are written down in accordance with the Group's amortisation policy. The assets are reviewed by management to ensure the amortisation period is appropriate. Investments are revalued monthly at market value as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation are, as disclosed in note 24. Any potential impairments would be written down as and when the Group is notified.

 

3. Segmental analysis

The Directors, who together are the entity's Chief Operating Decision Maker, consider that its services for FY-23 and prior years comprise one operating segment (being the provision of currency and derivatives management services) and that it operates in a market that is not bound by geographical constraints. The Group provides Directors with revenue information disaggregated by product, whilst operating costs, assets and liabilities are presented on an aggregated basis. This reflects the unified basis on which the products are marketed, delivered and supported. Revenue analysed by product is provided in note 4.

 

Looking ahead to the current financial year (FY-24), the Group expects its diversification into asset management will result in an alternative revenue stream (i.e. Asset Management as opposed to Currency Management). This will represent a different operating segment and will be reported separately from FY-24.

 

4. Revenue

Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the provision of currency management services. Our revenues typically arise from charging management fees, performance fees and other currency services income and are accounted for in accordance with IFRS 15 - "Revenue from Contracts with Customers".

 

Management fees and other currency services income are recorded on a monthly basis as the service occurs; there are no other performance obligations (excluding standard duty of care requirements). Management fees are calculated as an agreed percentage of the Assets Under Management Equivalents ("AUME") denominated in the client's chosen base currency. The percentage varies depending on the nature of services and the level of AUME. Management fees are typically invoiced to the customer quarterly with receivables recognised for unpaid invoices. Fees are recognised on a monthly based on the agreed fee rate and AUME over the period.

 

The Group is entitled to earn performance fees from some clients where the performance of the clients' mandates exceeds defined benchmarks over a set time period, and are recognised when the fee amount can be estimated reliably and it is highly probable that it will not be subject to significant reversal.

 

Performance fee revenues are not considered to be highly probable until the end of a contractual performance period and therefore are not recognised until they crystallise, at which time they are payable by the client and cannot be clawed back. There are no other performance obligations or services provided which suggest these have been earned either before or after crystallisation date.

 

a. Revenue from contracts with customers

The following table provides a breakdown of revenue from contracts with customers, with management fees analysed by product. Other currency services income includes fees from signal hedging and fiduciary execution.

 


2023

2022

Revenue by product type

£'000

£'000

Management fees

 


Passive Hedging

12,912

11,768

Dynamic Hedging

12,013

10,020

Currency for Return

6,789

5,513

Multi-product

6,584

6,782

Total management fee income

38,298

34,083

Performance fee income

5,805

499

Other services income

586

570

Total revenue from contracts with customers

44,689

35,152

 

Management fees are recognised at a point in time and are invoiced typically on a quarterly basis, although Record may invoice fees monthly for some of its larger clients. Performance fees are recognised at a point in time and can be invoiced on a quarterly, six-monthly or annual basis, as agreed with our clients.

 

b. Geographical analysis

The geographical analysis of revenue is based on the destination i.e. the location of the client to whom the services are provided. All revenue originated in the UK. Other relates to a number of regions that are individually immaterial.

 


2023

2022

Revenue by geographical region

£'000

£'000

Management and performance fee income

 


UK

2,545

2,775

US

14,179

13,049

Switzerland

16,985

10,877

Europe (excluding UK and Switzerland)

9,339

6,926

Other

1,641

1,525

Total revenue

44,689

35,152

 

c. Major clients

During the year ended 31 March 2023, four clients individually accounted for more than 10% of the Group's revenue. The four largest clients generated revenues of £6.6 million, £6.3 million, £5.2 million and £4.9million in the year (2022: two clients generated revenues of more than 10% totalling £4.9 million and £4.8 million in the year).

 

5. Operating profit

Operating profit for the year is stated after charging/(crediting):


2023

2022


£'000

£'000

Staff costs

20,412

16,479

Other staff-related costs

1,545

1,352

IT and technology

3,582

2,380

Professional fees

1,775

1,139

Occupancy

1,111

668

Depreciation of property, plant and equipment

285

357

Depreciation of leased property

375

489

Amortisation of intangibles

135

192

Auditor fees:

 


Fees payable to the Group's auditor for the audit of the Company's annual accounts

134

72

Fees payable to the Group's auditor for the audit of subsidiary undertakings

191

103

Auditor fees total

325

175

Fees payable to the Group's auditor and its associates for other services:

 


Audit-related assurance services required by law or regulation

6

5

Other non-audit services

15

12

Loss on forward FX contracts held to hedge cash flow

800

467

Loss on derivative financial instruments held by seed funds

-

42

Other exchange losses/(gains)

(289)

(141)

Investment losses/(gains)

(218)

4

 

6. Staff costs

The average number of employees, including Directors, employed by the Group during the year was:

 


2023

2022

Corporate

6

6

Client relationships

13

14

Investment research

18

16

Operations

31

24

Risk management

5

5

Support

15

17

Annual average

88

82

 



 

The aggregate costs of the above employees, including Directors, were as follows:

 


2023

2022


£'000

£'000

Wages and salaries

14,540

11,931

Social security costs

2,295

1,758

Pension costs

686

635

Other employment benefit costs

2,891

2,155

Aggregate staff costs

20,412

16,479

 

Other employment benefit costs include sharebased payments, share option costs, and costs relating to the Record plc Share Incentive Plan.

 

7. Taxation - Group

Current tax is the tax currently payable based on taxable profit for the year. Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

 


2023

2022


£'000

£'000

UK current year charge

2,961

2,006

Overseas taxes

64

56

Prior year adjustments

175

(88)

Current tax charge

3,200

1,974

Origination and reversal of temporary differences

76

(12)

Prior year adjustment

(17)

240

Impact of change in tax rate for deferred tax

-

23

Total deferred tax

59

251

Tax on profit on ordinary activities

3,259

2,225

 

The total charge for the year can be reconciled to the accounting profit as follows:

 


2023

2022


£'000

£'000

Profit before taxation

14,598

10,856

Taxation at the standard rate of tax in the UK of 19% (2022: 19%)

2,774

2,062

Tax effects of:

 


Other disallowable expenses and nontaxable income

164

(37)

Deferred tax asset not recognised on start-up entities

146

-

Higher tax rates on subsidiary undertakings

15

15

Prior year adjustment

160

162

Change in tax rates

-

23

Total tax expense

3,259

2,225

The tax expense comprises:

 


Current tax expense

3,200

1,974

Deferred tax expense

59

251

Total tax expense

3,259

2,225

 

The standard rate of UK corporation tax for the year is 19% (2022: 19%). A full corporation tax computation is prepared at the year end. The actual charge as a percentage of the profit before tax may differ from the underlying tax rate. Differences typically arise as a result of capital allowances differing from depreciation charged, and certain types of expenditure not being deductible for tax purposes. Other differences may also arise. The rate increased to 25% from 1 April 2023.

 

The tax charge for the year ended 31 March 2023 was 22% of profit before tax (2022: 20%). Other temporary differences for the year ended 31 March 2023 include the impact of deferred tax expense of £59k (2022: expense of £251k).

 

8. Earnings per share

Basic earnings per share is calculated by dividing the profit after tax for the financial year 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.

 


2023

2022


£'000

£'000

Weighted average number of shares used in calculation of basic earnings per share

190,483,365

191,068,307

Effect of potential dilutive ordinary shares - share options

4,830,186

6,230,794

Weighted average number of shares used in calculation of diluted earnings per share

195,313,551

197,299,101

 


pence

pence

Basic earnings per share

5.95

4.52

Diluted earnings per share

5.81

4.37

 

The potential dilutive shares relate to the share options, JSOP and LTIP awards granted in respect of the Group's Share Scheme (see note 22). There were share options and JSOP awards in place at the beginning of the year over 13,513,045 shares. During the year 3,607,836 share options were exercised, 633,125 JSOP awards vested and a further 1,247,502 options lapsed or were forfeited. The Group granted 3,810,000 share options and LTIP awards over 2,890,000 shares with a potentially dilutive effect during the year. Of the 14,724,582 share options, JSOP and LTIP awards in place at the end of the period, 11,878,815 have a dilutive impact at the year end.

 

9. Dividends

Ordinary, special and interim dividends are recognised in the financial statements when paid. Final ordinary dividends are required to be approved by shareholders.

 

The dividends paid by the Group during the year ended 31 March 2023 totalled £9,095,232 (4.77 pence per share), which comprised a final dividend in respect of the year ended 31 March 2022 of £3,420,850 (1.8 pence per share), a special dividend in respect of the year ended 31 March 2022 of £1,748,435 (0.92 pence per share) and an interim dividend for the year ended 31 March 2023 of £3,925,947 (2.05 pence per share).

 

The dividends paid by the Group during the year ended 31 March 2022 totalled £6,511,887 (3.40 pence per share), which comprised a final dividend in respect of the year ended 31 March 2021 of £2,220,404 (1.15 pence per share), a special dividend in respect of the year ended 31 March 2021 of £868,854 (0.45 pence per share) and an interim dividend for the year ended 31 March 2022 of £3,422,629 (1.80 pence per share).

 

For the year ended 31 March 2023, a final ordinary dividend of 2.45 pence per share has been proposed and a special dividend of 0.68 pence per share has been declared, totalling approximately £4.7 million and £1.3 million respectively.

