R
e
c
o
r
d
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
0
Intelligent
currency
management
Record plc
Annual Report 2020
Our purpose to deliver innovative, thought
leading and practical solutions to the needs
of currency market users and investors, while
maintaining independence and integrity.
Financial statements
pages 90 to 130
Independent auditor’s report
Financial statements
Notes to the financial statements
Additional information
pages 131 to 132
Five year summary
Information for shareholders
Definitions
91
96
103
131
131
132
Contents
Strategic report
pages 1 to 49
Highlights
About us
Chairman’s statement
Chief Executive Officer’s statement
Business model
Markets
Strategic priorities and goals
Key performance indicators
Operating review
Financial review
Risk management
Corporate social responsibility
Governance
pages 50 to 89
Corporate governance
Chairman’s introduction
Board of Directors
Corporate governance report
Nomination Committee report
Audit and Risk Committee report
Remuneration report
Directors’ report
Directors’ responsibilities statement
1
2
4
6
10
18
22
26
30
34
38
46
50
51
52
54
62
64
70
86
89
Highlights
Assets Under Management
Equivalents1 (“AUME”)
$58.6bn
2019: $57.3bn
+2.3%
Earnings per share
3.26p
2019: 3.27p
-0.3%
Revenue
Ordinary dividend per share
£25.6m
2019: £25.0m
+2.4%
2.30p
2019: 2.30p
0.0%
Profit before tax
Special dividend per share
£7.7m
2019: £8.0m
-3.2%
0.41p
2019: 0.69p
-40.6%
1. As a currency manager Record manages only the impact of foreign exchange and not the underlying assets, therefore its “assets under management” are notional
rather than real. To distinguish this from the AUM of conventional asset managers, Record uses the concept of Assets Under Management Equivalents (“AUME”)
and by convention this is quoted in US dollars. AUME is an alternative performance measure and further detail on how it is defined is provided on page 132.
Record plc Annual Report 2020
1
Strategic reportGovernanceFinancial statementsAdditional information About us
A client-focused approach.
A culture of integrity.
Strengths developed through 37 years of experience.
Who we are
What we do
We are an independent, specialist
currency manager and have been since our
formation in 1983. We have over 37 years
of experience in currency markets which
has allowed us to develop a deep and
fundamental understanding of the risk and
reward opportunities within those markets.
Record plc has a premium listing on the
Main Market of the London Stock
Exchange, and is majority‑owned
by its Directors and employees.
We listen to our clients and use our years
of experience and thought leadership in
currency markets to develop solutions
tailored to their individual currency‑related
needs, including robust and innovative
products and market‑leading service levels.
Our range of products typically assist
our clients in achieving either their
risk‑reduction or return‑seeking objectives,
or alternatively our bespoke Multi‑product
mandates have combined risk‑reducing
and return‑seeking objectives.
Our clients are largely institutions, including
pension funds, charities, foundations,
endowments, and family offices, as well as
other fund managers and corporate clients.
Research
Experience and
know how
Innovation
Bespoke
Where we operate
Head office
Windsor
Sales office
New York
Sales office
Switzerland
North America
Europe
Rest of the World
2
Record plc Annual Report 2020
About us
About
us
Business
model
Strategic
priorities
and goals
Key
performance
indicators
Markets
Operating
review
Finance
and risk
Corporate
social
responsibility
Where we operate
How we create value
Quality client
experience
Technology and
innovation
Talent
development
Superior service is core to our client
proposition and we achieve this on
various levels by assigning a
dedicated and experienced
relationship manager to oversee each
client portfolio. Direct communication
between our operational and
administrative specialists with each
client’s own internal functions builds
on the general level of interaction with
the client and underpins the overall
“trusted adviser” relationship.
Over the last 37 years Record has
developed a leading position in its
sector. Our knowledge of the
currency market is sustained by our
research, and results in innovative
products and continued process
enhancement whilst incorporating
advances in technology.
We aim to develop and retain a
diverse pool of talent which is key
to delivering our “best in class”
business model and ensuring the
long‑term stability of the business.
The Group’s main geographical markets as determined
by the location of clients to whom services are provided,
are the UK, North America and Continental Europe,
in particular Switzerland. The Group also has clients
elsewhere, including Australia.
The Group’s Head Office is in Windsor, UK from where the
majority of its operations are performed and controlled.
The Group also has offices in New York and in Zürich.
In addition to these main markets, we continue to explore
new geographical markets which we believe may offer
attractive opportunities.
72%
14%
11%
AUME
$42.3bn
Europe (excluding UK)
AUME
$8.1bn
North America
AUME
$6.7bn
United Kingdom
3%
AUME
$1.5bn
Rest of the world
Record plc Annual Report 2020
3
Strategic reportGovernanceFinancial statementsAdditional information
Chairman’s statement
Writing this statement in the middle
of the Coronavirus lockdown is a
timely reminder both of the value of
our asset-based revenue model, and
of the importance of adaptability.
Neil Record
Chairman
2020 will be remembered as the Coronavirus year. It is also
the year in which Record plc made some important decisions
for its future.
In February 2020, we announced that James Wood‑Collins was
stepping down as CEO, and that he would be replaced by our
Client Team Director, Leslie Hill.
Group strategy
I indicated above that the Board is prioritising growth and
succession in its strategy. This will mean building on our existing
strong base of current business, including a review of the products
and services that Record offers to its clients, and an assessment of
the way in which we deliver those products and services.
Before I describe the thinking behind this change, I want to pay
tribute to the efforts that James devoted to Record in his nine
years in this role. Under James’s leadership, we re‑established
our equilibrium following the Global Financial Crisis, and diversified
our range of currency market products and services.
Early in the year, the Board took the view that two imperatives
were emerging at Record: that it was becoming increasingly vital to
orientate the firm for growth, and it was also becoming increasingly
vital to establish succession in the most senior executive posts
at Record.
The Board took the view that Leslie Hill, 64, our veteran Client
Team Director, with 27 years already completed at Record, had the
skills and vision to deliver both growth and succession.
This change was facilitated by the arrival of a new Client Team
Director, Sally Francis‑Cole, who comes with 20 years’ experience
in FX sales.
Leslie sets out her plans in more detail in her statement.
Financial overview
Strong net inflows of $4.6 billion for the year (2019: outflows
of $4.5 billion) helped drive the 2.3% increase in our final AUME
of $58.6 billion, despite the negative impact on markets from
covid‑19 and the consequent decrease of $4.5 billion in our AUME
in the final quarter.
Revenues increased by 2.4% to £25.6 million (2019: £25.0 million),
operating profit fell slightly to £7.6 million (2019: £7.9 million) and
earnings per share remained broadly flat at 3.26 pence (2019:
3.27 pence).
Further information on AUME flows and financial results can be
found in the Operating review and Financial review sections on
pages 30 and 34 respectively.
Record is no longer a young company. At 37 years old, we
have built up a modus operandi which is reliable and effective.
However, technological changes, FX market changes and the
changing nature of our client base means that the time has
come to re‑think how we deliver our services in an increasingly
technologically dominated market.
Under Leslie’s new leadership, we will embrace change to deliver
our goals.
Further detail on our strategy and goals and our progress made
against initiatives can be found under “Strategic priorities and
goals” on pages 22 to 25.
Capital and dividend
Our capital policy aims to ensure retained capital broadly equivalent
to one year’s worth of future estimated overheads (excluding
variable remuneration), in addition to 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 dividend which is at least
covered by earnings and which allows for 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 1.15 pence
per share (2019: 1.15 pence), with the full‑year ordinary dividend at
2.30 pence, which is equivalent to the full‑year ordinary dividend in
respect of the prior year (2019: 2.30 pence). The interim dividend
of 1.15 pence per share was paid on 27 December 2019, and the
final ordinary dividend of 1.15 pence per share will be paid on
11 August 2020 to shareholders on the register at 3 July 2020,
subject to shareholders’ approval.
4
Record plc Annual Report 2020
Chairman’s statement
The Board has considered at length the current market conditions,
including uncertainties surrounding global trade, Brexit and the
high likelihood of a global recession arising from the Coronavirus.
Such a high level of uncertainty brings with it the need for a
measured and prudent approach to ensuring the business retains
sufficient capital and liquidity to withstand any negative impacts
arising, whilst also allowing the business to continue to invest in
implementing its new strategy.
Against this backdrop, the Group has assessed its capital
requirement both in terms of the current market conditions and
also its anticipated costs and regulatory capital required for the
current financial year, which has resulted in an increase to capital
required in line with its policy. The net increase in capital required is
equivalent to 0.55 pence per share and consequently the Board is
announcing a special dividend of 0.41 pence per share to be paid
simultaneously with the final ordinary dividend. Total dividends for
the year are 2.71 pence per share (2019: 2.99 pence) compared
to earnings per share of 3.26 pence per share (2019: 3.27 pence).
The Board will continue to consider ordinary dividends and other
distributions to shareholders on a “total distribution” basis. The
total distribution for any year will be at least covered by earnings,
and will always be subject to the financial performance of the
business, the market conditions at the time and to any further
capital assessed as required under the policy described above.
Outlook
Many chairmen’s statements written in the first half of 2020 will
look ahead with a much larger degree of uncertainty than is usually
the case – and this one is no different. At the time of writing, the
UK is beginning to gradually ease restrictions, our offices remain
closed, and all our activity is taking place by remote working
using technology.
I cannot predict the path of the global economy, of the global
regulatory environment or of global political developments with
any clarity. However, it is at least clear to me that the services we
offer – the management of risks and opportunities associated with
foreign currency markets – will continue to find demand from
clients. If our new strategy is successful, then we should see that
demand rising, whatever the global backdrop.
On behalf of the Board, I would like to thank everyone at Record
for their hard work and extraordinary adaptability in the face of the
unprecedented demands of the Coronavirus lockdown. Many of
my colleagues were working very long days in surroundings
unfamiliar to business activities, and their commitment and
flexibility has meant that our clients have continued to receive
the services that they pay us for.
The Board
The only change to the composition of the Board was the
departure of James Wood‑Collins in February 2020. The Board has
acted decisively in making the personnel changes I have outlined,
but more importantly, has helped executives focus on the
importance of change and renewal in every aspect of the firm.
Neil Record
Chairman
18 June 2020
Record plc Annual Report 2020
5
Strategic reportGovernanceFinancial statementsAdditional information Chief Executive Officer’s statement
Our strategy is focused on
accelerating growth, planning
for generational change and in
delivering added-value for all of
our stakeholders.
Leslie Hill
Chief Executive Officer
Using this foundation, my role is now to develop the business
by injecting new energy and vigour to deliver on the growth
opportunities that we currently anticipate through diversification
and modernisation. By taking the right steps to leverage our
position as a trusted and professional provider of Currency Risk
Management and Risk for Return products, in combination with
the introduction of new talent and leadership, for example in the
shape of our new Head of Global Sales, Sally Francis‑Cole and
others, I believe we have the resources to sharpen our client focus
and put the business on an accelerated growth trajectory over the
medium term. Looking forwards we will look to further expand and
strengthen our sales team to be able to capitalise on the new
product offerings we are developing.
Our plan is also to deepen and broaden our interaction with
existing and potential clients, both in our traditional product range
and in the new diversifying products and services we are evolving.
This will enable us to strengthen our business, and use our
financial stability and liquid asset rich balance sheet to launch new
initiatives and innovate – always keeping a very firm eye on what
our clients tell us they want and will pay us to provide.
This requires a change of emphasis both in how we utilise
our current resources most effectively, and also where we need
to focus additional effort and resources going forward in order
to achieve our goals. Our strategy will seek to consolidate our
presence in our key international markets, as well as extend
our reach across and into different geographical markets,
using diversified and innovative products and services,
and using and expanding our existing relationships both
with investment consultants and clients.
Our success will depend upon reinforcing, and further building
on the cornerstones to our strategy, which are:
• Quality client experience
• Technology and innovation
• Talent development
I am delighted to welcome you to this year’s Annual Report,
my inaugural report after my appointment as Record’s CEO in
February 2020, and just prior to the end of the financial year.
For those of you who are new to Record, I joined the business in
1992, and was appointed as a Director and Head of Client Team in
1999, having previously gained experience as a Director and Head
of Corporate Foreign Exchange sales worldwide for Merrill Lynch.
I am fortunate in being able to take over from James Wood‑Collins,
who has shown full commitment over the last nine years in building
Record into the strong and more diversified business that it is
today, and for which I and the rest of the Board are grateful.
Looking ahead, I see some exciting opportunities for the Group to
accelerate growth and to realise its full potential, and I fully intend
to capitalise on as many of these opportunities as possible.
Company strategy
Record is a listed specialist currency management business which
has built a unique position with over 37 years in the FX market.
Over this period, we have built a robust and diversified business
with an excellent team of committed and talented professionals.
Our strategy has always been to deliver high quality products and
services to our clients, using our thought leadership married with
our capabilities in research and innovation. This approach has
served us well over 37 years and has enabled us to build
long‑standing and trusted relationships with our clients,
and a strong and sustainable business.
6
Record plc Annual Report 2020
Chief Executive Officer’s statement
Assets Under Management
Equivalents (“AUME”)
$58.6bn
2019: $57.3bn
+2.3%
Quality client experience
A feature of many of our service offerings in recent years has been
fee compression. We have countered this by working hard to add
value in many ways to client hedging portfolios, for example Cash
Collateralisation services, enhancements to Passive Hedging to
reduce hedging cost, and hedging of difficult and complex portfolios,
like Illiquid Assets and Emerging Market Equities and Bonds. During
the recent covid‑19 crisis we found that clients really appreciated our
stability, reliability and our deep infrastructure. By helping them with
complex derivatives as well as the more standard hedging we have
been able to show that although clients may underestimate the value
of a full service offering when times are good, it comes into its own
at difficult times.
We do not necessarily expect this phenomenon to persist forever,
but I know our staff really enjoy being able to “show what they can
do” – like all good craftsmen and artists! This is a deep and abiding
source of satisfaction in all our offices, and makes us a true
specialist, who can nevertheless rise to a fresh challenge.
Our long‑standing client relationships allow us to know each other
well. As a result clients allow us, from time to time, to try things that
are new to them, and sometimes to us, allowing us to diversify.
This mutual trust is a source of our strength and also our future
growth. Seeding new products and ideas is always a challenge
and so we look for trusted and trusting seed capital to get ideas
off the ground, and I believe this will be a great launch pad for our
future growth, to strengthen our business and expand the base
from which we operate.
Technology and innovation
Technology is changing both the way we do business and the
markets in which we do business. Observing and investing in
new technology is essential for ensuring our business remains
competitive in terms of our client servicing, our product innovation
and productivity, and for maintaining profitability. We will adopt
relevant and innovative technology where we can be satisfied it
offers cost‑effective opportunities to maximise the possibilities for
new products and services as well as enhancing our current
capabilities and efficiencies.
In terms of product innovation, our new products and services
initiatives have included the hiring of an experienced Macro and
Currency Manager, John Floyd. His Dynamic Macro Currency
strategy has now been funded within the Record – Currency
Multi‑Strategy Fund. We intend to build a suite of Return‑Seeking
products of which we can be proud.
In addition we have been asked by clients to develop our EM
currency offering using so‑called Frontier Currencies, and this is
another step in the evolution of our EM currency product, and was
seeded this year.
We have developed an ESG/impact bond offering that has also
been attracting some attention, and while it is still early stages and
we have yet to see real fruits from this innovation, we have good
reason to think that this is a robust trend which will last a long
time – long enough for us to be able to add this product range
to our offering.
The effects of the covid‑19 lockdown are also allowing us to
consider how we can harness technology to evolve the way we
work, the locations we operate from and the way we interact with
each other and with our clients: we are being asked to engage in
virtual due diligence meetings for example and we are planning our
first virtual Final for a mandate in Europe. We hope this will be a
feature of our business going forward, allowing us to be cost
efficient and have greater global reach.
Record plc Annual Report 2020
7
Strategic reportGovernanceFinancial statementsAdditional information Chief Executive Officer’s statement continued
Talent development
This year we have started to work ever harder to develop our
young talented professionals, by rewarding them with training,
support, added responsibility and remuneration to take them to
the higher ranks within our organisation. We offer a collegiate
working environment but work within clear and firmly held beliefs
and structures. Everyone knows what they are supposed to do,
and are given help to achieve their goals and be the best that they
can be.
New hires in our Zürich, New York and London offices are an
important part of our talent recruitment and development.