 

10. Retirement benefit obligations

The Group operates defined contribution pension plans for the benefit of employees. The Group makes contributions to independently administered plans, such contributions being recognised as an expense when they fall due. The assets of the schemes are held separately from those of the Group in independently administered funds.

 

The Group is not exposed to the particular risks associated with the operation of defined benefit plans and has no legal or constructive obligation to make any further payments to the plans other than the contributions due.

 

The pension cost charge disclosed in note 6 to the accounts represents contributions payable by the Group to the funds.

 

11. Intangible assets

Intangible assets are shown at historical cost less accumulated amortisation and impairment losses. Amortisation is charged to profit or loss on a straightline basis over the estimated useful lives of the intangible assets unless such lives are indefinite. Amortisation is included within operating expenses in the statement of comprehensive income. Intangible assets are measured from the date they are available for use. Useful lives are as follows:

 

·     Software - 2 to 5 years.

 

Amortisation periods and methods are reviewed annually and adjusted if appropriate.

 

The Group's intangible assets comprise both purchased software and the capitalised cost of software deployment. No internal costs of software development are capitalised. Internal software costs, which would represent attributable employee costs, would be capitalised if they meet the IAS 38 criteria. The carrying amounts can be analysed as follows:

 


Software

Total

2023

£'000

£'000

Cost



At 1 April 2022

1,475

1,475

Additions

964

964

Disposals

(119)

(119)

At 31 March 2023

2,320

2,320

Amortisation



At 1 April 2022

913

913

Charge for the year

135

135

Disposals

(118)

(118)

At 31 March 2023

930

930

Net book amounts



At 31 March 2023

1,390

1,390

At 1 April 2022

562

562

 


Software

Total

2022

£'000

£'000

Cost



At 1 April 2021

1,141

1,141

Additions

334

334

At 31 March 2022

1,475

1,475

Amortisation



At 1 April 2021

721

721

Charge for the year

192

192

At 31 March 2022

913

913

Net book amounts



At 31 March 2022

562

562

At 1 April 2021

420

420

 

The annual contractual commitment for the maintenance and support of the above software is £207,253 (2022: £396,710). All amortisation charges are included within administrative expenses.

 

12. Leases

The Group's lease arrangements consist of business premises property leases. Rental contracts are typically made for fixed periods between three to six years but they may have extension and/or modification options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets cannot be used as security for borrowing purposes.

 

New and modified leases have been recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

 

Assets and liabilities arising from a lease are initially measured on a present value basis. Right-of-use assets include the net present value of the lease payments less any lease incentives receivable.

 

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Group's incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. As the Group has no borrowings it has estimated the incremental borrowing rate based on interest rate data available in the market, adjusted to reflect Record's creditworthiness, the leased asset in question and the terms and conditions of the lease. For those leases which existed prior to the IFRS 16 transition date on 1 April 2019, a discount rate of 4% was used in calculating the lease liability on transition.

 

The leases relevant to the twelve months ended 31 March 2023, and the comparative period, are as described below:

 

On 7 September 2016, the Group signed a new lease on premises at Second and Third Floors, Morgan House, Madeira Walk, Windsor, at an annual commitment of £507,603, expiring on 1 September 2022. On 11 February 2022, the Group signed a lease on premises at Second Floor, Morgan House, Madeira Walk, Windsor, at an annual commitment of £267,900, expiring on 1 September 2026. The 1 September 2022 lease modification has been capitalised and discounted at a rate of 3.95%.

 

On 1 June 2017, the Group signed a five-year lease on premises in Zürich, at an annual commitment of CHF 49,680. On 12 August 2021, the Group extended the lease to 1 June 2027, at an annual commitment of CHF 49,680.

 

Record assesses whether a contract is, or contains, a lease at the inception of the contract.

 

Rightofuse ("ROU") assets

Right-of-use assets are measured at cost comprising the following:

 

·     the amount of the initial measurement of lease liability;

·     any lease payments made at or before the commencement date, less any lease incentives received;

·     any initial direct costs; and

·     an estimate of costs to be incurred to restore the assets to the condition required by the terms and conditions of the lease.

 

Depreciation is calculated on a straight-line basis over the lease term and included within administration costs (note 5).

 

Net book value of rightofuse assets


Group

Company

Year ended 31 March 2023

£'000

£'000

Net book value on transition at 1 April 2022

1,421

1,232

Valuation adjustment on lease modification

(35)

(23)

Depreciation

(375)

(338)

Net book value at 31 March 2023

1,011

871

 


Group

Company

Year ended 31 March 2022

£'000

£'000

Net book value at 1 April 2021

684

642

Addition

1,226

1,043

Depreciation

(489)

(453)

Net book value at 31 March 2022

1,421

1,232

 

Lease liabilities


Group

Company

Year ended 31 March 2023

£'000

£'000

Current

285

251

Non-current

694

583

Total lease liabilities

979

834

 


Group

Company


£'000

£'000

At 1 April 2022

1,326

1,138

Additions

-

-

Interest expense

55

41

Lease - principal payments

(315)

(280)

Lease - interest payments

(55)

(43)

Valuation adjustment on lease modification

(35)

(22)

Foreign exchange movements

3

-

At 31 March 2023

979

834

 


Group

Company

Year ended 31 March 2022

£'000

£'000

Current

366

326

Non-current

960

812

Total lease liabilities

1,326

1,138

 



 


Group

Company


£'000

£'000

At 1 April 2021

638

597

Additions

1,226

1,042

Interest expense

17

16

Lease payments

(540)

(501)

Lease interest payments

(17)

(16)

Foreign exchange movements

2

-

At 31 March 2022

1,326

1,138

 

Lease payments

At 31 March 2023, the undiscounted operating lease payments on an annual basis are as follows:

 

Maturity of lease liability at 31 March 2023


Group

Company


£'000

£'000

Within 1 year

320

280

1-2 years

320

280

2-3 years

320

280

After 3 years

85

47

Total lease liability before discounting

1,045

887

 

The remainder of the movement in the lease liability relates to non-cash movements. The lease term is determined as the non-cancellable period of a lease, together with periods covered by an option to extend the lease if the Group considers that exercise of the option is reasonably certain.

 

13. Property, plant and equipment - Group

All property, plant and equipment assets are stated at cost less accumulated depreciation. Depreciation of property, plant and equipment is provided to write off the cost, less residual value, on a straightline basis over the estimated useful life as follows:

 

·     leasehold improvements - period from lease commencement to the earlier of the lease termination date and the next rent review date;

·     computer equipment - 2 to 5 years; and

·     fixtures and fittings - 4 to 6 years.

 

Residual values, remaining useful economic lives and depreciation methods are reviewed annually and adjusted if appropriate. Gains or losses on disposal are included in profit or loss.

 

The Group's property, plant and equipment comprise leasehold improvements, computer equipment and fixtures and fittings. The carrying amount can be analysed as follows:

 


Leasehold

Computer

Fixtures



improvements

equipment

and fittings

Total

2023

£'000

£'000

£'000

£'000

Cost





At 1 April 2022

693

1,056

293

2,042

Additions

116

148

8

272

Disposals

(33)

(181)

(70)

(284)

At 31 March 2023

776

1,023

231

2,030

Depreciation





At 1 April 2022

642

718

281

1,641

Charge for the year

68

204

13

285

Disposals

(33)

(170)

(70)

(273)

At 31 March 2023

677

752

224

1,653

Net book amounts





At 31 March 2023

99

271

7

377

At 1 April 2022

51

338

12

401

 

 



 


Leasehold

Computer

Fixtures



improvements

equipment

and fittings

Total

2022

£'000

£'000

£'000

£'000

Cost





At 1 April 2021

693

983

305

1,981

Additions

-

73

2

75

Disposals

-

-

(14)

(14)

At 31 March 2022

693

1,056

293

2,042

Depreciation





At 1 April 2021

520

515

263

1,298

Charge for the year

122

203

32

357

Disposals

-

-

(14)

(14)

At 31 March 2022

642

718

281

1,641

Net book amounts





At 31 March 2022

51

338

12

401

At 1 April 2021

173

468

42

683

 

The Group's tangible non-current assets are located predominantly in the UK.

 

14. Investments

 


Group

Company


2023

2202

2023

2022


£'000

£'000

£'000

£'000

Investment in subsidiaries at cost

-

-

2,069

2,069

Capitalised investment in respect of share-based payments

-

-

2,932

2,018

Investment in equity reserve of subsidiary

-

-

1,095

-

Investment in funds

2,530

1,070

1,965

942

Investment in impact bonds

770

2,177

-

-

Other investments

1,601

200

1,001

-

Total direct investments

4,901

3,447

9,062

5,029

 

Other investments includes £600k invested directly in the share capital of start-up companies in the digital asset sector (2022: £200k) through Record Digital. Also included is £1 million invested into a separate investment strategy to test the viability of a potential new product offering in a diverse set of alternative assets.

 

During the year, the Group signed commitments totalling $823,507 (£804,384), which were fully called up in the year. At the beginning of the year, the Group had existing commitments of $383,100 (£309,839) of which $78,100 (£63,165) was called up in the year, leaving a balance of $305,000 (£246,674) which may or may not be called up in future (see note 26: contingent liabilities for further information).

 



 

Company

Investments in subsidiaries

Investments in subsidiaries are shown at cost less impairment losses. The capitalised investment in respect of sharebased payments offered by subsidiaries is equal to the cumulative fair value of the amounts payable to employees recognised as an expense by the subsidiary.

 


2023

2022


£'000

£'000

Investment in subsidiaries (at cost)

 


Record Currency Management Limited

10

10

Record Group Services Limited

10

10

Record Portfolio Management Limited

10

10

Record Currency Management (US) Inc.

-

-

Record Currency Management (Switzerland) GmbH

16

16

Record Digital Asset Ventures Limited

2,000

2,000

Record Asset Management GmbH

23

23

Record Fund Management Limited

-

-

N P Record Trustees Limited

-

-

Total investment in subsidiaries (at cost)

2,069

2,069

Capitalised investment in respect of sharebased payments

 


Record Group Services Limited

2,530

1,801

Record Currency Management (US) Inc.

89

89

Record Currency Management (Switzerland) GmbH

316

129

Total capitalised investment in respect of sharebased payments

2,935

2,019

Total investment in subsidiaries

5,004

4,088

 

Particulars of subsidiary undertakings

 

Name

Nature of business

Record Currency Management Limited

Currency management services (FCA, SEC and CFTC registered)

Record Group Services Limited

Management services to other Group undertakings

Record Currency Management (US) Inc.

US advisory and service company (SEC and CFTC registered)

Record Currency Management (Switzerland) GmbH

Swiss advisory and service company

Record Digital Asset Ventures Limited

UK company investing in opportunities linked to innovation and research surrounding digital assets

Record Asset Management GmbH

German advisory and service company

RAM Strategies GmbH

German consultant and distribution agent

Record Portfolio Management Limited

Dormant

Record Fund Management Limited

Dormant

N P Record Trustees Limited

Dormant trust company

 

The Group's interest in the equity capital of subsidiary undertakings is 100% of the ordinary share capital in all cases. Record Currency Management (US) Inc. is incorporated in Delaware (registered office: Corporation Service Company, 251 Little Falls Drive, Wilmington, DE 19808), Record Currency Management (Switzerland) GmbH is incorporated in Zürich (registered office: Münsterhof 14, 8001 Zürich) and Record Asset Management GmbH and RAM Strategies GmbH are incorporated in Germany (registered office: Königsallee 92a, 40212 Düsseldorf). All other subsidiaries are incorporated in the UK and have the registered office at Morgan House , Madeira Walk, Windsor, Berkshire, SL4 1EP. All investments in subsidiaries are directly held with the exception of RAM Strategies which is held 100% indirectly through the Company's 100% holding in Record Asset Management GmbH.

 

Capitalised investment in respect of share-based payments

The accounting treatment of capitalised investment in respect of share-based payments can be found in note 22.

 

Group

Entities are consolidated on a line-by-line basis where the Group has determined that a controlling interest exists through an investment holding in the entity, in accordance with IFRS 10 - "Consolidated Financial Statements". Otherwise, investments in entities are measured at fair value through profit or loss.

 



 

15. Deferred taxation - Group

Deferred tax is the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities shown on the statement of financial position. The amount of deferred tax provided is based on the expected manner of recovery or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date.

 

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. The carrying amounts of the deferred tax assets are reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

 

A deferred tax liability is generally recognised for all taxable temporary differences.

 

Deferred tax assets or liabilities arising on goodwill are not recognised but are however recognised on separately identifiable intangible assets. Deferred tax arising on the initial recognition of an asset or liability, other than a business combination, that at the time of the transaction affects neither the accounting profit or loss nor the taxable profit or loss, is not recognised.

 


2023

2022


£'000

£'000

Opening balance deferred tax asset/(liability)

 253

 212

Current year movement

(72)

(251)

Prior year adjustment

 14


Deferred tax in Equity

(61)

 292

Closing balance deferred tax asset/(liability)

 134

 253

 

The deferred tax asset consists of the tax effect of temporary differences in respect of:

 


2023

2022


£'000

£'000

Deferred tax allowance on unvested share options and LTIP awards

366

393

Excess of taxation allowances over depreciation on fixed assets

(232)

(140)

Total

134

253

 

At the year end there were share options and LTIP awards not exercised with an intrinsic value for tax purposes of £1,937,599 (2022: £4,287,634). On exercise, the Group will be entitled to a corporation tax deduction in respect of the difference between the exercise price and the strike price. The Group has losses in relation to overseas entities totalling £766k (2022: £438k) which are available to carry forward against future profits. No deferred tax asset has been recognised in respect of these in the current or prior year as there is uncertainty as to when these losses will be reversed. Deferred tax has been calculated based on the future tax rate of 25% for differences from 1 April 2023. It is subject to change if tax rates change in future years.        

 

16. Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less loss allowances. The amortised cost of trade and other receivables is stated at original invoice value, as the interest that would be recognised from discounting future cash receipts over the short credit period is not considered to be material.

 

An analysis of receivables is provided below:

 


Group

Company


2023

2022

2023

2022


£'000

£'000

£'000

£'000

Trade receivables

10,185

8,231

1,538

3,441

Accrued income

1,743

25

-

-

Other receivables

685

497

26

38

Prepayments

1,760

1,130

864

43

Total

14,373

9,883

2,428

3,522

 

All amounts are shortterm. The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. The Group has not renegotiated the terms of any receivables in the year ended 31 March 2023. The Group's trade receivables are generally short-term and do not contain significant financing components.

 

The Group applies the IFRS 9 simplified approach to measuring ECLs for trade receivables at an amount equal to lifetime ECLs. The ECLs on trade receivables are calculated based on actual historic credit loss experience over the preceding 25 years on the total balance of non-credit impaired trade receivables, adjusted to incorporate any relevant forward looking information. The Group has therefore concluded that the ECLs for trade receivables are reasonable. The Group does not expect to incur any credit losses and has not recognised any ECLs in the current year (2022: £nil).

 

Accrued income relates to accrued management and performance fees earned but not yet invoiced.

 

17. Derivative financial assets and liabilities

Derivative financial instruments are initially recognised at cost on the date on which the contract is first entered into, unless the fair value at acquisition is different to cost, in which case fair value is recognised. Subsequently they are measured at fair value with gains and losses recognised in profit or loss. Transaction costs are immediately recognised in profit or loss. The fair values of derivative financial instruments are determined by reference to active market transactions.

 

The Group holds derivative financial instruments for two purposes. The Group uses forward foreign exchange contracts to reduce the risk associated with assets denominated in foreign currencies, and additionally uses both foreign exchange options and forward foreign exchange contracts in order to achieve a return within the seed funds. The instruments are recognised at fair value. The fair value of the contracts is calculated using the market rates prevailing at the period end date. The net gain or loss on instruments is included within other income or expense.

 


2023

2022

Derivative financial assets

£'000

£'000

Forward foreign exchange contracts held to hedge non-sterling-based assets

31

-

Forward foreign exchange contracts held for trading

23

-

Total

54

-

 

 


2023

2022

Derivative financial liabilities

£'000

£'000

Forward foreign exchange contracts held to hedge non-sterling-based assets

(5)

(15)

Forward foreign exchange contracts held for trading

-

(109)

Total

(5)

(124)

 

Derivative financial instruments held to hedge non-sterling-based assets

At 31 March 2023 there were outstanding contracts with a principal value of £8,647,055 (31 March 2022: £9,085,804) for the sale of foreign currencies in the normal course of business. The fair value of the contracts is calculated using the market forward contract rates prevailing at 31 March 2023. The Group does not apply hedge accounting.

 

The net gain or loss on forward foreign exchange contracts held to hedge non-sterling-based assets is as follows:

 


2023

2022

Derivative financial instruments held to hedge non-sterling-based assets

£'000

£'000

Net loss on forward foreign exchange contracts at fair value through profit or loss

800

467

 

Derivative financial instruments held for trading

The Record - Currency MultiStrategy Fund may use a variety of instruments including forward foreign exchange contracts, options and futures in order to achieve a return.

 

All derivative financial instruments held by the Record - Currency Multi-Strategy Fund were classified as held for trading until termination in June 2021.

 

At 31 March 2023 there were outstanding contracts with a principal value of £nil (31 March 2022: £nil).

 

The net gain or loss on derivative financial instruments held for trading for the year was as follows:

 


2023

2022

Derivative financial instruments held to hedge non-sterling-based assets

£'000

£'000

Net loss on forward foreign exchange contracts and foreign exchange options at fair value through profit or loss

-

42

 



 

18. Cash management

The Group's cash management strategy employs a variety of treasury management instruments including cash, money market deposits and treasury bills. Whilst the Group manages and considers all of these instruments as cash, which are subject to its own internal cash management process, not all of these instruments are classified as cash or cash equivalents under IFRS.

 

IFRS defines cash and cash equivalents as cash in hand, on demand and collateral deposits held with banks, and other shortterm highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Moreover, instruments can only generally be classified as cash and cash equivalents where they are held for the purpose of meeting shortterm cash commitments rather than for investment or other purposes.