In addition, existing staff have a chance to elect to work overseas,
and access our network for high quality training and work
experience, on occasion, outside our own office environment.
It is essential we build a really strong plan for generational change,
and we will not hold back here. It is often hard to achieve, but we
believe that by taking the lead from our Chairman, who has been
courageous over the years in allowing new talent to flourish, we
can achieve the same again.
More detailed information on Talent development is provided in
the Strategic report on pages 22 to 25.
Market overview
Following a relatively calm first half, the impact of covid‑19 on
currency markets was reflected in heightened volatility, reduced
liquidity and sharp increases in bid/offer spreads in the final quarter
of our financial year. In such times, our established long‑term
trading relationships come to the fore, allowing us to cement our
relationships with clients by ensuring we respond to their requests
and continue to deliver the highest levels of client service and best
execution available. As we enter a period of heightened economic
uncertainty and probable recession following covid‑19, the
importance of having a trusted partner with the expertise and
experience to help clients navigate through such uncertain markets
cannot be underestimated, and this provides us with an excellent
opportunity for growth.
More detailed information on foreign exchange markets over the
period is provided in the Markets section on pages 18 to 21.
Investment performance
As mentioned above, during the year we introduced a new
return‑seeking currency strategy to our portfolio: the Dynamic
Macro Currency strategy managed by John Floyd, which is
complementary to Record’s more systematic return‑seeking
currency strategies and which offers some welcome diversification
to our return‑seeking product suite.
The Dynamic Macro strategy tends to perform well in more volatile
markets as evidenced by the overall positive performance for the
year. Conversely, and notwithstanding three quarters of positive
performance to the end of the calendar year, the Multi‑Strategy
product delivered overall negative performance for the year linked
to the impact of covid‑19 on markets in the final quarter.
Further detail on our product range is provided on pages 14 to 17,
and product performance data is provided on pages 30 and 31.
Asset flows and financial performance
AUME closed the year at $58.6 billion, increasing by 2.3% in
US dollar terms, and increasing by 7.5% to £47.3 billion in
sterling terms. Net inflows for the first six months of $2.0 billion
were further bolstered by an additional $2.6 billion in the second
half, in aggregate representing 8% of the opening AUME position.
This was driven predominantly by inflows of $4.1 billion into
Passive Hedging, although both Dynamic Hedging and Currency
for Return saw inflows of $0.2 billion and $0.3 billion during the
year respectively.
Detailed analysis of AUME is provided on pages 31 to 33.
The management fees of £25.6 million increased 2.4% (2019:
£25.0 million). We have invested in our people and technology and
will continue to do so cost effectively as we aim for growth, which
we believe will strengthen the business over the longer term.
Consequently, the Group’s operating margin reduced marginally
from 32% to 30%, and profit before tax decreased by 3.2% to
£7.7 million (2019: £8.0 million). Basic earnings per share was
broadly flat at 3.26 pence (2019: 3.27 pence).
The Financial review on pages 34 to 37 gives additional
commentary.
8
Record plc Annual Report 2020
Chief Executive Officer’s statement continued
Outlook
Rigour and discipline is always hard to marry with creativity and
flexibility and it is this art that we seek to achieve, staying relevant,
and surprising our clients and prospects with the range and quality
of our thinking, and with the ability to deliver what we promise.
Our flexibility and capability to react to volatile and occasionally
extreme market conditions has been proved over the last few
months, both in terms of continuing to service our clients to the
high levels they expect and deserve, but also in maintaining the
business continuity under the most severe circumstances, whilst
always ensuring the wellbeing and motivation of our staff. In the
current market conditions we need to be careful not to
overpromise but always to try and over achieve.
We are a strong and resilient business, with a long‑standing client
base and a cash generative business model. Our team is talented
and experienced, we are committed to our business, to each other
and of course, always, to our clients. This I believe will allow us to
take our business to the next level and we will give it everything we
have to achieve that goal.
Leslie Hill
Chief Executive Officer
18 June 2020
Record plc Annual Report 2020
9
Strategic reportGovernanceFinancial statementsAdditional information Business model
Our business model depends on our
relationships and our people.
Relationships and resources
What we do
Our clients
We are client‑led – client relationships are the keystone
of our success. Only by building strong, long‑term
“trusted adviser” relationships with our clients can we fully
understand their currency issues and develop effective
solutions for their currency requirements.
Our experience
We are a specialist currency manager with over 37 years’
experience – we have a fundamental understanding of how
currency markets operate, which we have used to develop a
leading position in managing currency for institutional clients.
Our people
We view our ability to attract, retain and motivate
highly talented staff as key to organisational stability
and long‑term success.
Our recruitment process is carefully structured to ensure
that talented people with the right skills and experience
are recruited into the Group. See “Talent development”
on page 25 for further information.
Technology and infrastructure
Investing in new technology is essential for ensuring our
business remains competitive in terms of our client servicing,
our product innovation and productivity, and for maintaining
profitability.
Our operational infrastructure is built around how we service
our clients and ensures a collaborative approach across all
sections of the business. Refer to “Technology and
innovation” on page 24 for further information.
Our financial resources
The business maintains a robust balance sheet and strong
capital position. Positive cash generation allows us to
reinvest for growth in the business and to drive shareholder
value and returns.
Our core stakeholder groups:
• Clients
• Society
• Shareholders
• External suppliers
• People
• Regulators
Our investment process
We seek to identify and understand persistent patterns
that exist within currency markets that are rooted in
macroeconomic cycles, global risk management activity,
as well as structural and behavioural features of investment
activity. By understanding these patterns, whether they be
market inefficiencies or risk premia, we can develop both risk
mitigation and value‑adding strategies.
We develop robust systematic processes, with macro and
market‑informed portfolio positioning and intelligent risk
management oversight, which offer the best chance to
achieve client objectives once implemented within our
rigorous operational environment.
We continually test the underlying assumptions that support
our investment beliefs and practices. This constant cycle of
challenging and reviewing our investment philosophies drives
product enhancement and new product development
alongside the requirements of our clients.
Our independence and transparency
We act as an independent agent for each of our clients.
Being independent from any banks or brokerage firms, we
remain unconflicted and fully able to act in our clients’ best
interests and to fulfil our fiduciary obligations. Everything we
do is for our clients. We are fully transparent in terms of our
costs – our only source of revenue is from client fees and we
make no money from spreads.
Our operational risk management
We assume full operational risk on behalf of our clients –
our infrastructure, systems and processes are designed to
mitigate and minimise the operational risk associated with
managing clients’ currency mandates.
Our distribution process
• Our products are delivered both through segregated
mandates and pooled fund structures to suit individual
client requirements.
• We distribute both through direct sales to institutional
clients, and through local and global investment
consultants.
• We build long‑term relationships with investment
consultants and help develop their understanding
of our products and services.
10
Record plc Annual Report 2020
Business model
About
us
Business
model
Markets
Strategic
priorities
and goals
Key
performance
indicators
Operating
review
Finance
and risk
Corporate
social
responsibility
How we generate cash
What we deliver
Revenue generation
Our revenue comes from management fees and performance
fees. Management fees are charged based upon levels of
Assets Under Management Equivalents (“AUME”). Fee rates
vary between products and clients depending on factors such
as product type, mandate size and the level of tailoring to
individual client requirements. Performance fees are typically
charged as a percentage of investment performance above a
benchmark or a previous higher valuation “high water mark”.
Expenditure
Record is a service company and our biggest asset is
our people. The majority of the Group’s costs comprise
personnel costs, representing remuneration for individuals
across all areas of the business including the client‑facing
teams and the teams responsible for managing the Group’s
operations and infrastructure. The Group also has
non‑personnel costs representing, for example,
the overheads incurred in running and maintaining
the offices day‑to‑day, and payments to suppliers.
Investment
Cash can be used for investment purposes such as the
seeding of new funds or investment into new infrastructure
and technology.
Delivering value
By building strong relationships with our clients and
providing high levels of client service and tailored solutions,
we generate value for our clients, employees, shareholders
and our other stakeholders.
Net operating
cash inflow of
£6.5m
Further details of cash
generation on page 128.
Our products
Bespoke solutions – we operate Hedging mandates
and unfunded Currency for Return mandates as bespoke,
segregated mandates, using robust operational systems built
to manage exposures efficiently and to minimise operational
risk. Our Currency for Return strategies can also be delivered
through a pooled fund structure.
Find out more about our products on pages 14 to 17.
Premium client service
Superior service is core to our client proposition and we
achieve this on various levels by assigning a dedicated and
experienced team to oversee each client portfolio. Direct
communication between our operational and administrative
specialists with each client’s own internal functions builds on
the general level of interaction with the client and underpins
the overall “trusted adviser” relationship.
Rewarding careers
At Record we have created an environment which
encourages bright, dynamic and committed individuals
to flourish. We provide excellent career prospects and the
opportunity to work closely with senior and experienced
people and for talented individuals to have responsibility
at early stages of their career.
Thought leadership
Over the last 37 years Record has developed a leading
position in its sector. Our knowledge of the currency market
is sustained by our research and results in innovative
products and continued process enhancement.
Shareholder value
We aim to operate an effective and efficient capital policy,
and to deliver business growth and maximise shareholder
returns over the long term. The Group’s dividend policy
aims to return any excess of future earnings over ordinary
dividends and additional capital requirements to
shareholders, potentially in the form of special dividends.
Record plc Annual Report 2020
11
Strategic reportGovernanceFinancial statementsAdditional information Business model: our stakeholders
Our stakeholders
How we engage
Clients
Clients are the central focus of
Record’s business. The Group’s
resilience and ongoing success is
built upon the ability to understand
clients’ evolving needs and respond
to them accordingly.
Shareholders
Record relies on the support and
engagement of its shareholders to
deliver its strategic objectives and
grow the business.
People
Record’s people are central to the
ongoing success of the business
and the Group aims to attract,
retain, develop and motivate the
right people for current and future
business needs.
Society
Record recognises the
responsibility it has to the local
community, wider society and the
environment.
The Group’s operational infrastructure is built around the specific requirements of our clients, including systems and
controls to reduce risk and manage each stage of the process as efficiently as possible.
The Client Team builds lasting relationships with current and potential clients to develop a clear view of client objectives
and how these will evolve.
Regular review meetings with clients ensure client requirements are consistently monitored.
a robust risk framework, transparency, value
for money and maintaining the high levels of
service they receive and bespoke products
fulfilling their needs.
Our clients’ material interests relate to the
The change of Chief Executive Officer and refreshed business strategy has further enhanced Record’s
performance of Record’s products after fees,
client‑led focus.
The Group Chief Executive and Chief Financial Officer presented the full‑year and half‑year results to major investors.
Our shareholders want Record to ensure it is a
The change of PR firm has enhanced media and market communications and enabled Record to expand
The primary means of communicating with shareholders are through the Annual General Meeting, the Annual Report
and Accounts, half‑year results and related presentations. All of these are available on the Company’s website and the
Interim Report and Annual Report and Accounts are sent to all shareholders. The Group’s website also contains
information on the business of the Company, corporate governance, all regulatory announcements, key dates in
the financial calendar and other important shareholder information.
We engage with our employees through a variety of channels including a company intranet, management briefings,
e‑mail updates and presentations by the Group Chief Executive to discuss progress made by the business, together
with future objectives and challenges.
The Group seeks to encourage employees in developing their careers, offering assistance in such forms as study
support and the possibility of secondments to overseas offices.
The Group’s remuneration framework includes schemes aimed at aligning employees’ interests with those of
shareholders by offering them the opportunity to share in our success through share ownership.
long‑term sustainable business which delivers
the reach of its news and business both to existing and new potential shareholders.
attractive returns through share price growth and
regular dividends.
The Chair of the Nomination Committee contacted certain institutional shareholders to discuss changes
to the UK Corporate Governance Code requirements related to the tenure of the Chairman.
Our people’s material interests relate to the
Tim Edwards was appointed the designated Non‑executive Director responsible for workforce
working and cultural environment provided by
engagement and reporting to the Board on employee viewpoints.
The amendment of the Group Profit Share Scheme to be more objectives driven has enabled Record
to better reward the contributions of individuals directly and this has been welcomed by employees.
Record. They want to be fairly rewarded for their
contribution and have opportunities for learning,
growth, further development and to share in the
business success.
We are proud to support the communities in which Record operates and have a long history of contributing through
monetary donations, gift giving and employee time. Further details can be found on pages 46 to 49.
We are keen to promote responsible investing and have incorporated environmental, social and governance (“ESG”)
issues into some of our currency management products. Record has been a signatory to the Principles for Responsible
Investment since June 2018.
Record aims to manage the business in a
manner which minimises its impact on the
environment and helps to benefit society.
Employees helped to raise £15,242 for local and national charities during the year.
Record has now been certified carbon neutral for over eleven years.
In December 2019, Record launched an Impact Bond strategy, investing in international and regional
multi‑lateral organisations which are signatories of the UN Sustainable Development Goals. Further details
can be found on page 46.
External suppliers and service providers
Record relies on the use of
external suppliers and service
providers to supplement the
Group’s own infrastructure,
benefiting from the expertise
these suppliers provide.
Regulators
As a global business, Record
seeks to have transparent and
open relationships with its
regulators around the world.
Regulators provide key oversight
of how the business is run, thereby
offering comfort to our clients.
We maintain a close working relationship with all our suppliers and service providers, with regular review of contracts
and arrangements in place performed as part of the budgeting process.
All material supplier contracts are subject to due diligence checks and contracts are thoroughly reviewed by Record’s
in‑house legal team before signing. Signed service level agreements are in place for all critical suppliers.
Record has a supplier payment policy which ensures that all invoices are approved and duly paid within agreed terms.
Our suppliers wish to develop mutually beneficial
An update of trading application software was undertaken during the year which involved working closely
working relationships over the long term.
with the supplier to ensure a successful upgrade which met Record’s trading and record keeping
requirements within the timescale and cost budget set at the start of the project.
Record has an experienced Head of Compliance and Risk to manage the compliance function and oversee
regulatory matters.
Record engages directly and through its membership of various industry bodies with regulators and policymakers as
appropriate to ensure that our business understands and contributes to evolving regulatory requirements.
The Audit and Risk Committee receives regular reports from the Head of Compliance and Risk which cover the Group’s
regulatory processes and procedures and its relationship with regulators. The reports also outline the material changes
in the regulatory environment in which the Group operates.
Regulators want to ensure that Record’s
business is run responsibly with the best
interests of its clients at the centre of everything
it does. They seek to protect the integrity of the
financial systems they supervise and promote
fair competition for the benefit of clients.
Record has complied with the latest version of the UK Corporate Governance Code as deemed
appropriate given the size and nature of the business.
Compliance with the new SMCR regime was achieved by the 9 December regulatory deadline.
Section 172 Companies Act 2006
We set out in the above table our key stakeholder groups, their
material issues and how we engage with them. Each stakeholder
group requires a tailored engagement approach to foster effective
and mutually beneficial relationships.
By understanding our stakeholders, we can factor into
Boardroom discussions the potential impact of our decisions on
each stakeholder group and consider their needs and concerns,
in accordance with s172 of the Companies Act 2006.
12
Record plc Annual Report 2020
Business model: our stakeholders
The Group’s operational infrastructure is built around the specific requirements of our clients, including systems and
controls to reduce risk and manage each stage of the process as efficiently as possible.
The Client Team builds lasting relationships with current and potential clients to develop a clear view of client objectives
and how these will evolve.
Regular review meetings with clients ensure client requirements are consistently monitored.
Our clients’ material interests relate to the
performance of Record’s products after fees,
a robust risk framework, transparency, value
for money and maintaining the high levels of
service they receive and bespoke products
fulfilling their needs.
The change of Chief Executive Officer and refreshed business strategy has further enhanced Record’s
client‑led focus.
Their material issues
2020 highlights
Record relies on the support and
The Group Chief Executive and Chief Financial Officer presented the full‑year and half‑year results to major investors.
The primary means of communicating with shareholders are through the Annual General Meeting, the Annual Report
and Accounts, half‑year results and related presentations. All of these are available on the Company’s website and the
Interim Report and Annual Report and Accounts are sent to all shareholders. The Group’s website also contains
information on the business of the Company, corporate governance, all regulatory announcements, key dates in
the financial calendar and other important shareholder information.
Our shareholders want Record to ensure it is a
long‑term sustainable business which delivers
attractive returns through share price growth and
regular dividends.