 

In the Group's judgement, bank deposits and treasury bills with maturities in excess of three months do not meet the definition of shortterm or highly liquid and are held for purposes other than meeting shortterm commitments. In accordance with IFRS, these instruments are not categorised as cash or cash equivalents and are disclosed as money market instruments with maturities >3 months from origination.

 


Group

Company


2023

2022

2023

2022

Assets managed as cash

£'000

£'000

£'000

£'000

Bank deposits with maturities > 3 months

4,549

13,913

-

-

Money market instruments with maturities > 3 months

4,549

13,913

-

-

Cash

6,405

3,345

213

43

Cash equivalents

3,543

-

-

-

Cash and cash equivalents

9,948

3,345

213

43

Total assets managed as cash

14,497

17,258

213

43

 


Group

Company


2023

2022

2023

2022

Cash and cash equivalents

£'000

£'000

£'000

£'000

Cash and cash equivalents - sterling

6,632

1,169

212

43

Cash and cash equivalents - USD

821

450

1

-

Cash and cash equivalents - CHF

748

318

-

-

Cash and cash equivalents - other currencies

1,747

1,408

-

-

Total cash and cash equivalents

9,948

3,345

213

43

 

Details of how the Group manages credit risk are provided in note 23.

 

19. Current liabilities

Trade and other payables are stated at their original invoice value, as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material.

 


Group

Company


2023

2022

2023

2022

Trade and other payables

£'000

£'000

£'000

£'000

Trade payables

221

478

-

-

Amounts owed to Group undertakings

-

-

4,953

4,155

Other payables

-

16

-

-

Other tax and social security

716

619

-

-

Accruals

5,074

3,608

2

6

Total

6,011

4,721

4,955

4,161

 

Accruals include £3,637,640 for the Group Bonus Scheme (31 March 2022: £2,506,656). The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

 


Group

Company


2023

2022

2023

2022

Current tax liabilities

£'000

£'000

£'000

£'000

Corporation tax

1,329

924

-

-

 



 

20. Provisions

 

The Group has provisions reflecting its contractual obligations connected to reaching the end of its contractual lease terms.

 


Group

Company


2023

2022

2023

2022


£'000

£'000

£'000

£'000

Provisions

122

200

122

200

 

The provision relates to an obligation to pay for dilapidations in connection with the Group's office lease on the second floor of Morgan House, Windsor, further information for which is included in note 12.

 

21. Issued share capital

The share capital of Record plc consists only of fully paid ordinary shares with a par value of 0.025p each. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders' meeting.

 


2023

2022


£'000

Number

£'000

Number

Authorised

 

 



Ordinary shares of 0.025p each

100

400,000,000

100

400,000,000

Calledup, allotted and fully paid

 

 



Ordinary shares of 0.025p each

50

199,054,325

50

199,054,325

 

Movement in Record plc shares held by the Record plc Employee Benefit Trust ("EBT")

The EBT was formed to hold shares acquired under the Record plc sharebased compensation plans. Under IFRS the EBT is considered to be under de facto control of the Group, and has therefore been consolidated into the Group financial statements.

 

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

 


Number

Record plc shares held by EBT as at 31 March 2021

6,296,657

Adjustment for net purchases by EBT

3,335,374

Record plc shares held by EBT as at 31 March 2022

9,632,031

Adjustment for net purchases by EBT

(897,029)

Record plc shares held by EBT as at 31 March 2023

8,735,002

 

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.

 

Further information regarding the Record plc sharebased compensation plans and relevant transactions made during the year is included in note 22.

 

22. Share-based payments

During the year ended 31 March 2023 the Group has managed the following sharebased compensation plans:

 

·     the Record plc Bonus Scheme (previously the Group Profit Share Scheme): share awards issued under the Bonus Scheme are classified as sharebased payments with cash alternatives under IFRS 2;

·     the Record plc Share Scheme: share options issued under the Record plc Share Scheme are classified as equitysettled sharebased payments under IFRS 2;

·     the Record plc Share Incentive Plan: the Group operates the Record plc Share Incentive Plan ("SIP") to encourage more widespread ownership of Record plc shares by employees. The SIP is a taxapproved scheme offering attractive tax savings for employees retaining their shares in the scheme over the medium to long term;

·     the Record plc Jointly Owned Share Plan: participants' interests awarded under the Jointly Owned Share Plan ("JSOP") are classified as equity-settled share-based payments under IFRS 2; and

·     the Record Long-Term Incentive Plan: participants' interests awarded under the Long-Term Incentive Plan ("LTIP") are classified as equity-settled share-based payments under IFRS 2.

 

All obligations arising from the five schemes have been fulfilled through purchasing shares in the market.

 



 

a. Bonus Scheme

Share-based payments with cash alternatives

These transactions are compound financial instruments, which include a debt element and a cash element. The fair value of the debt component of the amounts payable to the employee is calculated as the cash amount alternative offered to the employee at grant date and the fair value of the equity component of the amount payable to the employee is calculated as the market value of the share award at grant date less the cash forfeited in order to receive the share award. The debt component is charged to profit or loss over the period in which the award is earned and remeasured at fair value at each reporting date. The equity component is charged to profit or loss over the period in which the award is earned.

 

The Bonus Scheme allocates a proportion of operating profits to a profit share pool to be distributed between all employees of the Group. The Remuneration Committee has the discretion to vary the proportion allocated to the Bonus pool between 25% and 35% of operating profits. Directors and senior employees receive one-third of their Bonus in cash, one-third in shares ("Earned Shares") and may elect to receive the final third as cash only or to allocate some, or all, of the amount for the purchase of Additional Shares. The charge to profit or loss in respect of Earned Shares in the period was £2,047,328 (2022: £1,463,802). Other employees receive two-thirds of their profit share in cash and may elect to receive the final third as cash only or to allocate some, or all, of the amount for the purchase of Additional Shares.

 

All shares which are the subject of share awards vest immediately and are transferred to a nominee, allowing the employee, as beneficial owner, to retain full rights in respect of the shares purchased. Shares awarded under the Bonus Scheme are subject to restrictions over subsequent sale and transfer and these restrictions are automatically lifted over one-third on each anniversary of the profit share payment date for the next three years. In the meantime, these shares cannot be sold, transferred or otherwise disposed of without the consent of the Remuneration Committee.

 

The Bonus Scheme rules contain clawback provisions allowing for the repayment of Bonus payments under certain circumstances, including a material breach of contract, an error in performance of duties or a restatement of accounts which leads to a change in any prior award under the scheme.

 

b. The Record plc Share Scheme

Equitysettled sharebased payments

The fair value of the amounts payable to employees under these awards is recognised as an expense over the vesting period of the award, with a corresponding increase in equity. All such awards made by the Group involve the parent company granting rights to its equity instruments to employees of its subsidiary. Consequently, the subsidiary measures the services received from its employees in accordance with the above classification under IFRS 2 and recognises a corresponding increase in equity as a contribution from the parent. The parent has the obligation to settle the transaction with the subsidiary's employees and therefore recognises an increase in its investment in the subsidiary and 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 including any market or performance conditions, and using quoted share prices.

 

The Record plc Share Scheme allows deferred share awards to be granted to employees and Directors in the Record Group. Part 1 of the scheme allows the grant of tax-unapproved ("Unapproved") options to employees and Directors and Part 2 allows the grant of HMRC tax-approved ("Approved") options to employees and Directors. Each participant may be granted Approved options over shares with a total market value of up to £30,000 on the date of grant. There is no such limit on the value of grant for Unapproved options, which have historically been granted with a market value exercise price in the same way as for the Approved options.

 

Options over an aggregate of 3,810,000 shares were granted under the Share Scheme during the year (2022: 3,747,500), of which options over 814,000 shares were granted as Approved options and options over 2,996,000 shares were granted as Unapproved options (2022: 195,000 granted as Approved options and 3,552,500 granted as Unapproved options). All Approved and Unapproved options were granted with an exercise price per share equal to the share price prevailing at the time of grant.

 

The 588,000 Approved options issued to employees on 13 May 2022 all become exercisable on the fourth anniversary of the date of grant, subject to the employee being in employment with the Group at the relevant vesting date and to the extent performance conditions have been satisfied.

 

The 2,052,000 Unapproved options issued to employees on 13 May 2022 each become exercisable in four equal tranches on the first, second, third and fourth anniversary of the date of grant, subject to the employee being in employment with the Group at the relevant vesting date and to the extent performance conditions have been satisfied.

 

The 26,000 Approved options issued to employees on 29 June 2022 all become exercisable on the fourth anniversary of the date of grant, subject to the employee being in employment with the Group at the relevant vesting date and to the extent performance conditions have been satisfied.

 

The 199,000 Unapproved options issued to employees on 29 June 2022 each become exercisable in four equal tranches on the first, second, third and fourth anniversary of the date of grant, subject to the employee being in employment with the Group at the relevant vesting date and to the extent performance conditions have been satisfied.

 

The 50,000 Approved options issued to employees on 2 August 2022 all become exercisable on the fourth anniversary of the date of grant, subject to the employee being in employment with the Group at the relevant vesting date and to the extent performance conditions have been satisfied.

 

The 70,000 Unapproved options issued to employees on 3 August 2022 each become exercisable in four equal tranches on the first, second, third and fourth anniversary of the date of grant, subject to the employee being in employment with the Group at the relevant vesting date and to the extent performance conditions have been satisfied.