The change of PR firm has enhanced media and market communications and enabled Record to expand
the reach of its news and business both to existing and new potential shareholders.
The Chair of the Nomination Committee contacted certain institutional shareholders to discuss changes
to the UK Corporate Governance Code requirements related to the tenure of the Chairman.
Record’s people are central to the
We engage with our employees through a variety of channels including a company intranet, management briefings,
ongoing success of the business
e‑mail updates and presentations by the Group Chief Executive to discuss progress made by the business, together
and the Group aims to attract,
retain, develop and motivate the
right people for current and future
business needs.
with future objectives and challenges.
The Group seeks to encourage employees in developing their careers, offering assistance in such forms as study
support and the possibility of secondments to overseas offices.
The Group’s remuneration framework includes schemes aimed at aligning employees’ interests with those of
shareholders by offering them the opportunity to share in our success through share ownership.
Our people’s material interests relate to the
working and cultural environment provided by
Record. They want to be fairly rewarded for their
contribution and have opportunities for learning,
growth, further development and to share in the
business success.
Tim Edwards was appointed the designated Non‑executive Director responsible for workforce
engagement and reporting to the Board on employee viewpoints.
The amendment of the Group Profit Share Scheme to be more objectives driven has enabled Record
to better reward the contributions of individuals directly and this has been welcomed by employees.
Record recognises the
We are proud to support the communities in which Record operates and have a long history of contributing through
responsibility it has to the local
monetary donations, gift giving and employee time. Further details can be found on pages 46 to 49.
community, wider society and the
environment.
We are keen to promote responsible investing and have incorporated environmental, social and governance (“ESG”)
issues into some of our currency management products. Record has been a signatory to the Principles for Responsible
Investment since June 2018.
Record aims to manage the business in a
manner which minimises its impact on the
environment and helps to benefit society.
Employees helped to raise £15,242 for local and national charities during the year.
Record has now been certified carbon neutral for over eleven years.
In December 2019, Record launched an Impact Bond strategy, investing in international and regional
multi‑lateral organisations which are signatories of the UN Sustainable Development Goals. Further details
can be found on page 46.
External suppliers and service providers
We maintain a close working relationship with all our suppliers and service providers, with regular review of contracts
and arrangements in place performed as part of the budgeting process.
All material supplier contracts are subject to due diligence checks and contracts are thoroughly reviewed by Record’s
in‑house legal team before signing. Signed service level agreements are in place for all critical suppliers.
Record has a supplier payment policy which ensures that all invoices are approved and duly paid within agreed terms.
Our suppliers wish to develop mutually beneficial
working relationships over the long term.
An update of trading application software was undertaken during the year which involved working closely
with the supplier to ensure a successful upgrade which met Record’s trading and record keeping
requirements within the timescale and cost budget set at the start of the project.
Record has an experienced Head of Compliance and Risk to manage the compliance function and oversee
regulatory matters.
Record engages directly and through its membership of various industry bodies with regulators and policymakers as
appropriate to ensure that our business understands and contributes to evolving regulatory requirements.
The Audit and Risk Committee receives regular reports from the Head of Compliance and Risk which cover the Group’s
regulatory processes and procedures and its relationship with regulators. The reports also outline the material changes
in the regulatory environment in which the Group operates.
Regulators want to ensure that Record’s
business is run responsibly with the best
interests of its clients at the centre of everything
it does. They seek to protect the integrity of the
financial systems they supervise and promote
fair competition for the benefit of clients.
Record has complied with the latest version of the UK Corporate Governance Code as deemed
appropriate given the size and nature of the business.
Compliance with the new SMCR regime was achieved by the 9 December regulatory deadline.
Clients
Clients are the central focus of
Record’s business. The Group’s
resilience and ongoing success is
built upon the ability to understand
clients’ evolving needs and respond
to them accordingly.
Shareholders
engagement of its shareholders to
deliver its strategic objectives and
grow the business.
People
Society
Record relies on the use of
external suppliers and service
providers to supplement the
Group’s own infrastructure,
benefiting from the expertise
these suppliers provide.
Regulators
As a global business, Record
seeks to have transparent and
open relationships with its
regulators around the world.
Regulators provide key oversight
of how the business is run, thereby
offering comfort to our clients.
Section 172 Companies Act 2006
This in turn ensures we deliver offerings our clients want and need,
continue to work effectively with our colleagues and suppliers,
comply with regulatory requirements, make a positive contribution
to local communities and achieve long‑term sustainable returns for
our investors.
Acting in a fair and responsible manner is a core element of our
business practice, as seen in our Corporate social responsibility
report on pages 46 to 49.
Record plc Annual Report 2020
13
Strategic reportGovernanceFinancial statementsAdditional information Business model: our products
The Group’s suite of core products is split into two main categories:
Currency Risk Management and Return-Seeking products. We also
offer bespoke solutions tailored to individual client requirements.
Currency Risk Management
Record’s primary risk management products are the hedging products and are predominantly systematic in nature. Record has
the experience and expertise to deliver tailored hedging programmes to suit the individual currency needs of our clients.
We continually enhance our product offerings so that they maintain their premium product status. In a competitive marketplace,
our ability to differentiate our hedging products is key to maintaining and growing our market share further.
CPH
DH
SH
AF
Core Passive
Hedging
Since 1999
Dynamic
Hedging
Since 1983
Signal Hedging
Since 2016
Audit and
Fiduciary
Execution
Since 2003
EPH
Enhanced
Passive
Hedging
Since 2014
EM
Emerging Market Momentum Hedging
Since 2014
EM
MP Multi-product
14
Record plc Annual Report 2020
Business model: our products
Return‑Seeking
Record’s Return‑Seeking strategies have the generation of investment return as their principal objective.
Alternative risk premia investing
Alpha investing
CMS
ESG
DMC
ESG in
Currency
Since 2018
Dynamic
Macro
Currency
Since 2019
(live since
2004)
Currency Multi-Strategy
Since 2012
Carry
Since 2003
Emerging Market (“EM”) Currency
Since 2009
Currency Momentum
Since 2012
Currency Value
Since 2012
Range Trading
Since 2018
MP Multi-product
Record plc Annual Report 2020
15
Strategic reportGovernanceFinancial statementsAdditional information Business model: our products continued
Currency Risk Management
Passive Hedging
Passive Hedging mandates have the cost‑effective reduction of
currency risk as their sole objective. This is achieved through
symmetrical and unbiased elimination of currency exposure from
clients’ international portfolios.
CPH
Core Passive Hedging
The core Passive Hedging product requires execution and operational expertise
to a greater extent than investment judgement, and provides the following
benefits to clients:
•
Independent, best execution
• Custom benchmarks
• Optimised exposure capture
• Netting benefits
• Regulatory reporting
• Management of cash flows
EPH
Enhanced Passive Hedging
The enhanced Passive Hedging product offers the same benefits and requires
the same level of execution and operational expertise as the core product, but
recognises the opportunities presented for adding value by taking advantage of
structural inefficiencies and behavioural changes arising in FX markets. It requires
continuous monitoring, investment judgement and specialised infrastructure to
identify the opportunities and then to take advantage of them with a structured
and risk‑managed approach.
DH
Dynamic Hedging
Record’s Dynamic Hedging product is an attractive alternative to
Passive Hedging and has reduction of currency volatility as well as
generating value as dual objectives. The Dynamic Hedging product
seeks to allow our clients to benefit from foreign currency strength
while protecting them from foreign currency weakness relative to
their own base currency.
Value is generated entirely through the asymmetric reduction of
pre‑existing currency risk and Dynamic Hedging’s ability to outperform
Passive Hedging is dependent on trending in currency markets.
SH
Signal Hedging
Record has a licensing agreement with WisdomTree, the New
York‑headquartered exchange‑traded fund and exchange‑traded
product sponsor and asset manager, under which it provides
signals that are used to dynamically hedge currency exposures
within WisdomTree’s rules‑based index family, and which includes
the hedging of emerging market currencies.
Since Record is not managing the exchange‑traded funds included
under such licences, assets under management in these funds do
not contribute to Record’s AUME. Record reports revenues arising
from these licensing agreements under “Other currency services
income”.
AF
Audit and fiduciary execution
Record offers transparent and cost‑effective fiduciary execution for
clients wishing to undertake foreign exchange transactions (spot
and forward) which are unrelated to their currency hedging or
investment mandates. All trades are executed by Record (as agent)
in the client’s name, and in accordance with best execution
practices. Clients benefit from both the wholesale pricing Record is
able to achieve for their trades, as well as from the knowledge that
their transactions are undertaken on a best execution basis.
For clients whose FX transactions are undertaken by a third party
(e.g. FX custodian), Record offers currency audits using
comprehensive price data (both internal and externally sourced).
Our reports are able to shed light on the quality of execution and
highlight to our clients where there may be scope for improvement.
EM
Emerging Market Momentum Hedging
Whilst emerging market (“EM”) currency exposure is generally
expected to deliver positive returns through time, EM currencies
are more volatile than their developed market counterparts and are
sensitive to many of the same macro‑economic factors which drive
local equity and bond markets. This can add further pressure to
portfolio performance during challenging market environments.
Record’s EM Momentum Hedging is intended to help investors
principally concerned with drawdown protection by improving the
downside risks of holding EM currency exposures. Through an
early warning indicator, EM currency exposure is temporarily
phased‑out from the portfolio, helping to protect investors during
rapid market sell‑off phases.
16
Record plc Annual Report 2020
Business model: our products continued
Return‑Seeking
CMS
Currency Multi-Strategy
The Currency Multi‑Strategy range includes five principal
strategies, being Carry, Emerging Market, Momentum, Value
and Range Trading and it is possible to offer these in either a
segregated or pooled fund structure.
These strategies can be combined in different weightings
that appeal to particular market segments under Record’s
Multi‑Strategy approach, which can be applied as an “overlay”
to help clients achieve a variety of investment objectives, and offers
clients access to the main sustainable sources of return in the
currency market. Clients receive a diversified return stream which
performs well under a variety of market conditions and reduces the
correlation of their currency programme to other asset classes.
Further detail on each of the five principal strands is given below:
Carry
The Forward Rate Bias is the observation that higher‑yielding currencies tend
to outperform lower yielding currencies over longer time periods, and is regarded
by Record as a fundamental and structural currency risk premium. The Carry
strategy aims to exploit this observation and generate returns by buying selected
developed market higher interest rate currencies and selling selected lower
interest rate currencies.
Emerging Market (“EM”) currency
EM currencies offer investors an opportunity either to seek a return from such
currencies or to seek to separate the currency effect from the underlying overseas
domestic asset performance (typically equities or bonds). Record believes that as
a result of convergence in the levels of economic output between emerging and
developed markets, holding EM currencies offers the benefit of real exchange
rate appreciation as well as offering higher positive real yields. This currency
appreciation has been a significant contributor of returns to (developed market)
holders of EM assets including equities and bonds.
Currency Momentum
This strategy exploits the periodic tendency of the spot exchange rate to
appreciate after a prior appreciation, and to depreciate after a previous
depreciation. This market inefficiency has persisted across different currencies
and is present in other asset classes, such as equities. Currency is commonly
thought of as “trending” and the Momentum strategy seeks to make a return
from this phenomenon.
Currency Value
Research suggests that purchasing power parity (“PPP”) valuation models have
been good predictors of the long‑term direction of spot movements. Currency
Value strategies exploit this insight, buying currencies that are undervalued
relative to PPP and selling currencies that appear overvalued.
Range Trading
The Range Trading strategy exploits the tendency for certain currency pairs to
trade within narrow ranges.
The philosophy comes from the observation that spot rate volatility is excessive
when measured daily, but dissipates over a one‑to‑three month period. This
stems from the fact that demand and supply of FX over certain time frames is
random and disjointed, resulting in the spot rate reacting to maintain equilibrium
in short‑term supply and demand. Much of the flow in the FX markets is a
by‑product of economic activity (importing or exporting of goods or services,
cross‑border M&A transactions) or a consequence of quasi‑systematic processes
(such as passive rolling of FX hedges). In view of the above, many participants in
the FX markets will continue to transact despite adverse price movements,
informing our view that this is a reliable risk premium. Additionally, recent
regulatory changes in the FX markets have decreased the extent to which
traditional market makers can cushion supply and demand shocks by holding
inventory, which may exacerbate this tendency. This elevated volatility must
compensate capital with a sufficient return.
ESG
ESG in Currency
Research has shown that the institutional framework of a
country plays an important role in its economic growth, with better
institutions leading to higher growth and also lower volatility, paving
the way for a more sustainable path for the country. Our approach
to ESG first reviews a wide currency universe from an institutional,
social, and political perspective with the objective of determining
which currencies to accept in our strategy. We then identify
pro‑ESG factors towards which we can tilt exposures, increasing
the sustainability of the overall portfolio whilst maintaining its
return‑seeking characteristics. Factors are reviewed both
quantitatively and qualitatively and are applied to tilt the portfolio
and to inform our discretionary risk management. They are drawn
from a number of the United Nations Development Programme’s
(“UNDP’s”) Sustainable Development Goals (“SDGs”) which we
believe serve as advanced indicators for higher productivity growth;
so by systematically incorporating ESG in alignment with the
UNDP’s SDGs, we expect to produce positive risk‑adjusted returns.
DMC
Dynamic Macro Currency
The Dynamic Macro Currency strategy utilises a modern,
multi‑disciplined investment approach to developed and emerging
market currencies. A four‑pillared proprietary process integrates
macroeconomics, market neurology, and quantitative price metrics
with disciplined risk management. The team’s analyses target the
generation of a variant perception of future market price direction.
The portfolio is innovatively structured and managed to implement
investment views and provide an upside asymmetric return profile.
Historically, the long‑term track record has been negatively correlated
with traditional asset classes such as the S&P500, but has also
provided positive risk‑adjusted returns during “risk on” environments.
John Floyd is the Portfolio Manager of the Dynamic Macro Currency
strategy. Prior to joining Record in 2019, Mr. Floyd ran a successful
Global Macro Hedge Fund for over twelve years and has previously
worked for a number of leading institutions including Merrill Lynch,
UBS, Swiss Bank Currency Fund and Deutsche Bank.
MP
Multi-product
Multi‑product mandates typically have combined risk‑reducing and
return‑seeking objectives, and are bespoke in nature. These may
include a hedging mandate overlaid with selected elements of the
Currency for Return product, which cannot readily be separated into
its hedging and return‑seeking components for reporting purposes.
Cash and other
Record also provides ancillary services including cash and liquidity
management, collateral management and derivatives overlays.
Information on product investment performance is given in the
Operating review section (pages 30 to 33).
Record plc Annual Report 2020
17
Strategic reportGovernanceFinancial statementsAdditional information Markets: our market environment and industry trends
Our market
Global and macro trends
Industry trends
The currency market represents the biggest
and most liquid market available, with
exceptionally low transaction costs and
daily FX volumes averaging $6.6 trillion
(source: BIS Triennial Central Bank Survey
of Foreign Exchange and OTC Derivatives
Markets 2019). The FX market is essential
to global trade and finance and includes a
high proportion of not‑for‑profit or forced
participants, resulting in profit‑seeking
financial institutions continuing to represent
a minority of FX market participants.
Consequently, the market displays
persistent patterns of behaviour or
inefficiencies which Record believes can
best be exploited by a combination of
systematic and discretionary processes.
The FX market continues to offer
opportunities for investors. Record’s
expertise is in identifying and understanding
these opportunities and then working with
clients to understand how such
opportunities may be used to their best
advantage, taking account of each client’s
individual circumstances and attitude
to risk.
Margin compression
and value for money
The average margin on our hedging
products and across the industry generally
has been under pressure over time from
clients seeking to reduce fees in a low yield
environment, for example by the use of
competitive fee pressure or through
increased tailoring of their product for
no increase in fees.
Brexit
The UK formally left the European Union
(“EU”) on 31 January 2020 and entered the
transition period, during which it continues
to follow EU rules whilst the negotiations
continue on the future relationship.
Whilst the UK Government has previously
committed to the conclusion of the transition
period by the end of 2020, this was prior to
the emergence of covid‑19 and a full
understanding of its effects on the global
economy and the distraction from, and
consequent delay to, Brexit negotiations.
At the time of writing, it remains uncertain
on how the negotiations on the future
relationship will conclude.