 

The 150,000 Approved options issued to employees on 27 January 2023 all become exercisable on the fourth anniversary of the date of grant, subject to the employee being in employment with the Group at the relevant vesting date and to the extent performance conditions have been satisfied.

 

The 675,000 Unapproved options issued to employees on 27 January 2023 each become exercisable in four equal tranches on the first, second, third and fourth anniversary of the date of grant, subject to the employee being in employment with the Group at the relevant vesting date and to the extent performance conditions have been satisfied.

 

The fair value of the services provided by employees has been calculated indirectly by reference to the fair value of the equity instruments granted. Fair value amounts for the options granted in the year ended 31 March 2023, and for which a charge to profit or loss was made in the year, were determined using a Black-Scholes option-pricing method and the following assumptions:

 


Weighted

Model input

average value

Share price

76.0p

Dividend yield

7.21%

Exercise price

76.0p

Expected volatility

48%

Option life

3 years

Risk-free interest rate (%)

2.7%

 

Expected volatility is based on historical volatility.

 

The Group sharebased payment expense in respect of the Share Scheme was £569,136 for the year ended 31 March 2023 (2022: £530,779).

 



 

Outstanding share options

At 31 March 2023, the total number of ordinary shares of 0.025p outstanding under Record plc share compensation schemes was 10,560,207 (2022: 11,605,545). These deferred share awards and options are over issued shares, a proportion of which are hedged by shares held in an EBT. Details of outstanding share options awarded to employees are set out below:

 






 

Earliest

Latest



At 1 April



Lapsed/

At 31 March

vesting

vesting

Exercise

Date of grant

2022

Granted

Exercised

forfeited

2023

date

date1

price

26/01/18

155,000

-

(155,000)

-

-

26/01/22

26/01/22

£0.4350

26/01/18

5,125

-

(5,125)

-

-

26/01/20

26/01/22

£0.4350

26/01/18

17,334

-

-

(17,334)

-

26/01/21

26/01/23

£0.4350

26/01/18

644,336

-

-

(644,336)

-

26/01/21

26/01/23

£0.4350

29/03/19

460,000

-

(460,000)

-

-

29/03/23

29/03/23

£0.2830

29/03/19

185,000

-

(92,500)

-

92,500

29/03/20

29/03/23

£0.2830

21/08/19

1,985,000

-

(330,836)

(330,832)

1,323,332

21/08/22

21/08/24

£0.3110

18/03/20

1,237,500

-

(475,000)

-

762,500

18/03/21

18/03/24

£0.28902

21/09/20

2,818,750

-

(1,106,250)

-

1,712,500

21/09/21

21/09/24

£0.3730

25/01/21

225,000

-

(75,000)

-

150,000

25/01/22

25/01/25

£0.49425

09/03/21

125,000

-

(31,250)

-

93,750

09/03/22

09/03/25

£0.63986

13/08/21

195,000

-

-

(35,000)

160,000

13/08/25

13/08/25

£0.85713

13/08/21

2,600,000

-

(650,000)

-

1,950,000

13/08/22

13/08/25

£0.4000

13/08/21

952,500

-

(226,875)

(45,000)

680,625

13/08/22

13/08/25

£0.85713

13/05/22

-

588,000

-

-

588,000

13/05/26

13/05/26

£0.698708

13/05/22

-

2,052,000

-

(75,000)

1,977,000

13/05/23

13/05/26

£0.698708

29/06/22

-

26,000

-

-

26,000

29/06/26

29/06/26

£0.729609

29/06/22

-

199,000

-

-

199,000

29/06/23

29/06/26

£0.729609

02/08/22

-

50,000

-

(50,000)

-

02/08/26

02/08/26

£0.717197

03/08/22

-

70,000

-

(50,000)

20,000

03/08/23

03/08/26

£0.717197

27/01/23

-

150,000

-

-

150,000

27/01/27

27/01/27

£0.972835

27/01/23

-

675,000

-

-

675,000

27/01/24

27/01/27

£0.972835

Total options

11,605,545

3,810,000

(3,607,836)

(1,247,502)

10,560,207




Weighted average exercise price of options

£0.41

£0.76

£0.39

£0.47

£0.54




1.   Under the terms of the deeds of grants, options are exercisable for twelve months following the vesting date.

 

During the year 3,607,836 options were exercised. The weighted average share price at date of exercise was £0.81. At 31 March 2023, a total of 473,750 options had vested and were exercisable (2022: 946,375). At 31 March 2023, the weighted average exercise price of the options vested and exercisable was £0.31 (2022: £0.35) and the weighted average contractual life was three years (2022: two years).

 

Performance measures

Performance conditions attached to all options granted to Board Directors differ to those granted for all other staff. All Executive Director option awards are subject to a performance condition and vest on each of the third, fourth and fifth anniversaries of the date of grant subject to an earnings per share ("EPS") hurdle linked to the annualised EPS growth for the respective three, four and five-year periods from grant. Vesting is on a stepped basis, with 25% of each tranche vesting if EPS growth over the relevant period is at least RPI plus 4% per annum, increasing through 50%, 75% and with 100% vesting if EPS growth exceeds RPI plus 13%, as shown in the table below. Options awarded subject to EPS performance conditions are valued using a Black-Scholes model, adjusted for the impact of the performance conditions.

 


Percentage of


shares subject


to the award

Record's average EPS growth

which vest

>RPI growth + 13%

100%

>RPI growth + 10%, =<RPI growth + 13%

75%

>RPI growth + 7%, =<RPI growth + 10%

50%

>RPI growth + 4%, =<RPI growth + 7%

25%

=<RPI growth + 4%

0%

 

Approved and Unapproved options issued to all other staff are not subject to a Group performance measure.

Approved options issued to all other staff vest in full on the fourth anniversary of the date of grant, subject to the employee being employed with the Group at the relevant vesting date and to the extent personal performance conditions have been satisfied.

 

Unapproved options issued to all other staff vest in four equal tranches on the first, second, third and fourth anniversaries of the date of grant, subject to the employee being employed with the Group at the relevant vesting date and to the extent personal performance conditions have been satisfied.

 

Clawback provisions

In addition to the performance measures above, both Approved and Unapproved options granted to Executive Directors under the Share Scheme are subject to clawback provisions. These provisions allow the Remuneration Committee to adjust the number of shares that may be, or were, acquired to be decreased if the Committee considers that either a material breach of contract has arisen or in respect of retrospective amendments required to calculations of the Group's performance upon which vesting calculations were originally based. The clawback provisions allow the Group to take various steps until the clawback obligation is satisfied, including reduction of future share option awards, transfer of shares back to the Group for nil consideration, reduction of future payments under the Group Bonus Scheme or payment of sales proceeds back to the Group.

 

c. The Record plc Share Incentive Plan

The Group operates the Record plc Share Incentive Plan ("SIP"), to encourage more widespread ownership of Record plc shares by employees. The SIP is a taxapproved scheme offering attractive tax savings for employees retaining their shares in the scheme over the medium to long term.

 

As an incentive to employees, the Group matches every two shares bought by employees with a free matching share. During the year, the Group awarded 31,039 matching shares (2022: 23,309 matching shares) to employees. The expense charged in respect of the SIP was £24,950 in the year ended 31 March 2023 (2022: £18,310).

 

There are no restrictions over shares issued under the Record plc Share Incentive Plan.

 

d. The Record plc Jointly Owned Share Plan ("JSOP")

Equity-settled share-based payments

At inception the employee is required to pay the Employee Benefit Trust ("EBT") for the market value of the participation interest, and the employing subsidiary has agreed to bear the expense of 50% of the amount due. The participation interest paid over at inception is non-refundable, regardless of whether the hurdle is reached. Therefore the amount paid by the employing subsidiary is expensed at inception.

 

The fair value of the amounts payable to employees under JSOP awards is recognised as an expense over the vesting period of the award, with a corresponding increase in equity. All such awards made by the Group involve the parent company granting rights to its equity instruments to employees of its subsidiary. Consequently the subsidiary measures the services received from its employees in accordance with the above classification under IFRS 2 and recognises a corresponding increase in equity as a contribution from the parent. The parent has the obligation to settle the transaction with the subsidiary's employees and therefore recognises an increase in its investment in the subsidiary and a corresponding increase in equity.

 

The JSOP scheme allows a set number of ordinary shares to be held jointly by the participant and the EBT. Under the terms of the JSOP agreement, the participant holds the beneficial interest in the future growth of the shares above the hurdle, whilst the trustee is entitled to the value up to the hurdle; the hurdle being the market price upon grant date. Upon vesting, the participant is entitled to receive the growth in value of the shares above the hurdle, which is settled in shares priced at market value on the vesting date.

 

The fair value of the JSOP award is measured at grant date using an appropriate valuation model, taking into account the terms and conditions upon which the instruments were granted including any performance conditions, and using quoted share prices.

 

No JSOP agreements were entered into during the year.

 

The Group sharebased payment expense in respect of the JSOP scheme was £2,384 for the year ended 31 March 2023 (2022: £28,438).

 

At 31 March 2023, the total number of ordinary shares of 0.025p outstanding under the Record plc JSOP was 1,274,375. These shares are jointly owned and are ring-fenced within the EBT. The JSOP award vests immediately on the vesting date, and the participant is entitled to any value over the hurdle; the trustee is then entitled to the value up to the hurdle.