What this means
for our business
What this means
for our business
Record does business in a market subject
to constant fee pressure and competition,
and has done so successfully for many
years. We have built our business based
on the highest levels of client service,
innovative products, robust infrastructure
and professional expertise. During periods
of relative calm in FX markets, it may be
natural for clients to underestimate the
potential dangers of volatility, or the value
delivered through such high service levels
and expertise. However, changing cycles
add to uncertainty in markets and bring
heightened volatility and reduced liquidity.
Consequently, opportunities continue for
Record to illustrate the value to clients of
its expertise and experience collected over
37 years, and to provide innovative
products to react to clients’ needs. Such
opportunities are only further heightened
by more extreme market conditions such
as the current covid‑19 pandemic.
Record has performed a client‑by‑client
assessment of the regulatory basis on
which we currently provide services to
EU27 clients. As a result, and in addition
to industry‑wide measures such as the
Memoranda of Understanding agreed
between the Financial Conduct Authority
and EU regulators previously announced,
at the time of writing we are confident we
will be able to continue to provide services
to all current EU27 clients post‑Brexit,
even in the event of a “hard Brexit” with no
extension to the transition period or no
other equivalence arrangements.
Subject to negotiations, it remains possible
that we would be constrained in marketing
our products and services to new clients in
certain EU27 countries, although even this
constraint is moderated by enabling
legislation in many such countries, allowing
authorised UK firms to continue to market
to professional clients. The situation will be
subject to further assessment in the light of
any regulatory changes, but the
establishment of an authorised subsidiary
within the EU27 countries to eliminate any
such remaining constraints remains a
possibility subject to an assessment of the
costs and benefits of doing so.
Despite this uncertainty, and as explained
above, we expect to be able to continue to
serve all our current EU27 clients,
irrespective of whether and how the UK
leaves the European Union.
18
Record plc Annual Report 2020
Markets: our market environment and industry trends
About
us
Business
model
Markets
Strategic
priorities
and goals
Key
performance
indicators
Operating
review
Finance
and risk
Corporate
social
responsibility
Industry trends
Price
transparency
Recent years have seen a move towards
heightened transparency over costs and
fees across our industry, driven by
regulatory pressure aimed at fair
competition and consistent methods of
reporting, and the need to build investor
confidence and trust in the sector generally.
Advances in
technology
Over recent years technological advances
have changed the way in which businesses
in our sector need to operate. This includes
how data is collected and analysed for
investment purposes, having the ability
to trade using electronic platforms and
algorithms, enabling improved client
reporting processes, and introducing
efficiencies in more manual processes
and procedures. The speed of change is
dramatic and will continue to change the
way business is done in our sector
going forward.
The changing pattern
of FX liquidity provision
Historically the role of liquidity providers and
market makers in the FX markets has been
filled by investment banks. However, this
role is now increasingly being filled by
players other than banks due to the
increased regulatory burden and capital
constraints imposed on banks following
the financial crisis.
What this means
for our business
What this means
for our business
What this means
for our business
Technology has a critical role to play in
our business, both to create efficiency
to deliver reliable low cost solutions for
clients, and to drive innovation in creating
new products and markets. Technologies
such as artificial intelligence and machine
learning, as well as improvements in data
science and the ability to utilise
opportunities offered through third party
systems, can all contribute to the aim of
improving our investment management
products and services. As a result, the
need to continue to observe and invest in
technology and innovation is paramount to
protect our capability to respond effectively
to disruption and change in our markets,
as well as to support our investment
management processes and systems,
improve client service and enhance our
operating efficiency and effectiveness.
Market stress or increased volatility can
cause large differentials in the pricing of
derivatives due to the lack of market
makers including those banks previously
willing to take risk onto their balance sheet.
In extreme circumstances, the risk of
reduced liquidity increases exponentially
such that those market participants not
expert in navigating the financial markets
or without relationships built over many
years with liquidity providers will either be
forced to pay significantly increased
spreads, or may not be able to trade at all
depending on their method of accessing
the market. Such circumstances provide
opportunities for our business to offer
unconflicted and independent expertise
in navigating such markets, ensuring as far
as possible best execution and access to
liquidity that would otherwise not be
accessible.
Record acts in a fiduciary capacity for its
clients with the continuing obligation to
provide best execution and to ensure full
transparency and disclosure of all fees for
the investment management services
provided to its clients. We welcome and
fully support all initiatives aimed at
achieving full transparency of fees and
charges within our industry. In this respect
we have previously worked closely with
the FCA’s Institutional Disclosure Working
Group (“IDWG”), and more latterly on the
Cost Transparency Initiative (“CTI”) in
conjunction with the Investment
Association, Pensions and Lifetime
Savings Association (“PLSA”) and the
Local Government Pension scheme
(“LGPS”) Advisory Board, using our
knowledge and experience within the FX
markets to help create a new framework
for the reporting of charges and costs to
pension scheme clients. Record is a
signatory to the LGPS Investment Code of
Transparency. We believe that fulfilling the
long‑term aim of achieving full cost
transparency across the investment
management industry can only be in the
best interests of all clients, whilst ensuring
a level playing field and providing
opportunities for firms such as ours already
providing full transparency over costs and
fees to its clients.
Record plc Annual Report 2020
19
Strategic reportGovernanceFinancial statementsAdditional information Markets: market review
FX volatility was broadly contained in the first half of the year,
although it changed abruptly in the first quarter of 2020 as
the severity of the covid-19 pandemic became apparent.
Review of the year ended 31 March 2020
The first half of the financial year saw a re‑escalation of trade
tensions between the US and China following what proved to be
a short‑lived truce. The visible effects on global trade and activity
compelled major central banks to embark on easing cycles and by
December several had cut rates – including the Federal Reserve
three times. FX volatility was broadly contained and the relative
strength of the US economy meant that the US dollar was
supported versus most other developed market currencies.
The global economic outlook shifted abruptly in the first quarter of
2020. As the severity of the covid‑19 pandemic became apparent,
governments rushed to shutter economies and all non‑essential
activity in order to prevent the spread of the virus. The unprecedented
sudden stop in activity led to a scramble for credit by businesses
globally in order to stay afloat and cover lost revenues. The surge in
credit demand and highly uncertain outlook saw credit spreads widen
sharply and equity markets quickly fall into bear market territory.
With the prospect of an economic and liquidity shock transforming
into a financial and solvency shock, policymakers acted with a
greater sense of urgency than even in the global financial crisis.
In order to prevent an economic depression, developed market
central banks conducted emergency rate cuts, and most either
restarted quantitative easing programmes or began new ones.
The Federal Reserve unveiled a raft of measures designed to ease
credit conditions in the US economy and extended its infamous FX
swap lines to foreign central banks to ensure adequate US dollar
supply abroad. The fiscal response came later but also in force,
with governments unveiling packages for the provision of business
loans and guarantees, and income replacement for displaced
workers. By the end of March, the lines between fiscal and
monetary policy had blurred, but the herculean effort on the part
of policymakers appeared to have prevented an immediate
financial collapse.
The acute demand for US dollars drove the world’s reserve
currency notably higher against most developed market currencies,
while the Japanese yen and Swiss franc were supported by strong
external asset positions and the convergence of short‑term
developed market yields towards the zero lower bound. As might
be expected, emerging market currencies were negatively affected
by the shock, with those countries starting from low bases of
growth, lacking fiscal room, and with reliance on external funding
falling the most. Asian emerging market currencies fared better
as more effective containment measures and the ability to enact
comprehensive fiscal packages provided relative economic shelter.
20
Record plc Annual Report 2020
Markets: market review
Coronavirus (“covid‑19”)
The covid‑19 pandemic has transformed economies and financial
markets. Many sectors incompatible with “social distancing” have
experienced substantial revenue and jobs losses. Reinforced by
the fall in commodity prices, this vulnerability extends in some
cases to entire national economies and currencies. Governments
everywhere navigate the trade‑offs between virus containment
and economic losses. Fiscal and monetary policies have been
wielded worldwide to cover these losses. However, the capacity
for policy response varies greatly among countries, as does the
method and effect of implementation.
In the same way that many individuals are isolating at home to
protect themselves or others from effects of the virus, we see
isolationist tendencies in the response of national governments,
sometimes even at the local level. In this sense, we expect
covid‑19 to catalyse trends which had begun before it arrived:
reduced trade, strained geopolitics, and hard borders. And yet,
this is locked in a paradox with the dense dollarisation of global
financial markets over the past decade. Indeed, one of the very
first revelations coming from this crisis was just how dependent
international (and local) finance was on US dollar liquidity. Just
as governments closed borders, they also clamoured for the
currency they shared with their neighbours.
We observed this demand for dollar liquidity across both spot
and swap rates, which have emerged as a barometer of liquidity
stress. The Federal Reserve and the IMF stepped in to fill the gap
as nations, banks and corporations aimed to cover funding
needs. And so as events unfold, we expect the interplay of the
virus’s real economic impact, risk sentiment, the demand for
dollar liquidity, and the supply to represent a dominant dynamic
in international markets including FX.
Despite the gradual easing of restrictions, risks of an acute crisis
have not passed, as losses continue to reverberate throughout
economies and financial markets. Longer‑term risks have also
appeared, and it remains to be seen what the impact on growth,
productivity, price level and asset values is of extended policy
measures, high debt levels, coordinated fiscal and monetary
policy, and transformed social structure.
Beyond the economics of FX value, recent events have also had
substantive effects on the structure of the FX market itself. Many
of the structural changes observed over the past ten years –
more electronic trading and significant non‑bank liquidity, blurring
the line between participants and market makers – reversed in
the blink of an eye. Even as banks’ risk capital faced new
constraints (corporates drawing on credit lines; rising credit risk
in their portfolios), they re‑emerged as sole market makers.
Electronic trading is debilitated by volatile markets, with platform
bid/ask spreads having reached an order of magnitude greater
than voice quotes. Established trading relationships are proving
more valuable than at any other time since 2009 or the Swiss
franc peg break in 2015.
Please refer to the Risk management section on page 40
to see how the Group has managed the impact of the
covid‑19 pandemic.
Record plc Annual Report 2020
21
Strategic reportGovernanceFinancial statementsAdditional information Strategic priorities and goals
Our purpose is to deliver innovative, thought-leading
and practical solutions to the needs of currency market users
and investors, while maintaining independence and integrity.
We are a specialist currency manager
Strategy and goals
Our strategic priorities and goals are presented below under the
three strategic areas, or cornerstones, which form the foundation
to our strategy. Further detail on the associated risks is provided
on pages 38 to 45.
Performance measurement
The Group uses key performance indicators (“KPIs”) to measure
and monitor the performance of the Group. The financial and
non‑financial KPIs are presented on pages 26 to 29.
Quality client
experience
page 23
Technology
and innovation
page 24
Talent
development
page 25
We aim to build strong, long‑term “trusted adviser”
relationships with our clients.
This is achieved through providing the highest levels
of service to our clients through proactive
relationships, informing clients on currency markets
and opportunities, seeking to understand their
currency issues and tailoring our products to meet
their individual requirements.
Measured by – Revenue, operating profit margin,
EPS, DPS, AUME, client numbers and client longevity
We aim to differentiate Record from our competitors
by reinforcing our thought leadership through
innovation and by investing in technology.
This is achieved through devising and implementing
innovative solutions to meet unique client
requirements in new products and services and by
enhancing existing products and strategies. Advances
in technology help us to ensure a scalable, robust and
efficient method of delivery for our products and
services.
Measured by – Operating profit margin, EPS, DPS,
AUME, average number of employees
We aim to develop and retain a diverse pool of talent
which is key both to delivery of a “best in class”
business model, and to the long‑term stability of
the business.
This is achieved through strong recruitment, career
development and support systems to identify and
retain talent aligned with both our culture and plans
for generational change.
Measured by – EPS, AUME, average number of
employees, staff retention and employees with
equity interest
1
Risks:
Strategy, concentration,
margin compression,
people and employment,
regulatory change,
operational and investment
2
Risks:
Strategy, concentration,
margin compression,
people and employment,
regulatory change,
operational and investment
3
Risks:
Strategy, people and
employment and
investment
22
Record plc Annual Report 2020
Strategic priorities and goals
About
us
Business
model
Markets
Strategic
priorities
and goals
Key
performance
indicators
Operating
review
Finance
and risk
Corporate
social
responsibility
1
Quality client experience
We provide the highest levels of service to our clients through proactive
relationships informing clients about currency markets and opportunities,
seeking to understand their currency issues and tailoring our products to
meet their individual requirements.
Initiatives
• Focus on generational change
to plan for future stability for
business and client relationships
•
Improve local presence in all key
markets
• Continue to provide the highest
possible levels of service to clients
at all times
• Develop new products aligned
with investor demand for
ESG‑related strategies and the
use of Frontier currencies in
EM products
• Focus on opportunities for existing
clients to benefit from product
enhancements and
complementary services alongside
current product range
Progress
• New Global Head of Sales
appointed in February 2020
• Headcount increased in our
Zürich office during the year to
support the focus on sales and
client service in Switzerland
• Continuity of client service
maintained despite
unprecedented disruption due to
covid‑19
• Stronger relationships forged with
clients through heightened
communication and response
during elevated volatility in FX
markets
• ESG/Impact offering in early
stages of development
• Frontier currencies seeded in EM
currency product during the year
Priorities
• Consider developing partnerships
with trusted third parties to
enhance distribution capabilities
and service offering
• Focus on enhancing investment
consultant relationships
•
Invest in technology to enhance
the service offering to clients and
the overall client experience
• Continue research into
diversification and enhancement
of products and services
• Further develop offerings for
both ESG/impact and frontier
currencies in EM currency
products in response to client
demand
Distribution
The Group’s sales and marketing activities are organised to ensure
that resources are deployed where opportunities have been
identified as giving the most likelihood of future success. The sales
and marketing team is split between the offices in the UK, US and
Switzerland, and a centralised team that provides comprehensive
technical and administrative support to the sales offices operates
from the headquarters based in the UK.
We distribute through both direct sales to institutional clients,
and through local and global investment consultants. Building
long‑term relationships with investment consultants and developing
their understanding of our products and services is important to
our continued success and our ability to deliver quality services to
our clients. By working closely both with clients and investment
consultants we can identify new business opportunities as the
currency landscape continues to change and evolve.
Record plc Annual Report 2020
23
Strategic reportGovernanceFinancial statementsAdditional information Strategic priorities and goals continued
2
Technology and innovation
We aim to differentiate Record from our competitors by reinforcing our
thought leadership through innovation and by investing in technology.
We also constantly review our operational model to identify opportunities
for process improvement and risk reduction.
Initiatives
• Diversification of products and
services through research and
innovation
Progress
• Dynamic Macro Currency strategy
now live within Record – Currency
Multi‑Strategy Fund
Priorities
• Focus on opportunities for client
collaboration and client‑led
product development
• Research opportunities for
• ESG/Impact offering in early
• Review opportunities for
development of new products
specifically to incorporate ESG/
Impact factors in currency‑related
investment strategies
•
Identify opportunities for
incorporating new technology
focused on enhancing clients’
experience, improving efficiency
of processes and to strengthen
security and business resilience
•
Improve flexibility of operational
systems to strengthen disaster
recovery capability
stages of development
•
Investment into ESG/Impact
bonds to increase operational
and reporting capabilities and
experience linked to Impact
offering
introducing third party systems to
improve operational efficiency and
capability
• Continued investment in research
to enhance existing products and
services
• Developed the innovative use of
• Disciplined approach to
new product development
opportunities, which must be
client‑led and commercially viable
Frontier currencies in EM currency
product during the year
• New HR system introduced
during the year to improve
employee communication and
engagement, and supporting
SMCR procedures
•
Invested in systems focused on
increased security and resilience
• Disaster recovery capability
enhanced through introduction of
flexible working systems allowing
full working from home capability in
response to the covid‑19 pandemic
Collaborative infrastructure
The Group’s operational infrastructure is built around how
we service our clients and ensures a collaborative approach to
promote innovation across all sections of the business. To this
end, our teams are deliberately organised by function, rather than
product. As such, all teams are involved (to a greater or lesser
extent) in the day‑to‑day management or support of each client
mandate. We maintain a purpose‑built and fully integrated
end‑to‑end operational process to allow for scalable and
customisable implementation of our products. Teams take
a collaborative approach to ensuring that each product
enhancement and every process improvement is
implemented seamlessly with a client‑centric focus.
24
Record plc Annual Report 2020
Strategic priorities and goals continued
3
Talent development
We aim to develop and retain a diverse pool of talent which
is key both to delivery of a “best in class” business model,
and to the long‑term stability of the business.
Initiatives
• Focus on generational change to
plan for future stability of business
and client relationships
• Providing a collaborative office
environment which enables
early‑career employees to benefit
from working alongside senior
colleagues
•
Investing in the physical and
mental wellbeing of our colleagues
as well as continued professional
development
• Promoting innovation through
alignment with variable
remuneration
Progress
• New Global Head of Sales
•
•
appointed in February 2020 and
new hires in US and Swiss offices
Investment in technology to
enhance communication channels
between Group entities and retain
close working links with
colleagues whilst working
from home
Introduction of workforce
development and training on
areas such as confidence and
resilience, gender equality and
unconscious bias
• Group Profit Share Scheme now
more fully aligned with individual
contribution and operating
performance
Priorities
• To ensure the wellbeing of all
of our staff working from home
during the covid‑19 lockdown
period
• To liaise with staff and to carefully
plan for the transition back to our
offices as covid‑19 restrictions
ease
• To consider the shape of future
work patterns to align the
interests of our employees
with those of our business
• Renewed vigour in continuing
to plan for generational change
• To continue to invest in
the development, retention,
wellbeing and diversity of
our talented employees
•
Introduction of
commission‑related scheme
to reward the introduction of
sustainable new business
• Alignment of pension
contributions across staff grades
by April 2022
Recruitment
Staff retention, motivation and development
The recruitment process is carefully structured and run
predominantly in‑house to ensure that talented people with the
right skills and experience are recruited into the Group. As part
of this, the Group runs a successful internship programme, which
gives the Group the opportunity to benefit from talented individuals
who are in the early stages of their career and identified as
potentially having the necessary skills required to add value to the
business in the future. The process continues with a
comprehensive induction programme for all new joiners to allow
them to adapt to the specialist environment within Record.
We invest heavily in our people, offering opportunities and
support for them to grow their knowledge, skills and capabilities.
An effective performance review and objective‑setting process,
personal development planning including the development of
career paths, together with our open and inclusive office culture,
are all key priorities in the development and retention of our staff.
In addition, the Group Share Scheme, the Group Profit Share
Scheme and the Record plc Share Incentive Plan promote the
acquisition of equity in the Company by staff, improving motivation
and retention, as well as aligning employees’ interests with those of
our clients and shareholders. At 31 March 2020, the proportion of
employee shareholders stood at 69% (2019: 70%).
Record plc Annual Report 2020
25
Strategic reportGovernanceFinancial statementsAdditional information Key performance indicators
Measuring our performance
against our strategy.
Financial KPIs
Revenue
(£m)
Revenue is earned mainly from the
provision of currency management
services in the form of management
fees and performance fees.
Operating profit margin
(%)
Operating profit margin is an
alternative performance measure,
calculated by dividing operating
profit by revenue.
Basic earnings per share
(“EPS”) (pence per share)
The Group aims to create
shareholder value over the long term,
illustrated by a consistent growth
in EPS.
2020
2019
2018
2017
2016
25.6
25.0
23.8
23.0
21.4
2020
2019
2018
2017
2016
30
32
31
34
32
2020
2019
2018
2017
2016
3.26
3.27
3.03
2.91
2.55
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.
Link to strategy: 1 2 3
Why this is important
Revenue is a key indicator of client
experience, growth and a key driver
of profitability. AUME growth, fee
levels sustained through product
enhancement, and investment
performance in excess of
benchmarks all contributed to
revenue growth during the year.
Link to strategy: 1 2
Why this is important
Operating profit margin is an indicator
of the efficiency of the business in
turning revenue into profit. Margin
compression has been a factor
across the sector over a number of
years, which continues to impact the
business as discussed further under
Industry trends on page 18. Further
information can be found under the
Financial review section on page 36.
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: 1 2 3
26
Record plc Annual Report 2020
Key performance indicators
About
us
Business
model
Markets
Strategic
priorities
and goals
Key
performance
indicators
Operating
review
Finance
and risk
Corporate
social
responsibility
Financial KPIs
The Board and Executive Committee use both financial and non-financial 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.
Key
1
2
3
Quality client experience
Technology and innovation
Talent development
Dividends per share (“DPS”)
(pence per share)
The Group’s policy is that total distributions in any year will be covered by earnings.
The Group aims to pay a progressive ordinary dividend and return surplus capital to
shareholders where it is in excess of business requirements, usually in the form of
special dividends.
Ordinary
Special
2020
2019
2018
2017
2.30
2.30
2.30
2.00
2020
2019
2018
2017
0.41
0.69
0.50
0.91
2016
1.65
2016
Nil
Why this is important
Repeatable dividend payments 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 is unchanged on last year.
The special dividend per share has decreased by 0.28 pence, resulting in a 41%
decrease in total dividends to 2.71 pence per share (2019: 2.99 pence per share).
Link to strategy: 1 2 3
Record plc Annual Report 2020
27
Strategic reportGovernanceFinancial statementsAdditional information Key performance indicators continued
Non‑financial KPIs
AUME
($ billion)
As a currency manager, Record
manages only the impact of foreign
exchange and not the underlying
assets of its clients, therefore its AUM
(Assets Under Management) are
notional. 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 is an
alternative performance measure
and further detail on how it is defined
is provided on page 132.
Clients
Client numbers represent the number
of separate legal entities that have
appointed Record directly as an
investment manager or invested
in a Record fund at the year end,
and acts as an indicator of
business growth.
Client longevity
(%)
Client longevity measures how
long Record has been providing
currency management services to
each client with a mandate active
at 31 March 2020.
2020
2019
2018
2017
2016
58.6
57.3
62.2
58.2
52.9
2020
2019
2018
2017
2016
72
>10yrs
22%
65
6‑10yrs
14%
60
59
58
3‑6yrs
1‑3yrs
0‑1yrs
22%
28%
14%
Why this is important
AUME is a key driver of future
revenue and an indicator of business
growth. AUME increased by 2.3% for
the year, including net inflows of
$4.6 billion, notwithstanding the
negative impact of covid‑19 on
the final quarter of the year.
Link to strategy: 1 2 3
Why this is important
The sustained growth in client
numbers is indicative of successful
client engagement, quality client
experience and the building of strong
“trusted adviser” relationships.
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.
Link to strategy: 1
Link to strategy: 1
28
Record plc Annual Report 2020
Key performance indicators continued
Non‑financial KPIs
Key
1
2
3
Quality client experience
Technology and innovation
Talent development
Average number
of employees
The average number of
employees through the year
includes Non‑executive Directors.
Staff retention
(%)
Staff retention is 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.
Employees with
equity interest (%)
The percentage of employees who
own shares in Record plc at year end.
2020
2019
2018
2017
2016
82
85
81
73
69
2020
2019
2018
2017
2016
81
84
93
83
88
2020
2019
2018
2017
2016
69
70
72
68
69
Why this is important
Average employee numbers is an
indicator of growth and also of
how effectively the Group is using
technology to make processes
more efficient.
Link to strategy: 2 3
Why this is important
The Group’s third cornerstone is
talent development, which includes
the development and retention of our
talented employees. Whilst every
business expects a degree of
employee turnover, the monitoring of
employee retention acts as a general
indicator for factors affecting our
employees’ wellbeing, development,
and issues such as longer‑term
succession.
Link to strategy: 3
Why this is important
The alignment of employee interests
with those of our shareholders is an
important factor in ensuring the
longer‑term success of our business
and is an important tool in managing
generational change.
Link to strategy: 3
Record plc Annual Report 2020
29
Strategic reportGovernanceFinancial statementsAdditional information Operating review
AUME increased by 2.3% in US dollar terms,
assisted by aggregate net inflows of $4.6 billion
across 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 has developed an enhanced Passive Hedging service,
which aims to reduce the cost of hedging by introducing new
flexibility into the implementation of currency hedges without
changing the hedge ratio. While the strategy is partly systematic,
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. Exceptional
levels of volatility in the FX derivatives market during the latter part
of the year has negatively affected some clients. However, for
others this volatility has increased the scope of opportunities
available.
The table below shows the total value added relative to a
fixed‑tenor benchmark for an enhanced Passive Hedging
programme for a representative account.
Return for
year to Return since
inception1
31 March 2020
Value added by enhanced
Passive Hedging programme relative
to a fixed‑tenor benchmark
(0.05%) 0.09% p.a.
Dynamic Hedging
The performance of our Dynamic Hedging product depends on
how the foreign currencies change in value relative to the base
currency of a client. During the year, US investors saw losses
from currency on international assets when valuing positions in
US dollars, as the US dollar appreciated against the majority of
G10 currencies. Record’s Dynamic Hedging product adjusted
hedge ratios in line with US dollar fluctuations, and on aggregate
helped protect clients against currency losses.
Return for
year to Return since
inception2
31 March 2020
Value added by
Dynamic Hedging programme
0.80% 0.54% p.a.
Currency for Return
Record’s Currency for Return suite of products includes both
systematic and discretionary investment styles. The systematic
offering combines five strategies under the Currency Multi‑Strategy
product, whilst the Dynamic Macro Currency product uses a more
discretionary approach.
Currency Multi‑Strategy
Record’s principal Currency for Return product during the year was
Currency Multi‑Strategy. This 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; and
• Momentum, Value and Range Trading strategies which are
more behavioural in nature, and as a result are less
risk‑sensitive.
Record’s Multi‑Strategy mandates delivered negative overall
performance over the year. The first three quarters saw cumulative
outperformance but gains were more than offset by losses in the
final quarter as a result of the covid‑19 pandemic.
Dynamic Macro Currency
The Dynamic Macro Currency strategy utilises a modern,
multi‑disciplined investment approach to developed and emerging
market currencies. A four‑pillared proprietary process integrates
macroeconomics, market neurology, and quantitative price metrics
with disciplined risk management, with analysis targeting the
generation of a variant perception of future market price direction.
The portfolio is innovatively structured and managed to implement
investment views and provide an upside asymmetric return profile.
Historically, the long‑term track record has been negatively
correlated with traditional asset classes such as the S&P500,
but has also provided positive risk‑adjusted returns during
“risk on” environments.
Over the year, the portfolio benefited from our independent
research ethos and risk management discipline, including early
recognition of the potential severity and global feedback
mechanisms of covid‑19. The strategy was able to develop early,
proprietary models to monitor the impact of the virus. Successful
management of the portfolio across various currencies,
instruments, and time horizons resulted in a +0.82 excess
return‑to‑risk ratio for the year ending 31 March 2020.
1. Since inception in October 2014.
2. Since inception in April 2009.
30
Record plc Annual Report 2020
Operating review
About
us
Business
model
Markets
Strategic
priorities
and goals
Key
performance
indicators
Operating
review
Finance
and risk
Corporate
social
responsibility
Fund name
Currency Multi‑Strategy Fund1
Returns
Dynamic Macro Currency2
Record Multi‑Strategy composite3
Return for
12 months to
31 March 2020
%
Scaling
Return since Volatility since
inception
% p.a.
inception
% p.a.
4.5‑6
(7.82%)
(5.42%)
9.11%
Return for
12 months to
31 March 2020
%
Return since Volatility since
inception
% p.a.
inception
% p.a.
4.20%
(3.84%)
4.25%
0.60%
9.30%
3.14%
Scaling
The Currency for Return product group allows clients to select
the level of exposure they desire in their currency programmes.
The segregated mandates allow clients to select the level of
scaling and/or the volatility target. The pooled funds have
historically offered clients a range of scaling and target
volatility levels.
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 segregated mandate size or
the pooled fund’s net assets. This is limited by the willingness
of counterparty banks to take exposure to the segregated client
or pooled fund. 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 segregated
mandate size or the pooled fund’s net assets.
AUME development
AUME expressed in US dollar terms finished the year at
$58.6 billion, an increase of 2.3% (2019: $57.3 billion). When
expressed in sterling, AUME increased by 7.5% to £47.3 billion
(2019: £44.0 billion).
AUME development bridge – year to 31 March 2020 ($bn)
+4.6
-3.2
-0.1
57.3
58.6
AUME at
1 April
2019
Net flows
Markets
FX effects
and scaling
adjustments
AUME at
31 March
2020
1. Record Currency Multi‑Strategy Fund return data is since inception in February 2018, GBP base.
2. Dynamic Macro data is since inception in January 2004.
3. Record Multi‑Strategy composite is since inception in July 2012, showing excess returns data gross of fees in USD base, and scaled to a 4% target volatility.
Record plc Annual Report 2020
31
Strategic reportGovernanceFinancial statementsAdditional information
Operating review continued
AUME development continued
AUME movements
Passive Hedging AUME increased by 4.3% to $50.3 billion at the
end of the year (2019: $48.2 billion), including inflows of $2.0 billion
from new clients, and net inflows of $2.1 billion from adjustments
by existing clients. Market movements had an impact of reducing
AUME by $2.2 billion, whilst movements in exchange rates had a
much smaller positive impact, increasing AUME by $0.2 billion.
Dynamic Hedging AUME ended the year at $2.5 billion
(2019: $3.1 billion), a decrease of 19% represented by the impact
of market movements which reduced AUME by $0.8 billion,
and was partially offset by net inflows from existing clients of
$0.2 billion.
Notwithstanding net inflows of $0.3 billion during the year,
Currency for Return AUME remained broadly unchanged at
$2.6 billion at the end of the year (2019: $2.7 billion). Movements
in exchange rates and scaling adjustments on mandates with fixed
target volatilities both decreased AUME by $0.3 billion and
$0.1 billion respectively.
AUME composition by underlying asset class as at 31 March 2020
Multi‑product AUME started and ended the year at $3.0 billion.
Tactical positions taken by clients during the year temporarily
increased AUME in the third quarter, which subsequently reversed
in the fourth quarter as a result of market movements.
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 $3.2 billion in the year ended 31 March 2020
(2019: increased $2.3 billion).
Further detail on the composition of assets underlying our Hedging
and Multi‑product mandates is provided below to help illustrate
more clearly the impact of equity and fixed income market
movements on these mandate sizes.
Passive Hedging
Dynamic Hedging
Multi‑product
Equity
%
28%
90%
0%
Fixed
income
%
39%
0%
0%
Other
%
33%
10%
100%
32
Record plc Annual Report 2020
Operating review continued
Forex
Approximately 89% of the Group’s AUME is non‑US 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 increased AUME by $0.1 billion
over the year. This movement does not have an equivalent impact on the sterling value of fee income.
At 31 March 2020, the split of AUME by base currency was 13% in sterling, 55% in Swiss francs, 11% in US dollars, 15% in euros and
6% in other currencies.
AUME composition by base currency
Base currency
Sterling
US dollar
Swiss franc
Euro
Australian dollar
Canadian dollar
Singapore dollar
Swedish krona
Product mix
AUME composition by product
Passive Hedging
Dynamic Hedging
Currency for Return
Multi‑product
Cash
Total
31 March 2020 31 March 2019
GBP 6.3bn GBP 5.7bn
USD 6.2bn USD 6.3bn
CHF 31.0bn CHF 32.5bn
EUR 8.1bn
EUR 8.3bn
AUD 1.6bn AUD 1.0bn
CAD 3.5bn CAD 0.6bn
SGD 0.0bn SGD 0.1bn
SEK 3.9bn
SEK 3.7bn
31 March 2020
31 March 2019
US $bn
50.3
2.5
2.6
3.0
0.2
%
86%
4%
4%
5%
1%
US $bn
48.2
3.1
2.7
3.0
0.3
%
84%
5%
5%
5%
1%
58.6
100%
57.3
100%
The mix of AUME remained broadly consistent with the prior year, with aggregate Hedging AUME representing 90% (2019: 89%).
Record plc Annual Report 2020
33
Strategic reportGovernanceFinancial statementsAdditional information
Financial review
Overview
Total revenue for the year increased by 2.4% to £25.6 million
(2019: £25.0 million) and operating expenses, excluding variable
remuneration, increased by 6.8% to £14.2 million. Variable
remuneration rose to £3.5 million (2019: £3.4 million), with the
operating profit margin decreasing to 30% (2019: 32%) and profit
before tax fell by 3.2% to £7.7 million (2019: £8.0 million).