 



 

 






 

Earliest

Latest



At 1 April



Lapsed/

At 31 March

vesting

vesting


Date of grant

2022

Granted

Vested

forfeited

2023

date

date

Hurdle

21/09/20

1,781,250

-

(593,750)

-

1,187,500

21/09/21

21/09/24

£0.37300

09/03/21

93,750

-

(31,250)

-

62,500

09/03/21

09/03/25

£0.63986

13/08/21

32,500

-

(8,125)

-

24,375

13/08/22

13/08/25

£0.85713

Total JSOP awards

1,907,500

-

(633,125)

-

1,274,375




Weighted average exercise price of options

£0.39

-

£0.39

-

£0.40




 

There are no Directors' interests in the JSOP scheme. No performance measures are attached to the JSOP.

 

During the year 633,125 shares over which a JSOP agreement had been granted vested. The weighted average share price at the vesting date was £0.75.

 

The JSOP scheme rules contain clawback provisions allowing re-transfer of the participant's interest and/or any vested shares for nil consideration under certain circumstances including a material breach of contract or an error in performance of duties.

 

e. The Record plc Long-Term Incentive Plan ("LTIP")

Equity-settled share-based payments

The fair value of the amounts payable to employees under these awards is recognised as an expense over the vesting period of the award, with a corresponding increase in equity. All such awards made by the Group involve the parent company granting rights to its equity instruments to employees of its subsidiary. Consequently, the subsidiary measures the services received from its employees in accordance with the above classification under IFRS 2 and recognises a corresponding increase in equity as a contribution from the parent. The parent has the obligation to settle the transaction with the subsidiary's employees and therefore recognises an increase in its investment in the subsidiary and a corresponding increase in equity.

 

The fair value of LTIP awards granted is measured at grant date using an appropriate valuation model, taking into account the terms and conditions upon which the instruments were granted including any market or performance conditions, and using quoted share prices.

 

The Record plc LTIP scheme started in April 2022, and allows nil-cost options to be granted to employees and Directors in the Record Group.

 

LTIP awards over an aggregate of 2,890,000 shares were granted under the LTIP scheme during the year (2022: nil). All will vest on 31 March 2025, subject to the employee being in employment with the Group at the relevant vesting date and to the extent performance conditions have been satisfied.

 

The fair value of the services provided by employees has been calculated indirectly by reference to the fair value of the equity instruments granted. Fair value amounts for the LTIP awards granted in the year ended 31 March 2023, and for which a charge to profit or loss was made in the year, were determined using a Black-Scholes option-pricing method and the following assumptions:

 


Weighted

Model input

average value

Share price

68.7p

Dividend yield

6.58%

Expected volatility

42.7%

LTIP award life

3 years

Risk-free interest rate (%)

3%

 

Expected volatility is based on historical volatility.

 

The Group sharebased payment expense in respect of the LTIP scheme was £344,231 for the year ended 31 March 2023 (2022: £nil).

 

 

 

 

Outstanding LTIP awards

 

At 31 March 2023, the total number of LTIP awards outstanding under Record plc share compensation schemes was 2,890,000 (2022: nil). These LTIP awards are over issued shares, a proportion of which are hedged by shares held in an EBT. Details of outstanding LTIP awards to employees are set out below:

 







Earliest

Latest


At 1 April



Lapsed/

At 31 March

vesting

vesting

Date of grant

2022

Granted

Vested

forfeited

2023

date

date

08/09/22

-

2,890,000

-

-

2,890,000

31/03/25

31/03/25

Total LTIP awards

-

2,890,000

-

-

2,890,000



 

Performance measures

Performance conditions attached to all LTIP awards granted to Board Directors are the same as to those granted for all other staff. LTIP awards granted to Executive Directors and all other staff vest after three years and vesting is subject to Record's average annualised EPS growth and Total Shareholder Return ("TSR") over the relevant period since grant as follows:

 

Two-thirds of the vesting for LTIP awards granted in September 2022 is subject to a three-year cumulative EPS threshold target of 15 pence, resulting in the EPS portion vesting at 25%, rising on a straight-line basis to 100% vesting for a three-year cumulative EPS of 18 pence at the end of the performance period.

 

One-third of the vesting for LTIP awards granted in September 2022 is subject to a relative TSR using a benchmark of the FTSE Small Cap index. The threshold target for the TSR portion is a TSR outcome in the 25th percentile of the index at which 25% of the TSR portion will vest, rising on a straight-line basis to 100% of the TSR portion at a TSR outcome in the 75% percentile of the index.

 

A principal strategic objective of the business is to create shareholder value for our investors over the long term. The Board considers this to be delivered by consistent growth in earnings of the business, and the chosen performance conditions and the EPS and TSR outcome which determine the number of LTIP awards that ultimately vest under the scheme rules reflect this.

 

The Directors' interests in the combined share schemes are as follows:

 


Ordinary shares held as at


31 March

31 March


2023

2022

Record plc Group Bonus Scheme (interest in restricted share awards)

 


Leslie Hill

591,284

467,296

Steve Cullen

44,896

57,422

Record plc Share Scheme (interest in unvested share options)

 


Leslie Hill

383,333

668,334

Steve Cullen

173,333

301,668

Record plc LTIP Scheme (interest in unvested LTIP awards)

 


Steve Cullen

325,000

-

 

Clawback provisions

In addition to the performance measures above, LTIP awards granted to Executive Directors under the Share Scheme are subject to clawback provisions. These provisions allow the Remuneration Committee to adjust the number of shares that may be, or were, acquired to be decreased if the Committee considers that either a material breach of contract has arisen or in respect of retrospective amendments required to calculations of the Group's performance upon which vesting calculations were originally based. The clawback provisions allow the Group to take various steps until the clawback obligation is satisfied, including reduction of future share option awards, transfer of shares back to the Group for nil consideration, reduction of future payments under the Bonus Scheme or payment of sales proceeds back to the Group.

 

23. Financial risk management

The Group's current activities result in the following financial risks and management responses to those risks in order to minimise any resulting adverse effects on the Group's financial performance.

 

Objectives, policies and processes for managing risk and the methods used to measure the risk

Financial assets principally comprise trade receivables, accrued income, other receivables, money market instruments, cash and cash equivalents and derivative financial assets. Financial liabilities comprise trade and other payables, financial liabilities relating to investment in seed funds, lease liabilities and derivative financial liabilities. The main risks arising from financial instruments are credit risk, liquidity risk, foreign currency risk, interest rate risk and concentration risk, each of which is discussed in further detail below.

 

The Group monitors and mitigates financial risk on a consolidated basis. The Group has implemented a framework to manage the risks of its business and to ensure that the Directors have in place risk management practices appropriate to a listed company. The management of risk is directed by the Board and controlled and reviewed by the Head of Business Risk.

 

The Company's material financial instruments are investments in the seed funds, cash and cash equivalents, and balances due to/from Group undertakings. Intercompany balances are classified as loans and receivables and are repayable on demand. No interest is charged on these balances. The Group has sufficient cash resources and hence management does not believe that the Company has a material exposure to credit risk. The Company's financial risk is managed as part of the Group financial risk management process and therefore separate disclosures for the Company have not been provided. Market risk is not considered to have a material impact on financial instruments, neither is it one of the Group's principal risks.

 

Credit risk

The Group has established a cash management team to manage Group cash in accordance with an approved cash management policy. The policy stipulates exposure limits by instruments, counterparty, tenor and duration. Counterparty exposures are measured against ratings published by creditrating agencies and are monitored daily. The maximum single exposure to any counterparty under the policy is 20% of total assets managed as cash.

 

The primary objective of the cash management team is to diversify and manage counterparty risk within the risk appetite of the Group and the limits set by the policy. The secondary objective is to maintain yield given the constraints under the policy whilst ensuring sufficient liquidity to meet future cash flow commitments as instructed by the Finance team.

 

The Chief Financial Officer is responsible for reviewing the Group's credit exposure and ensuring that any credit concerns are raised to the Risk Management Committee and that action is taken to mitigate these risks.

 

The quality of our clients and banking counterparties is reflected in the business having not suffered from any credit default for over 20 years through various market crises and cycles, and we do not anticipate this changing under the current circumstances.

 

The Group's maximum exposure to credit risk is as follows:


2023

2022

Financial assets at 31 March

£'000

£'000

Trade receivables

10,185

8,231

Accrued income

1,743

25

Other receivables

685

497

Derivative financial assets

54

-

Money market instruments with maturities > 3 months

4,549

13,913

Cash and cash equivalents

9,948

3,345

Total financial assets

27,164

26,011

 

The debtors' age analysis is also evaluated on a regular basis for expected credit losses. It is management's opinion that there is no requirement to provide for any expected credit losses. The table below is an analysis of trade receivables and accrued income by due date:



Neither


More than


Carrying

impaired nor

0-3 months

3 months


amount

past due

past due

past due

At 31 March 2023

£'000

£'000

£'000

£'000

Trade receivables

10,185

9,775

309

101

Accrued income

1,743

1,743

-

-

Total

11,928

11,518

309

101

 

 

97%

2%

1%

 



Neither


More than


Carrying

impaired nor

0-3 months

3 months


amount

past due

past due

past due

At 31 March 2022           

£'000

£'000

£'000

£'000

Trade receivables

8,231

8,231

-

-

Accrued income

25

25

-

-

Total

8,256

8,256

-

-



100%

0%

0%

The Group offers standard credit terms of 30 days from invoice date. It is the Group's policy to assess debtors for expected loss on an individual basis and to make a provision where it is considered necessary. In assessing recoverability, the Group takes into account any indicators of impairment up to the reporting date, adjusting to incorporate any relevant forward looking information. The application of this policy generally results in debts that are past due not being provided for unless individual circumstances indicate that a debt is impaired.