Profit and loss (£m)
Revenue
Cost of sales
Gross profit
Personnel (excluding GPS)
Non‑personnel cost
Other income or expense
Total expenditure (excluding GPS)
GPS
Operating profit
Operating profit margin
Net interest received
Profit before tax
Tax
Profit after tax
2020
25.6
(0.3)
25.3
(8.6)
(5.7)
0.1
(14.2)
(3.5)
7.6
30%
0.1
7.7
(1.3)
6.4
2019
25.0
(0.4)
24.6
(8.2)
(5.1)
—
(13.3)
(3.4)
7.9
32%
0.1
8.0
(1.6)
6.4
The Group has shown its resilience
through a challenging year, and
remains independent and profitable
supported by its strong and liquid
balance sheet.
Steve Cullen
Chief Financial Officer
Revenue
Record’s revenue derives from the provision of currency
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.
As shown under AUME development on page 31, average levels
of AUME, and hence management fees, increased across the year
predominantly as a result of net inflows of $2.0 billion and
$2.6 billion over the first and second halves respectively. These
were partially offset by net decreases due to market movements
for the year of $3.2 billion. The period up to the last quarter of the
year showed an increase of $1.3bn, followed by a $4.5 billion
decrease in the final quarter linked to the covid‑19 outbreak.
Record’s aggregate revenue for the year increased by 2.4% to
£25.6 million, including performance fees of £1.8 million (2019:
£2.3 million).
Management fees earned during the year increased by 3.7% to
£23.1 million (2019: £22.3 million). The increase in management
fees of £0.8 million more than offset the decrease in performance
fees of £0.5 million for the year.
34
Record plc Annual Report 2020
Financial review
About
us
Business
model
Markets
Strategic
priorities
and goals
Key
performance
indicators
Operating
review
Finance
and risk
Corporate
social
responsibility
Revenue
£25.6m
2019: £25.0m
+2.4%
Revenue analysis (£m)
Year
ended
31 Mar 2020
Year
ended
31 Mar 2019
Performance fees
Performance fees are derived from a combination of hedging
and return‑seeking products. Aggregate performance fees of
£1.8 million were earned during the year (2019: £2.3 million).
Management fees
Passive Hedging
Dynamic Hedging
Currency for Return
Multi‑product
Total management fees
Performance fees
Other currency services income
Total revenue
12.0
11.6
4.0
2.0
5.1
23.1
1.8
0.7
25.6
4.6
1.8
4.3
22.3
2.3
0.4
25.0
Management fees
Passive Hedging management fees increased by £0.4 million to
£12.0 million for the year, an increase of 3.6% (2019: £11.6 million)
in line with the higher average Passive Hedging AUME over the year.
Dynamic Hedging management fees fell by 13.1% to £4.0 million
(2019: £4.6 million), predominantly reflecting the reduction in
AUME seen in the final quarter of last year, partially offset by net
inflows this year of $0.2 billion.
Currency for Return management fees increased by 11.7% to
£2.0 million, reflecting movements in AUME including net inflows
of $0.3 billion. Multi‑product management fees increased by
18.6% to £5.1 million, bolstered by the temporary tactical
mandate activity seen in the second half of the year.
Average management fee rates remained broadly constant
throughout the year ended 31 March 2020. However, the trend
of increased margin pressure seen in recent years across our
industry continues, with clients seeking reduced fees rates or
increased tailoring for existing fees, especially across our Passive
Hedging offering.
Other currency services income
Other currency services income totalled £0.7 million
(2019: £0.4 million) and consists 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 comprises referral fees and costs in relation to the
Record Umbrella Fund.
Operating expenditure
The Group operating expenditure (excluding variable
remuneration) increased by 6.8% to £14.2 million for the year
(2019: £13.3 million).
Growth in personnel costs of 4.9% to £8.6 million (2019:
£8.2 million) reflects salary increases arising as a result of internal
promotions during the year, plus the effect of recruiting at more
senior levels towards the end of the financial year. The full‑year
effect of these movements will be reflected in an increase in
personnel costs for the forthcoming year.
Non‑personnel costs increased by 11.8% during the year to
£5.7 million (2019: £5.1 million). The Group continued to invest in
technology and to improve the resilience of its systems, reflected
by an increase in IT‑related costs of £0.3 million which are
expected to increase in the forthcoming year. One‑off
project‑related costs totalled £0.3 million, including
technical consultancy and professional fees.
Other income was £0.1 million for the year (2019: £nil) and
represents net gains made on derivative financial instruments
employed by the Group’s seed funds, hedging activities and
other FX adjustments or revaluations.
Record plc Annual Report 2020
35
Strategic reportGovernanceFinancial statementsAdditional information
Financial review continued
Expenditure continued
Group Profit Share (“GPS”) Scheme
The Group operates a discretionary GPS Scheme i.e. variable
remuneration, which is linked to both the financial performance of
the Group and the achievement against individual performance
objectives for staff. Historically a long‑term average of 30% of
underlying operating profit before GPS (“GPS pool”) has been
made available to be awarded to staff. However, for the year ended
31 March 2020 the Remuneration Committee introduced changes
to the operation of the scheme with the aim of rewarding individual
employee behaviour that drives revenue growth, improvements to
efficiency and reduced costs. Consequently the expectation is that
the average GPS % will now diverge from the long‑term average
due to the Remuneration Committee using the flexibility and
discretion it already holds in varying the GPS pool between 25%
to 35% of underlying operating profit before GPS.
For the year ended 31 March 2020, the GPS pool is 31.4% of
pre‑GPS underlying operating profit, which represents £3.5 million,
an increase of 3.8% over the previous financial year (2019:
£3.4 million).
Further information on variable remuneration, and specifically the
changes to the operation of the Group Profit Share Scheme from
1 April 2019, can be found in the Remuneration report starting on
page 70.
Operating profit and margin
Group operating profit decreased by 2.9% to £7.6 million (2019:
£7.9 million) and the Group operating margin decreased to 30%
(2019: 32%). Notwithstanding the increase in revenue for the year,
the continued investment in personnel and other resources for the
year have impacted the operating margin.
Cash flow
The Group consolidated statement of cash flows is shown on
page 99 of the financial statements.
The Group’s year‑end cash and cash equivalents stood at
£14.3 million (2019: £13.0 million). The cash generated from
operating activities before tax is shown in note 25 to the financial
statements and was £7.9 million (2019: £8.2 million). During the
year, taxation of £1.4 million was paid (2019: £1.2 million) and
£5.9 million was paid in dividends (2019: £5.5 million).
At the year end, the Group held money market instruments with
maturities between three and twelve months, worth £8.0 million
(2019: £10.7 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 1.15 pence per share (2019 interim:
1.15 pence) was paid to shareholders on 27 December 2019,
equivalent to £2.3 million.
As disclosed in the Chairman’s statement on page 4, the Board is
recommending a final ordinary dividend of 1.15 pence per share,
equivalent to £2.3 million, taking the overall ordinary dividend for
the financial year to 2.30 pence per share. Simultaneously,
the Board is also paying a special dividend of 0.41 pence
equivalent to £0.8 million making the total dividend in respect of
the year ending 31 March 2020 of £5.3 million equivalent to 83%
of total earnings.
The total ordinary and special dividends paid in respect of the
prior year ended 31 March 2019 were 2.3 pence per share and
0.69 pence per share respectively, equivalent to total dividends of
£5.9 million and representing 91% of total earnings of 3.27 pence
per share.
36
Record plc Annual Report 2020
Financial review continued
Regulatory capital resources (£m)
Core Tier 1 capital
Deductions: intangible assets
Regulatory capital resources
2020
28.0
(0.4)
27.6
2019
27.3
(0.3)
27.0
Further information regarding the Group’s capital adequacy
information can be found in the Group’s Pillar 3 disclosure, which
is available on the Group’s website at www.recordcm.com.
Cautionary statement
This Annual Report contains certain forward‑looking 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.
Financial stability and capital management
The Group’s balance sheet is strong and liquid with total net assets
of £28.2 million at the end of the year, including current assets
managed as cash totalling £22.3 million. The business remains
cash generative, with net cash inflows from operating activities
after tax of £6.5 million for the year (see note 25 to the financial
statements).
The Board’s capital policy is to retain minimum capital (being
equivalent to shareholders’ funds) within the business broadly
equivalent to twelve months’ worth of future estimated operating
expenses (excluding variable remuneration), plus capital assessed
as sufficient to meet regulatory capital requirements and working
capital purposes, and for investing in new opportunities for the
business. 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 and frequent basis. The
Group has no debt.
Record Currency Management Limited (“RCML”) is a BIPRU limited
licence firm authorised and regulated in the UK by the Financial
Conduct Authority (“FCA”), and is a wholly owned subsidiary of
Record plc. Both RCML and the Group submit semi‑annual capital
adequacy returns to the FCA, and held significant surplus capital
resources relative to the regulatory financial resource requirement
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.
The Group held regulatory capital resources based on the audited
financial statements as at 31 March (excluding non‑controlling
interests), as follows:
Record plc Annual Report 2020
37
Strategic reportGovernanceFinancial statementsAdditional information
Risk management
Record’s culture is one of integrity and accountability,
and is embedded into the control environment across
all areas of the business.
The Board has ultimate responsibility for risk and the oversight of
the risk management process within the business. Recognising
that risk is inherent in all of the Group’s business dealings, and in
the markets and instruments in which the Group operates, it places
a high priority on ensuring an integrated approach and a strong risk
management culture is embedded throughout the Group, with
accountability at all levels within the business. Effective risk
management and strong internal controls are integral to the
Group’s business model and are reflected in the risk management
framework adopted within the business.
Risk management framework
Risk appetite
As part of its responsibility for the oversight of the risk management
process, the Board determines the risk appetite of the business.
This defines the risk tolerances within which the business must
operate in order to achieve its strategic and business objectives,
and takes into account the interests of clients, employees and
shareholders as well as any capital or any other regulatory
requirements. The Board’s ICAAP (Internal Capital Adequacy
Assessment Process) considers the risk appetite statement and
the process used for the monitoring of key risks against defined
thresholds to ensure adverse trends or levels of heightened risk are
identified and appropriately escalated for action if required.
The Board reviews and considers the principal risks, and its risk
appetite and tolerances, on a regular and ongoing basis in light of
strategic plans, and changes in the business and regulatory
environment. The Board currently considers the following
categories of risk in determining the risk appetite of the Group:
Capital adequacy risk
Capital adequacy risk is the risk that the Group is unable to
support its strategic business objectives due to not meeting its
minimum regulatory capital. The Group has a capital and dividend
policy, which is designed to ensure that capital retained is broadly
equivalent to one year’s worth of estimated future overheads
(excluding variable remuneration), in addition to capital assessed as
required for regulatory purposes, for working capital purposes and
for investing in new opportunities for the business.
This policy ensures a significant capital buffer over regulatory
requirements, and consequently capital adequacy risk is not
considered a significant risk in terms of the principal risks
detailed on pages 41 to 44.
The business is also exposed to more overarching risks, being
conduct risk and reputational risk.
Conduct risk
Conduct risk is defined as the risk of causing detriment to a client
or damaging the integrity of the market because of poor systems
or processes, or inappropriate judgement by staff in execution of
the Group’s business. The conduct of our staff and the strength of
our internal control systems and processes are fundamental to the
effective operation of the Group’s risk management framework.
The conduct risk is therefore evident and managed within each
individual category of risk, and when combined equates to the
overall conduct risk of the Group. Consequently, conduct risk is
not considered as a separate risk category within the Principal
risks section on pages 41 to 44.
Risk management framework – overview
Record Board
Executive Committee
Audit and Risk Committee
Investment Committee
Risk Management Committee
38
Record plc Annual Report 2020
Risk management
Reputational risk
Reputational risk is the risk of loss or adverse impact arising
from an unfavourable perception of the Group on behalf of clients,
counterparties, employees, regulators, shareholders or other
stakeholders. Reputational risk can manifest as a consequence
of an occurrence of any of the Group’s principal risks, either in
isolation or together with other risks, and is therefore considered to
form an integral part of each of the Group’s principal risks. For this
reason, reputational risk is not considered as a separate risk
category within the Principal risks section on pages 41 to 44.
The remaining principal risk categories are listed below and further
detail is given on pages 41 to 44:
Strategic risk
Business risk
Operational risk
Investment risk
Oversight
Oversight of the risk management framework is governed
by various committees as delegated by the Board.
The Board has delegated authority to the Audit and Risk
Committee to provide oversight and independent challenge
in relation to internal controls, risk management systems and
procedures and external financial reporting.
The Executive Committee is the delegated decision‑making
body for the day‑to‑day operation of the business and includes
executive Board members and other senior personnel.
The Board has delegated authority to the Investment Committee to
approve changes to any of the Group’s investment processes and
to establish and maintain policies for these processes.
The Investment Committee’s members are listed on page 61.
Investment Committee approval is required prior to implementation
of any new or amended investment process or product.
As prescribed in terms of reference determined by the Audit and
Risk Committee, the Risk Management Committee continually
reviews existing and new risks, and the nature of any operational
incidents, with the objective of ensuring that adequate systems
and controls are in place to minimise and preferably eliminate
such incidents and their impact on clients and the Group.
Lines of defence
The Record culture is one of integrity and accountability; core
values that are embedded into the control environment surrounding
all areas of the business.
The overall risk management framework is underpinned by three
lines of defence and is overseen by the Audit and Risk Committee,
as delegated by the Board.
External independent assurance activity
Statutory external audit
ISAE 3402 and AT-C320
service auditor’s report
on internal controls
Embedded culture of integrity and accountability
1st line of defence:
2nd line of defence:
3rd line of defence:
Business operations
and support
Control and oversight
functions
Internal audit
(independent
assurance – Deloitte)
Within this framework, the first line of defence provides
management assurance and rests with line managers within their
specific departments and with senior managers responsible for the
implementation and maintenance of higher‑level controls to ensure
adherence to quality standards and regulatory requirements.
Functions such as Front Office Risk Management, Compliance and
Risk, Legal, HR and Finance provide the second line of defence
through the drafting, implementation and monitoring of policies and
procedures to align with best practice, to ensure compliance and
to provide assurance and oversight for the Board and the Audit
and Risk Committee.
Record plc Annual Report 2020
39
Strategic reportGovernanceFinancial statementsAdditional information Risk management continued
Lines of defence continued
The third line of defence is performed by internal audit, which
provides independent assurance on the adequacy and effectiveness
of the Group’s risk management, control and governance processes,
providing recommendations to improve the control environment.
Internal audit is provided by Deloitte LLP (“Deloitte”).
External independent assurance for shareholders is gained through
the statutory annual external audit process run by
PricewaterhouseCoopers LLP (“PwC”), the Group’s external
auditor. The Group has commissioned RSM Risk Assurance
Services LLP (“RSM”), an independent third party, to perform the
annual service auditor’s report in respect of Record Currency
Management Limited under both the International Standard on
Assurance Engagement (“ISAE”) 3402 and the American Institute
of Certified Public Accountants Attestation Standard AT‑C Section
320 (“AT‑C 320”). In performing this work, RSM reports its opinion
on the description of internal controls with respect to the
investment management and information technology activities, the
suitability of the design of the relevant controls, and the operating
effectiveness of specific controls for the period 1 April to 31 March,
in line with the Group’s financial year.
The Group considers the strong capital buffer retained under the
capital and dividend policy provides an effective additional line of
defence in terms of mitigation when considering its principal risks.
Emerging risks
Emerging risks are primarily external in nature and tend to overlay
the Group’s existing principal risk categories. Emerging risks can
include natural disasters, pandemics, disruption in financial
markets and business infrastructure, political risk and changes in
the competitive landscape. The Group Board, management and
Risk Management Committee constantly monitor emerging risks,
assessing the likelihood of impact on the principal risks faced by
the business.
At the time of writing, the Coronavirus pandemic (“covid‑19”) has
effectively temporarily shut down the world economy as global
leaders fight to stop the spread of the virus through enforced
lockdowns in their respective countries. Although some countries
are beginning to ease restrictions as mortality rates decline, it
remains to be seen whether a second wave of the virus ensues,
and if not, how quickly the global economy returns to pre‑covid‑19
levels, if at all. The speed and scale of disruption caused by the
pandemic is unprecedented, meaning the risk has fully transitioned
from an emerging risk to a business continuity risk.
Information on the Group’s response to the pandemic and the
effect on its business and operations is given in more detail below.
Review of the impact of covid‑19
Our clients
Record’s clients are institutional and of high quality with strong,
long‑standing and trusted relationships built over many years.