 

Trade receivables are made up of 113 debtors' balances (2022: 91). The largest individual debtor corresponds to 16% of the total balance (2022: 16%). Debtor days, based on the generally accepted calculation of debtor days, is 83 days (2022: 85 days). This reflects the quarterly billing cycle used by the Group for the vast majority of its fees. As at 31 March 2023, 3% of debt was overdue (2022: 0%). No debtors' balances have been renegotiated during the year or in the prior year.

 

Liquidity risk

The Group is exposed to liquidity risk, namely that it may be unable to meet its payment obligations as they fall due. The Group maintains sufficient cash and marketable securities to be able to meet all such obligations. Management review cash flow forecasts on a regular basis to determine whether the Group has sufficient cash reserves to meet the future working capital requirements and to take advantage of business opportunities. The average creditor payment period is 9 days (2022: 28 days).

 

Contractual maturity analysis for financial liabilities

 



Due or due

Due between

Due between


Carrying

in less than

1 and

3 months


amount

1 month

3 months

and 1 year

At 31 March 2023

£'000

£'000

£'000

£'000

Trade payables

221

221

-

-

Accruals

5,074

486

2,001

2,587

Derivative financial liabilities

5

-

5

-

Total

5,300

707

2,006

2,587

 



Due or due

Due between

Due between


Carrying

in less than

1 and

3 months


amount

1 month

3 months

and 1 year

At 31 March 2022

£'000

£'000

£'000

£'000

Trade payables

478

318

29

131

Accruals

3,608

302

1,503

1,803

Derivative financial liabilities

124

7

117

-

Total

4,210

627

1,649

1,934

 

Lease liabilities are not included within the table below, please see note 12 for further details.

 

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from interest-bearing financial assets and liabilities held by the Group. Interest-bearing assets comprise money market instruments and cash and cash equivalents which are considered to be shortterm liquid assets. It is the Group's policy to settle trade payables within the credit terms allowed and the Group does not therefore incur interest on overdue balances.

 

A sensitivity analysis has not been disclosed for the impact of interest rate changes as any reasonable range of change in interest rate would not directly have a material impact on profit or equity.

 



 

Interest rate profiles

 



No



Fixed rate

interest rate

Total

At 31 March 2023

£'000

£'000

£'000

Financial assets




Trade receivables

-

10,185

10,185

Accrued income

-

1,743

1,743

Other receivables

-

685

685

Derivative financial assets at fair value through profit or loss

-

54

54

Money market instruments with maturities > 3 months

4,549

-

4,549

Cash and cash equivalents

9,948

-

9,948

Total financial assets

14,497

12,667

27,164

Financial liabilities

 

 

 

Trade payables

-

(221)

(221)

Accruals

-

(5,074)

(5,074)

Lease liability

-

(979)

(979)

Derivative financial liabilities at fair value through profit or loss

-

(5)

(5)

Total financial liabilities

-

(6,279)

(6,279)

 



No



Fixed rate

interest rate

Total

At 31 March 2022

£'000

£'000

£'000

Financial assets




Trade receivables

-

8,231

8,231

Accrued income

-

25

25

Other receivables

-

497

497

Money market instruments with maturities > 3 months

13,913

-

13,913

Cash and cash equivalents

3,345

-

3,345

Total financial assets

17,258

8,753

26,011

Financial liabilities




Trade payables

-

(478)

(478)

Accruals

-

(3,608)

(3,608)

Lease liability

-

(1,326)

(1,326)

Derivative financial liabilities at fair value through profit or loss

-

(124)

(124)

Total financial liabilities

-

(5,536)

(5,536)

 

Foreign currency risk

Foreign currency risk refers to the risk that the value of a financial commitment or recognised asset or liability will fluctuate due to changes in foreign currency rates. The Group makes use of forward foreign exchange contracts to manage the risk relating to future transactions in accordance with the Group's risk management policy.

 

The Group is exposed to foreign currency risk on revenue invoices and cash holdings that are denominated in a currency other than sterling, and also on assets and liabilities held by the Record Currency - Strategy Development Fund. The principal currencies giving rise to this risk are the US dollar, the Swiss franc, the euro and the Canadian dollar.

 

During the year ended 31 March 2023, the Group invoiced the following amounts in currencies other than sterling:

 


2023

2022


Local

Value in

Local

Value in


currency

reporting

currency

reporting


value

currency

value

currency


£'000

£'000

£'000

£'000

US dollar (USD)

24,978

20,869

23,949

17,742

Swiss franc (CHF)

16,138

14,223

12,460

10,010

Euro (EUR)

4,293

3,748

4,135

3,498

Canadian dollar (CAD)

1,618

1,014

1,626

960

Australian dollar (AUD)

1,089

612

1,029

563

Japanese yen (JPY)

8,795

54

4,824

31

Swedish krona (SEK)

-

-

36

3

Singapore dollar (SGD)

-

-

4

2

 

The value of revenues for the year ended 31 March 2023 that were denominated in currencies other than sterling was £40.2 million (31 March 2022: £32.8 million).

 

Record's policy is to reduce the risk associated with the Group's revenues denominated in foreign currencies by using forward fixed rate currency sales contracts, taking into account any forecast foreign currency cash flows.

 

The settlement of these forward foreign exchange contracts is expected to occur within the following three months. Changes in the fair values of forward foreign exchange contracts are recognised directly in profit or loss.

 

The cash denominated in currencies other than sterling (refer to note 18) is covered by the Group's hedging process, therefore the Directors consider that the foreign currency risk on cash balances is not material.

 

Foreign currency risk - sensitivity analysis

The Group has considered the sensitivity to exchange rate movements by considering the impact on those revenues, costs, assets and liabilities denominated in foreign currencies as experienced in the given period.

 


Impact on profit after tax

for the year ended 31 March

Impact on total equity

as at 31 March


2023

2022

2023

2022


£'000

£'000

£'000

£'000

Sterling weakening by 10% against the dollar

1,000

871

1,000

871

Sterling strengthening by 10% against the dollar

(1,000)

(871)

(1,000)

(871)

Sterling weakening by 10% against the Swiss franc

755

445

755

445

Sterling strengthening by 10% against the Swiss franc

(755)

(445)

(755)

(445)

 

Sterling/US dollar exchange rate

The impact of a change of 10% has been selected as this is considered reasonable given the current level of exchange rates and the volatility observed on a historical basis and market expectations for future movement. When applied to the average sterling/USD exchange rate of £1 = $1.20 this would result in sterling weakening to £1 = $1.09 and sterling strengthening to £1 = $1.33.

 

Sterling/Swiss franc exchange rate

The impact of a change of 10% has been selected as this is considered reasonable given the current level of exchange rates and the volatility observed on a historical basis and market expectations for future movement. When applied to the average sterling/CHF exchange rate of £1 = CHF 1.13 this would result in sterling weakening to £1 = CHF 1.03 and sterling strengthening to £1 = CHF 1.26.

 

Sensitivity analyses have not been disclosed for other currencies as any reasonable range of change in exchange rate would not have a material impact on profit or equity.

 

Concentration risk

The Group is exposed to concentration risk in respect of product, client type and geographical location, which could lead to over-reliance on any one category of revenue. Note 4 provides detail on clients contributing greater than 10% of revenue. Mitigating activities are detailed in the Risk management section.

 

Concentration risk - sensitivity analysis

The Group has considered the impact of losing the Group's largest client, assuming that only variable remuneration costs can be reduced in the short term.

 


Impact on profit after tax

for the year ended 31 March

Impact on total equity

as at 31 March


2023

2022

2023

2022


£'000

£'000

£'000

£'000

Loss of largest client

3,486

2,594

3,486

2,594

 



 

24. Fair value measurement

The following table presents financial assets and liabilities measured at fair value in the consolidated statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:

 

·     level 1: quoted prices (unadjusted) in active markets for identical financial assets or liabilities;

·     level 2: inputs other than quoted prices included within level 1 that are observable for the financial asset or liability, indirectly (i.e. derived from prices); and

·     level 3: inputs for the financial asset or liability that are not based on observable market data (unobservable inputs).

 

The level within which the financial asset or liability is classified is determined based on the lowest level of input to the fair value measurement. The financial assets and liabilities measured at fair value in the statement of financial position are grouped into the fair value hierarchy as follows:

 


2023

Level 1

Level 2

Level 3


£'000

£'000

£'000

£'000

Financial assets at fair value through profit or loss

 




Impact bonds

770

770

-

-

Investment in funds

2,530

1,077

-

1,453

Other investments

1,601

1,001

-

600

Forward foreign exchange contracts held to hedge non-sterling assets

54

-

54

-

Financial liabilities at fair value through profit or loss

 




Forward foreign exchange contracts held to hedge non-sterling assets

(5)

-

(5)

-

Total

4,950

2,848

49

2,053

 


2022

Level 1

Level 2

Level 3


£'000

£'000

£'000

£'000

Financial assets at fair value through profit or loss





Impact bonds

2,177

2,177

-

-

Investment in funds

1,070

944

-

126

Other investments

200

-

-

200

Financial liabilities at fair value through profit or loss





Forward foreign exchange contracts used by seed funds

(15)

-

(15)

-

Other investments

(110)

-

(110)

-

Total

3,322

3,121

(125)

326

 

There have been no transfers between levels in the reporting period (2022: none).

 

Basis for classification of financial instruments classified as level 1 within the fair value hierarchy

Impact bonds, listed funds and other listed investments are classified as level 1. These investments are valued using market prices and coupon rates as applicable.

 

Basis for classification of financial instruments classified as level 2 within the fair value hierarchy

Forward foreign exchange contracts and options are both classified as level 2. Both of these instruments are traded on an active market. Options are valued using an industry standard model with inputs based on observable market data whilst the fair value of forward foreign exchange contracts may be established using interpolation of observable market data rather than from a quoted price.

 

Basis for classification of financial instruments classified as level 3 within the fair value hierarchy

Direct investments in private funds and share capital of start-up companies in the digital sector have been classified as level 3. There is no observable market for these investments, therefore fair value measurements have been derived from valuation techniques that include inputs that are not based on observable market data. The private funds are valued at net asset value in accordance with independent professional valuation reports or International Private Equity and Venture Capital Valuation Guidelines where relevant. The direct investments in capital of the start-up companies are valued at cost.

 

Classes and fair value of financial instruments

It is the Directors' opinion that the carrying value of all financial instruments approximates to their fair value.

 



 

Categories of financial instrument

 




Financial

Assets at

Liabilities at



Assets at

liabilities

fair value

fair value



amortised

measured at

through

through profit



cost

amortised cost

profit or loss

or loss

At 31 March 2023

Note

£'000

liabilities

£'000

£'000

Impact bonds

14

-

-

770

-

Investment in funds

14

-

-

2,530

-

Other investments

14

-

-

1,601

-

Trade and other receivables (excludes prepayments)

16

12,613

-

-

-

Money market instruments with maturities > 3 months

18

4,549

-

-

-

Cash and cash equivalents

18

10,757

-

-

-

Derivative financial assets at fair value through profit or loss

17

-

-

54

-

Trade payables

19

-

(221)

-

-

Accruals

19

-

(5,074)

-

-

Derivative financial liabilities at fair value through profit or loss

17

-

-

-

(5)

Total

 

27,919

(5,295)

4,955

(5)

 




Financial

Assets at

Liabilities at



Assets at

liabilities

fair value

fair value



amortised

measured at

through

through profit



cost

amortised cost

profit or loss

or loss

At 31 March 2022

Note

£'000

liabilities

£'000

£'000

Impact bonds

14

-

-

2,177

-

Investment in funds

14

-

-

1,070

-

Other investments

14

-

-

200

-

Trade and other receivables (excludes prepayments)

16

8,753

-

-

-

Money market instruments with maturities > 3 months

18

13,913

-

-

-

Cash and cash equivalents

18

3,345

-

-

-

Trade payables

19

-

(478)

-

-

Accruals

19

-

(3,608)

-

-

Derivative financial liabilities at fair value through profit or loss

17

-

-

-

(124)

Total


26,011

(4,086)

3,447

(124)

 

25. Related parties transactions

Company

Details of transactions between the Company and other Group undertakings, which are related parties of the Company, are shown below:

 

Transactions with subsidiaries

The Company's subsidiary undertakings are listed in note 14, which includes a description of the nature of their business.

 


2023

2022


£'000

£'000

Amounts due to subsidiaries

(3,415)

(714)

Dividends received from subsidiaries

10,500

4,600

 

Amounts due to subsidiaries consist of funds lent by the subsidiaries to the Company to facilitate the Company's investing activities. Amounts due to subsidiaries are disclosed as a net amount, and consist of amounts owed to Group undertakings in note 19 and trade receivables in note 16. All amounts owed to and by related parties will be settled in cash. No guarantees have been given or received. No provisions for expected credit losses have been raised against amounts outstanding (2022: £nil). No expense has been recognised during the year in respect of expected credit losses due from related parties.

 

Group

Transactions or balances between Group entities have been eliminated on consolidation, and in accordance with IAS 24, are not disclosed in this note.

 



 

Key management personnel compensation

 


2023

2022


£'000

£'000

Shortterm employee benefits

10,311

8,457

Postemployment benefits

327

330

Sharebased payments

3,539

2,467

Total

14,177

11,254

 

Key management personnel dividends

The dividends paid to key management personnel in the year ended 31 March 2023 totalled £4,073,511 (2022: £3,056,662).

 

Directors' remuneration

 


2023

2022


£'000

£'000

Emoluments (excluding pension contribution)

3,580

2,809

Pension contribution (including payments made in lieu of pension contributions)

101

96

Total

3,681

2,905

 

During the year, no Directors of the Company (2022: none) participated in the Group Personal Pension Plan, a defined contribution scheme. Further detail on Directors' remuneration is provided in the Remuneration report.

 

26. Contingent liabilities and commitments

The Group has committed to subscriptions to equity capital of $1,791,870, of which $1,486,870 has been called.

 

On 20 January 2023, the Group committed to a licence to use an office in London. The commitment is to 28 February 2025 and the outstanding amount to be paid at 31 March 2023 was £1,628,225. £836,060 is payable within twelve months and £864,180 within the following twelve months.

 

A previous commitment on an office in London had been made on 1 October 2021, with the commitment being to 31 October 2023 and the original outstanding amount to be paid between 1 April 2023 and 31 October 2023 being £352,800. However, this commitment ended on 28 February 2023, when it was replaced and superseded by the commitment made on 20 January 2023.

 

27. Capital management

The Group's objectives when managing capital are (i) to safeguard the Group's ability to continue as a going concern; (ii) to provide an adequate return to shareholders; and (iii) to meet regulatory capital requirements under the relevant jurisdictions (FCA and BaFin).

 

The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets, while also continuing to ensure that the minimum required regulatory capital is maintained. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, or issue new shares. The Group had no debt in the current or prior financial year and consequently does not calculate a debttoadjusted capital ratio.

 

The Group's total capital is equal to the net assets of the Group, and is managed within the categories set out below:

 


2023

2022


£m

£m

Required regulatory capital

7.1

5.4

Other operating capital

21.2

20.5

Total capital

28.3

25.9

 

Total capital covers the Group's regulatory capital requirements plus capital required for daytoday operational purposes and other investment purposes. The Directors consider that the other operating capital significantly exceeds the actual day-to-day operational requirements.

 

28. Ultimate controlling party

As at 31 March 2023 the Company had no ultimate controlling party, nor at 31 March 2022.

 

29. Post-reporting date events

No adjusting or significant nonadjusting events have occurred between the reporting date and the date of authorisation.

 

30. Restatement of the share premium account and retained earnings

Gains prior to 31 March 2022 on the release of shares from the Employee Benefit Trust have been reclassified from share premium to retained earnings as there was no issue of new shares. The prior cumulative movements to 31 March 2021 and for the year ended 31 March 2022 of £609,000 and £820,000 respectively, resulting in a total reclassification of £1,429,000 to the retained earnings balance as at 31 March 2022. 

 

In addition to this, a reclassified of £1,240,000 between the release of shares held by EBT and share based payment reserve movement in the statement of changes in equity was made to correct the classification of consolidation adjustments necessary to remove internal gains and losses arising when shares are transferred within the Group, and recognise it separately from the IFRS 2 charges.

 

The restatement does not impact the current or previous years' profit or loss.

 

31. Restatement of profit after tax in the Company statement of cash flows

For the prior year ended 31 March 2022, the Company statement of cash flows previously showed the loss after tax of £41,000 excluding dividends received of £4,600,000. In order for the profit after tax figure to reconcile to the Company statement of changes in equity, this figure has now been updated in the FY-22 comparative figure to a profit after tax of £4,599,000 including dividends. A corresponding line to remove the dividends received from subsidiaries from cash flows from operating activities was also added, as this is recognised in investing activities in line with the company policy. Since this represents a presentational adjustment only, the restatement does not impact the totals reported for cash inflow from operating activities nor the net decrease in, or closing balance for, cash and cash equivalents for the year.

 

Notes to Editors

This announcement includes information with respect to Record's financial condition, its results of operations and business, strategy, plans and objectives. All statements in this document, other than statements of historical fact, including words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "will", "continue", "project" and similar expressions, are forward- looking statements.

 

These forward-looking statements are not guarantees of the Company's future performance and are subject to risks, uncertainties and assumptions that could cause the actual future results, performance or achievements of the Company to differ materially from those expressed in or implied by such forward-looking statements.

 

The forward-looking statements contained in this document are based on numerous assumptions regarding Record's present and future business and strategy and speak only as at the date of this announcement.

 

The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this announcement whether as a result of new information, future events or otherwise.

 

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

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Companies

Record (REC)
UK 100

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