Record has not lost any clients as a result of the covid‑19
pandemic and has maintained strong lines of communication and
service levels throughout the crisis, responding to client requests in
volatile markets and restricted liquidity, and underpinning the
quality of our service offering. A large proportion of our current
client base by assets (90%) is represented by hedging products
which seek to reduce the FX risk associated with our clients’
overseas assets – extreme volatility in times of market stress only
serves to further reinforce the benefit of such risk mitigation
strategies.
The quality of our clients is reflected in the business having not
suffered from any unpaid fees for over 20 years through various
market crises and cycles, and we do not anticipate this changing
under the current circumstances.
Our people
Record has successfully transitioned to full remote working without
detriment to our clients or employees. We continue to closely
monitor the wellbeing and motivation of all of our staff and to listen
and respond to their feedback and requirements. Planning has
begun for the easing of restrictions and how these may impact the
return to “normal” working conditions in terms of social distancing,
travel, increased office hygiene requirements and other measures.
Record has not seen any employee attrition as a result of the crisis,
has not cut wages and does not anticipate utilising any of the
Government’s job retention or loan schemes for businesses.
Our technology and operations
Prior to the UK Government imposed lockdown, Record’s
operational teams, had already been split between the disaster
recovery (“DR”) site and the Windsor office, and this changed to
full working from home for all employees, including all operational
teams, subsequent to the lockdown measures being introduced.
Throughout these phases full business continuity was maintained.
Remote access systems have been strengthened and over the
course of the lockdown additional IT equipment has been sourced
for individuals to assist with facilitating the required working
environment from home.
Our governance and oversight
Virtual meetings have replaced physical meetings in the office and
broadly follow the same pattern as prior to the crisis, although the
frequency for some meetings has been increased, for example
more regular Audit and Risk Committee meetings to review risk
and weekly Executive Committee catch‑ups to discuss employee
wellbeing, market behaviour and other management issues.
Our risk and management reporting framework continues to
operate as usual, as do monitoring and oversight tasks operated
by the compliance team.
Our business model
With the exception of those items discussed above, any further
impact of covid‑19 on our business model has been limited.
Our costs have not materially increased as a result of the virus and
our balance sheet remains well capitalised and robust. In terms of
revenue, whilst we have not seen and do not anticipate any direct
material outflows as a result of covid‑19, the link between some of
our clients’ mandates with other markets, such as equity and fixed
income, means our AUME is also affected to a lesser extent to
movements in such markets. This was illustrated by the fall of our
fourth quarter AUME by ‑$4.5 billion (‑7%) linked to market
movements. Conversely, we would expect to see any rebound in
such markets reflected by an increase in our AUME.
Our business has responded well to the changes enforced by
the covid‑19 pandemic, with continuity in operational and client
servicing matters, and maintaining a full team without the need for
additional funding or Government assistance. We believe that we
are capable of continuing to operate under current circumstances
for the foreseeable future.
Please see page 21 for analysis of the market impact of the
covid‑19 pandemic.
40
Record plc Annual Report 2020
Risk management continued
Principal risks
The following section shows the Board’s assessment of the principal risks faced by the business alongside an explanation of how these
risks have been managed or mitigated, and how the significance of the risk has changed during the year. These risks fall into a number of
distinct categories and the means to mitigate them are both diverse and relevant to the nature of the risk concerned.
Strategic risk
The risk of failing to identify and implement the correct strategy would impact expected outcomes, earnings and profitability of the Group.
This risk is influenced by internal and external factors.
Link to
strategy
1
2
3
Risk
Failure to deliver strategy
– risk of failure to achieve
strategic objectives through
internal or external factors.
Potential impact – reduced short
to medium‑term profitability, and
growth prospects and viability
limited longer‑term.
Business risk
Rating
Change
Mitigating activities and update
Medium
The Board sets strategy and is responsible for ensuring the
Group has the right structure, leadership and culture to
execute.
Regular and ongoing review of strategic options,
opportunities and threats.
A change of leadership was announced on 13 February
2020 to deliver on growth opportunities anticipated by the
business.
The risk of the business being unable to generate fee income and to control costs in line with business plans.
This risk is influenced by internal and external factors.
Link to
strategy
1
2
Risk
Concentration risk – the risk of
concentration either by product,
client type or geographical
location leading to over‑reliance
on any one category of revenue.
Potential impact – Record’s
products are all currency
management based. A move
away from currency by its core
client base or a high‑value client,
or a change in Swiss regulation,
could result in material outflows
and loss of revenue.
Rating
Change
Mitigating activities and update
Medium
Continued diversification of investment capabilities across
risk‑reducing and return‑seeking products, plus the
capability to offer bespoke products to meet client
requirements.
Commitment to client services excellence and transparent
investment process is integral to retention.
Building long‑term and close trusted adviser relationships
with clients assists with retention even in the event of
regulatory change or market uncertainty and disruption.
Client numbers and AUME increased in FY‑20.
The addition of the Dynamic Macro Currency strategy
adds further diversification to Record’s product range.
Investigation continues into possibilities arising from impact
investing, frontier currencies and ESG‑related opportunities
in currency.
Key to strategy link
1 Quality client experience
Record plc Annual Report 2020
2 Technology and innovation
3 Talent development
41
Strategic reportGovernanceFinancial statementsAdditional information Risk management continued
Business risk continued
Risk
Link to
strategy
Rating
Change
Mitigating activities and update
Medium
Medium
Low
1
2
1
2
3
1
2
Margin compression – the risk
of a lower fee environment due to
changes in investor demand or
competitive pricing pressures,
and/or rising costs within the
industry arising from regulatory
requirements and/or technological
advances.
Potential impact – reduced fee
rates and/or increased costs lead
to decreased margins and lower
returns for shareholders.
People and employment risk
– the inability to attract or retain
key employees could impact the
Group’s ability to support
business activities or achieve
strategic objectives.
Potential impact – not
supporting business activities or
achieving the strategic objectives
of the Group would lead to a
material negative impact on
corporate performance.
Regulatory change – the risk of
failure by the Group to comply
with the introduction of new
regulation or changes to existing
regulation.
Potential impact – ability to
do business may be affected,
resulting in loss of revenue or
regulatory censure.
Bespoke solutions and added‑value to differentiate
products within the market.
Focus on offering premium service differentiates Record
from competition and builds long‑standing and “trusted
adviser” relationships.
Continued investment into resources and technology to
ensure effective and cost‑efficient processes.
Pressure on Passive Hedging fee rates has continued
during the year. However, market uncertainty and volatility
in the final quarter and since year end has served to
underline to clients the benefits of having specialist
advisers with proven expertise in managing complex
financial and operational risk.
Continued investment in resources to broaden capabilities
in research, investment and client servicing.
Promotion of collegiate and professional culture career
opportunities study support and overseas secondments.
Remuneration policy and share‑based remuneration
schemes promote key personnel retention.
Minimal reliance on key investment personnel and products
managed on a predominantly systematic process.
The Group continues to focus on succession planning to
mitigate the risk from over‑reliance on key personnel, as
evidenced by the recruitment of a new Global Head of
Sales prior to the year end and a new senior manager level
hire post year end in our Swiss office.
Experienced Board and senior management engage
proactively with industry bodies and have a transparent
and open relationship with regulators.
Investment in expertise, systems and training to ensure
robust compliance culture maintained across the business.
Record successfully implemented the new Senior Managers
and Certification Regime (“SMCR”) during the year.
Key to strategy link
1 Quality client experience
2 Technology and innovation
3 Talent development
42
Record plc Annual Report 2020
Risk management continued
Operational risk
Operational risks are broad in nature and inherent in all activities and processes performed across the business, and all other businesses.
They include the risk that operational flaws result in business losses – through error or fraud, the inability to capitalise on market
opportunities, or weaknesses in systems and controls.
Risk
Link to
strategy
Rating
Change
Mitigating activities and update
High
Low
1
2
1
2
Technology and information
security risk – cyber security
presents an ongoing significant
risk to financial services
companies, including the risk of
failure of the Group’s technology
and support systems, or
penetration of such systems by
third parties.
Potential impact – consequential
loss of data, or the significant
disruption to, or prevention of,
the Group’s ability to operate,
which could cause negative
financial and reputational
consequences.
Operational control
environment – the risk of errors
in execution and process
management, legal, dealing,
portfolio implementation,
settlement, managing bespoke
requirements and reporting and
the risk of non‑compliance
including monitoring of
investment breaches.
Potential impact – such errors or
non‑compliance could potentially
lead to negative financial and
reputational consequences.
Comprehensive disaster recovery (“DR”) and business
contingency plans are in place and tested on a regular basis.
Information technology policies and technical standards
are deployed across the Group, including induction and
regular security awareness training.
Record continues to monitor, review and challenge its
cyber and data security processes and their development,
including input from the internal auditor and third party
advisers.
Cyber‑related metrics are monitored, reported and
reviewed in monthly management information and Board
information packs.
Covid‑19 has impacted the risks associated with our
technology and information security systems. This reflects
the well‑publicised perceived increase in risk from potential
external third party “bad actors” and also the required
reallocation of IT resource from prescheduled projects to
ensure continuity of service and operations with employees
working from home.
Dedicated and experienced portfolio management team
oversees the investment process.
Dedicated and independent Front Office Risk Management
team provides pre and post‑trade compliance assurances.
Compliance and Risk department oversees adherence to
formal and established procedures via a structured
monitoring programme, reporting directly to the Risk
Management Committee.
Automated post‑trade compliance tests monitor whether
programmes are running in line with expectations and
allow timely resolution.
Internal audit function reports independently to the Audit
and Risk Committee, reviewing higher‑risk operational
areas.
Annual ISAE 3402 and AT‑C 320 service auditor’s report on
internal controls independently reviewed and tested by
RSM.
The Group has maintained the high standards around its
operational control environment notwithstanding the effects
of covid‑19 and the consequent requirement for full remote
working.
Key to strategy link
1 Quality client experience
Record plc Annual Report 2020
2 Technology and innovation
3 Talent development
43
Strategic reportGovernanceFinancial statementsAdditional information Risk management continued
Investment risk
The risk that long‑term investment performance is not delivered, damaging prospects for winning and retaining clients, and putting
management fee rates under pressure.
Risk
Link to
strategy
Rating
Change
Mitigating activities and update
High
Medium
1
2
3
1
2
Product underperformance
– the risk that long‑term
investment performance is not
delivered.
Potential impact – damages
prospects for winning and
retaining clients, minimises
revenues through reduced
management and performance
fees and may cause reputational
damage.
Market liquidity risk – the risk
of reduced or constrained market
liquidity, which would affect
Record’s investment process as
it relies on trading a high turnover
of client positions in both size
and volume.
Potential impact – a reduction
in market liquidity or the
non‑functioning of financial
markets could affect Record’s
ability to meet its contractual
obligations to clients, resulting in
outflows and reductions to
revenue.
Experienced Investment Committee meets regularly,
ensuring consistent core investment processes are applied.
Dedicated currency management research and investment
focus.
Diversification, both through offering multiple strategies that
benefit from opposing market conditions i.e. “risk‑on” and
“risk‑off”, and through a client base which is diverse in
geography and base currency.
Remuneration policy links senior management’s
remuneration to long‑term performance of the Group.
As the Group widens its return‑seeking product range, it
becomes more susceptible to the risk of client investment
disappointment. The effect on markets caused by covid‑19
has led to underperformance of Record’s Multi‑Strategy
product. However, the new Dynamic Macro Currency
strategy performed well in the final quarter.
The Group has a large panel of banking counterparties it
uses to trade on behalf of clients in currency and related
instruments.
Currency is a particularly deep and liquid market that has
continued to provide sufficient daily liquidity, despite
disruptive market “shock” events such as the result of the
EU referendum in June 2016 and more recently the impact
of covid‑19.
The Group has successfully navigated clients through a
period of extreme market volatility arising from covid‑19,
managing to secure sufficient liquidity in particularly
challenging markets.
Key to strategy link
1 Quality client experience
2 Technology and innovation
3 Talent development
44
Record plc Annual Report 2020
Risk management continued
Viability statement
In accordance with the UK Corporate Governance Code, the
Directors have performed a robust assessment of the viability of
the Group considering the business model, the Group’s expected
financial position, Board strategy and risk appetite, the Group’s
solvency and liquidity and its principal risks. Based on this
assessment, the Directors have a current and reasonable
expectation that the Group will continue to operate and meet
its liabilities as they fall due up to 31 March 2023.
The Directors review the financial forecasts and position of the
Group on an ongoing basis. The capital and dividend policy reflects
the stated objectives of maintaining a strong balance sheet whilst
allowing the Group the flexibility to adapt its products and services
to market conditions, or to take advantage of emerging business
opportunities. The Group’s strategy and principal risks are
assessed and reviewed regularly by the Board, as well as by the
Executive Committee and operational sub‑committees within the
Group. Further detail on the Group’s strategy and principal risks is
given in the Strategic report on pages 22 to 25 and 41 to 44
respectively.
In assessing the viability of the Group, the Directors have
considered the principal risks affecting the Group, which underpin
the basis for the stress testing of the business plan conducted as
part of the Group’s Internal Capital Adequacy Assessment Process
(“ICAAP”). The ICAAP uses severe but plausible stress scenarios
assuming the crystallising of a number of these principal risks to
assess the options for mitigating the impact on the Group, and for
ensuring that the ongoing viability of the Group is sustained. Such
scenarios include items that may have a severe effect on the
revenue generation capability and resulting profitability of the
Group, for example:
• market downturn – resulting in AUME decreasing, either through
outflows and/or a reduction in value due to the link to other
financial markets;
• operational risk event – causing AUME outflows and potentially
reputational damage; and
• the loss of key personnel – resulting in the loss of AUME or the
inability to win new clients.
The scenarios assume mitigating actions including the potential for
non‑critical cost reductions and reassessing the dividend policy,
although any mitigating actions would need to be reassessed
depending on the specific circumstances and expected duration of
the factors affecting the business model at the time. The possibility
that the impact and timing of factors potentially affecting the
viability of the Group could be more severe than assumed plausible
for the above testing should also be noted.
As discussed in more detail on page 40, the Group has responded
well to the challenges raised by the impact of the covid‑19
pandemic, maintaining both continuity in operational and client
servicing matters and remaining independent without the need
for additional funding or the use of related Government schemes.
However, the market downturn scenario has been the subject of
further focus and revision as a result the impact on financial
markets of covid‑19, and the corresponding decrease of 7% in the
Group’s AUME for the quarter ending 31 March 2020. The updated
scenario assumed an immediate 30% reduction in AUME due to
market movements with stagnant recovery over the viability
assessment period, and with management actions limited only
to the cessation of dividend payments. Notwithstanding such a
severe and immediate decrease in AUME and hence revenues,
the Group remained viable, retaining a strong capital position
significantly in excess of its regulatory requirement supported
by significant liquid resources.
Market disruption, changes to regulation and heightened economic
uncertainty in light of covid‑19 will continue to provide challenges
to the Group and the environment in which it operates. Through its
change in strategy and increased focus on growth combined with
the continued enhancement of its products and services and in
maintaining its approach to innovation and the use of technology,
the Directors believe the Company to be capable of meeting such
challenges. However, the Directors consider a three‑year horizon
over which to assess the viability of the Group to be appropriate
under such circumstances, since any further planning horizon
provides a greater level of uncertainty to financial projections.
Upon review of the results of the stress testing, the Directors
concluded that the Group would have sufficient capital and liquid
resources to withstand the stressed scenarios and ensure its
ongoing viability, based on current information and the three‑year
viability horizon.
Record plc Annual Report 2020
45
Strategic reportGovernanceFinancial statementsAdditional information Corporate social responsibility
We believe that all stakeholders are beneficiaries
of environmentally friendly business practice and
socially responsible investment.
In conducting its business operations, the Group has
a responsibility to its stakeholders and the environment.
Our stakeholders, with whom we maintain an ongoing dialogue,
are detailed on page 12. We believe that all stakeholders are
beneficiaries of environmentally friendly business practice
and socially responsible investment.
Our approach to corporate social responsibility has historically
been built around three key areas i.e. Community, Workplace
and Environment. More recently, we have introduced certain
environmental, social and governance (“ESG”) factors into some
of our currency management products, putting Record among
the first currency managers to develop a return‑seeking strategy
incorporating ESG factors into currency and to be accepted as
a signatory to the Principles for Responsible Investment (“PRI”)
(as announced in June 2018). Record has complied with the
PRI requirements of annual reporting, and attended the annual
conference in London. We are public supporters of the Task Force
on Climate‑related Financial Disclosures (“TCFD”), and are looking
into implementing its recommendations on disclosure of climate
risk exposure, and promoting this transparency across the industry.
We have therefore added “Responsible Investment” to our existing
key areas of CSR focus.
Record is a certified CarbonNeutral® company according to The
CarbonNeutral Protocol.
Responsible investment
As part of our drive to incorporate ESG factors into active currency
products, Record has worked in collaboration with Oxford‑based
researchers to extend the boundaries of ESG beyond its existing
base in equities and bonds, to encompass the currency markets.
Our ESG‑tilt product applies insights on the relationship between
productivity and exchange rates to a database of country‑specific
ESG data. The result is a range of currency‑relevant ESG factors
related to the United Nations Sustainable Development Goals.
These factors (for example: education, child mortality, improved
water sources and enforcement of legal contracts) are used to
construct an ESG metric which tilts the Multi‑Strategy currency
portfolio in a pro‑ESG manner. Record has seeded this strategy
and hopes to offer it to clients in due course.
Our experience of existing investment strategies takes into account
the links between currency returns and productivity gains, so we
have focused on those ESG factors most clearly related to
economic productivity. As ESG and productivity have a closer
relationship in Emerging Markets than Developed Markets, our first
ESG process has been designed to tilt the EM currency strand of
the Multi‑Strategy product.
In 2019 Record began research into its first “Impact” strategy,
and used its own cash for investing into Impact Bonds, organised
through international and regional multilateral organisations which
are signatories of the UN Sustainable Development Goals
(“SDGs”). The funds borrowed in global financial markets are
allocated to projects to support and promote economic, social and
environmental development in low and middle‑income countries.
Record believes that this will be a good use of cash to aid
development and achieve impact, as well as an opportunity to gain
experience in dealing, holding and reporting on Impact Bonds in
order to achieve a competitive and trusted understanding which
will underscore future Impact Bond‑related products.
Record acknowledges the diversity of approaches, determined by
varying preferences and priorities as well as underlying constraints,
taken by its clients to incorporate ESG into their investment.
Therefore Record is actively exploring ways to collaborate with
external parties including clients who might wish to apply the
methodology to reflect their own specific ESG views, and with
research institutes. Record’s research is ongoing, responding
to improvements in available data, as well as developing
and improving on its own strategies and building and innovating
new approaches to maintain its place at the forefront of research
in such a fast‑developing space.
Record became a sponsor for the Centre for the Study of
Financial Innovation and is a member of Swiss Sustainable
Finance. Our research team have also collaborated with
Princeton Professor Peter Singer AC on ethical investment.
46
Record plc Annual Report 2020
Corporate social responsibility
About
us
Business
model
Markets
Strategic
priorities
and goals
Key
performance
indicators
Operating
review
Finance
and risk
Corporate
social
responsibility
Workplace
Record’s working environment is designed to encourage bright,
dynamic and committed individuals to thrive. We believe that
investing in our staff and developing their potential is key to the
success of the business and our policies and practices reflect this.
The Group’s offices have been designed to allow all departments
to work together in an open plan environment. The open plan office
allows ease of communication between departments, as well as
enabling staff to work closely with senior management. Detail on
how the Group has successfully managed the transition to remote
working during the covid‑19 pandemic is provided on page 40.
The office environments and culture promote staff development
and training. All staff are invited to participate in monthly company
update meetings which are led by the Chief Executive Officer.
The Group also provides study support to employees who wish
to pursue relevant professional qualifications. The Board has
established a staff‑run welfare committee which organises
team‑building and other social events, enhancing interaction
between different departments within the business. An ESG
committee was created in 2020 to discuss firm‑level ESG projects
and improvements, as well as to engage with wider ESG issues,
events and industry developments.
In addition, the Group continues to provide a number of other
benefits to employees including pension, private medical cover,
life insurance, permanent health insurance, maternity and shared
parental benefits, lunchtime fitness classes and subsidised gym
membership. All employees participate in the Group Profit Share
Scheme and have the opportunity to acquire shares in Record plc
through this scheme, as well as through the Record plc Share
Incentive Plan. All employees are also offered the Employee
Assistance Programme, which provides 24/7 confidential
telephone support from qualified counsellors as well as online
computerised cognitive behavioural therapy, to support anyone
struggling with their mental health. Confidence and resilience
training was also offered to employees during the year and was
well attended.
The Group has an established internship programme for students
and during the year welcomed interns from the University of
Cambridge, Oxford University, the University of Birmingham and
the University of Luxembourg.
Staff retention (%)
FY-20
FY-19
FY-18
81%
84%
93%
Record plc Annual Report 2020
47
Strategic reportGovernanceFinancial statementsAdditional information Corporate social responsibility continued
Community
Record recognises its obligations and responsibility to contribute
to the wider community outside of the firm. Over the course of the
year, the Group made charitable donations totalling £15,242.
Our charitable giving is focused on employee choice, with the
Group matching employee donations and sponsorship. The Group
continues to encourage employees to participate in fundraising
activities for charitable causes and this year employees participated
in a variety of events, including charity lunches and fundraising
competitions. Staff donated and sent pictures in for World Health
Day, created a collage and raised £2,000 to support NHS
Charities. Other charity events included a Great British Bake Off
for Stand Up To Cancer, Jeans for Genes, a Children in Need
breakfast and fundraising for a 3 Peaks Challenge in aid of
Children4Children. A scheme allowing UK employees to give
to charity through the payroll is also offered.
Charitable donations (£’000)
FY-20
FY-19
FY-18
15.2
16.8
13.7
We also provide financial assistance to students studying at Balliol
College, Oxford through a bursary scheme, which provides grants
to students who aim to pursue ambitions which will benefit the
wider community, for example in medical or charitable fields.
Human rights
Record complies fully with appropriate human rights legislation in
the countries in which it operates.
Equal opportunities and diversity
The Group’s aims include ensuring that all staff are provided with
equal opportunities and that the workplace is free of discrimination.
It also aims to ensure that all recruitment processes are fair and are
carried out objectively, systematically and in line with the
requirements of employment law.
The Group ensures that all staff are aware that it is not acceptable
to discriminate, harass or victimise anyone, and also that it is
unlawful and that such behaviour will not be tolerated under any
circumstance.
The Group believes that valuing what is unique about individuals
and drawing on their different perspectives and experience will add
value to the way the Group does business. By accessing, recruiting
and developing talent from a diverse pool of candidates, the Group
can gain an insight into different markets and better support client
needs. The Group aims to create a productive environment,
representative of different cultures and groups, where everyone
has an equal chance to succeed.
Record celebrated the appointment of its first female CEO in
February 2020, Leslie Hill. A working group has been created to
begin the process of creating a Women’s Network, in order to
promote the talented individuals who identify as a woman, and
support progress in both the firm and across the industry towards
gender equality.
The gender diversity within the Group is shown below:
Gender balance
As at 31 March 2020
Board Directors
Senior management
Other staff
All employees
Female
Male
3
6
24
33
43%
26%
45%
40%
4
17
29
50
57%
74%
55%
60%
48
Record plc Annual Report 2020
Corporate social responsibility continued
Environment
The Group seeks to minimise its carbon footprint through
recognising the environmental impact of its activities, reducing that
impact through responsible procurement of goods and services,
and offsetting its remaining carbon emissions. The Group first
assessed its carbon footprint in July 2006, and has offset its
carbon emissions since then through investment in renewable
energy projects, currently in Kenya.
The Group’s annual emissions1 (before offset) have been calculated
using the WRI/WBCSD Greenhouse Gas Protocol. Scope 2
emissions principally relate to electricity and heat and Scope 3
emissions principally relate to travel. Scope 3 emissions accounted
for 85% of emissions (2019: 87%).
Gross CO2 emissions (Tonnes)
FY-20
42
FY-19
47
FY-18
58
231
316
348
Scope 2
Scope 3
Gross CO2 emissions by activity (Tonnes)
FY-20
FY-19
FY-18
118
123
120
104
51
184
218
54
68
Commuting
Business
travel
Other
The Strategic report is set out on pages 1 to 49 of the
Annual Report and outlines our strategic objectives,
performance and financial position, as well as our
outlook for the future.
The Strategic report was approved by the Board
on 18 June 2020 and signed on its behalf by:
Gross CO2 emissions per head (Tonnes)
FY-20
FY-19
FY-18
3.1
4.4
5.3
Leslie Hill
Chief Executive Officer
1. Group emissions data relates to the calendar year preceding the given
financial year end.
Record plc Annual Report 2020
49
Strategic reportGovernanceFinancial statementsAdditional information In this section
Chairman’s introduction
Board of Directors
Corporate governance report
Corporate governance overview
Board structure
Board activity
Board effectiveness
Corporate governance framework
Internal control and risk management
Nomination Committee report
Audit and Risk Committee report
Remuneration report
Chair of the Remuneration Committee’s statement
Remuneration policy
Annual report on remuneration
Directors’ report
Directors’ responsibilities statement
51
52
54
54
56
58
59
60
61
62
64
70
70
72
77
86
89
50
Record plc Annual Report 2020
Governance Chairman’s introduction
I am pleased to confirm that the Board and its Committees have
continued to work closely with the Group’s highly experienced
management team to maintain its strong governance framework
which effectively supports Record’s operational teams in delivering
a high-quality range of products and services.
I am confident that the Group’s governance arrangements are both
appropriate and effective and that going forward the Group will
continue to embrace regulatory, governance and best practice
changes in its drive to best serve all its stakeholders. The
appointment of Leslie Hill as CEO has brought a refreshed
perspective to business strategy and oversight which I am sure will
also lead to enhancements of the Group’s corporate governance
processes over the coming months and I look forward to seeing
these developments.
The Group’s strong and robust corporate governance framework
has allowed the Group to continue to effectively maintain its
governance and oversight practices during the covid-19 pandemic
and I wish to acknowledge and praise all the Committees and the
management team for their focus and contributions during this
crisis.
Neil Record
Chairman
18 June 2020
In this section of the Annual Report
we set out our extensive corporate
governance arrangements and
describe the operation of the Board
and its Committees during the year.
Neil Record
Chairman
Company purpose
To deliver innovative, thought leading and practical solutions to the
needs of currency market users and investors, while maintaining
independence and integrity.
Corporate culture
Since the business was first established in 1983, Record has
endeavoured to put the interests and needs of our clients first and
this cultural belief is encouraged and deeply embedded within all
business functions. The Board has worked hard to ensure that the
importance of client focus through diligence, transparency,
accountability and probity has been disseminated to all staff,
contractors and consultants across the Group.
Corporate governance framework
The Board has established a framework of committees and
sub-committees to ensure robust corporate governance practices
throughout the business. The Board is confident that this structure
is appropriate and that the delegation of responsibilities allows the
business to operate in a structured manner and to respond rapidly
when issues arise.
Further information on the corporate governance framework is
provided on pages 60 to 61.
Compliance with the UK Corporate Governance Code
This is the first year Record has been required to adopt and report
on the 2018 UK Corporate Governance Code (“Code”). We fully
support the introduction of the revised code and we have complied
with the new provisions as deemed appropriate to Record. Pages
54 and 55 provide an overview of how the Code has been applied
and Record’s departures from the Code are fully explained.
Section 172 disclosure
Section 172 of the Companies Act 2006 requires directors to
promote the success of the company for the benefit of the
members as a whole and in doing so to have regard to the
interests of stakeholders including clients, employees, suppliers,
regulators and the wider society in which it operates. Details of
how the Board engaged with Record’s various stakeholders are
shown on pages 12 and 13.
Record plc Annual Report 2020
51
Strategic reportGovernanceFinancial statementsAdditional information Board of Directors
The Board is a highly skilled and committed group of
individuals who are focused on understanding Record’s
strengths and the challenges the Group faces.
N
Neil Record
Chairman
Leslie Hill
Chief Executive Officer
Steve Cullen
Chief Financial Officer
Bob Noyen
Chief Investment Officer
Appointed: Neil founded
Record in 1983 and has been its
principal shareholder and
Chairman since then. Neil also
served as Record’s CEO until
October 2010.
Previous appointments: Prior
to founding Record Neil was an
economist at the Bank of
England and worked in the
commodity and currency trading
department at Mars Inc’s UK
subsidiary.
Current external appointments:
Neil is Chairman of the Board of
The Institute of Economic Affairs
and a director of IEA Forum
Limited, Chairman of The Global
Warming Policy Forum and a
director of Aims of Industry
Limited, Oxford Festival of the
Arts and Circular Wave Limited.
Skills and experience: As
founder of the business Neil
remains integral to the
development of Record’s
products and the direction of
business strategy. As Chairman
he is a strong figurehead,
well-known and well-respected
within the field of currency
management and as such is an
asset to the Board.
Neil is the author of numerous
books and articles on currency
and other risk management
topics and is a frequent speaker
at industry conferences and
seminars worldwide.
Appointed: Leslie joined Record
in 1992. She was appointed
Head of Sales and Marketing in
1999 and Chief Executive Officer
in February 2020.
Previous appointments:
Leslie’s extensive prior
experience includes working at
Lloyds Bank and Merrill Lynch
where she was Director and
Head of Corporate Foreign
Exchange Sales worldwide.
Current external appointments:
Leslie is a director of Trade
Record Ltd, a company in which
Record has a 40% investment.
Skills and experience: Having
worked at Record for 28 years
Leslie has a deep understanding
of Record’s products and the
needs of clients. As Head of the
Client Team she was
instrumental in driving the
client-focused culture of the
business and helped to maintain
existing and develop new client
relationships. Leslie is therefore
very well placed to provide a
client perspective during Board
discussions.
This extensive experience
means Leslie as CEO is ideally
suited to leading Record in the
current client led changing
environment and to ensuring
that it thrives within it.
Appointed: Steve was
appointed to the Board and
made Chief Financial Officer in
March 2013.
Previous appointments: Steve
qualified as a Chartered
Accountant in 1994 and gained
15 years of audit experience
within public practice.
Current external appointments:
Steve has no other
appointments outside of the
Record Group.
Skills and experience: Steve
joined Record in October 2003
and led Record’s Finance team
for over nine years reporting
directly to the Chief Financial
Officer. He was part of the
internal management team
at Record involved in the
preparation for admission to
trading on the London Stock
Exchange in December 2007.
With his FCA qualification and
over 30 years’ experience,
including over 16 years within
financial services, Steve brings
considerable accounting,
financial and risk management
expertise to the Board.
Appointed: Bob has been Chief
Investment Officer since 2000.
Previous appointments: Bob
previously worked as Assistant
Treasurer for Minorco (part of
Anglo American plc).
Current external appointments:
Bob has no other appointments
outside of the Record Group.
Skills and experience: Bob
joined Record in 1999 with
responsibility for Investment and
Research. He chairs Record’s
Investment Committee and the
Investment Management Group.
Bob has extensive knowledge of
currency and other markets and
he plays a key role in the
development of Record’s
products, ensuring products
evolve to meet the
ever-changing needs of clients.
Bob therefore brings a product
focus to Board deliberations.
He is also closely involved in
some of Record’s most
significant client relationships.
52
Record plc Annual Report 2020
Board of Directors
A
N *
R
*
A
N
R
A
N
R *
A
Audit and Risk
Committee
N
Nomination
Committee
Remuneration
Committee
Chair
R
*
Gender diversity
As at year end and as at the
date of report
Male
57%
Female
43%
Board tenure
As at year end
< 3 yrs
14%
3-6 yrs
29%
> 6 yrs
57%
James Wood-Collins served as
Chief Executive Officer from
October 2010 until he resigned
from the position in February
2020. His biographical details
were provided in previous
Annual Reports.
Jane Tufnell
Senior Independent Director
Rosemary Hilary
Non-executive Director
Tim Edwards
Non-executive Director
Appointed: Tim was appointed
as a Non-executive Director of
Record in March 2018.
Previous appointments:
Previously, Tim was a member
of the governing Board of
InnovateUK, the UK’s innovation
agency, a director of the UK Cell
and Gene Therapy Catapult and
Chair of the UK BioIndustry
Association.
Current external appointments:
Tim is a biotech entrepreneur,
who is currently chair of Karus
Therapeutics Limited and Storm
Therapeutics Limited, and a
director of AstronauTX Limited.
Skills and experience: Tim is a
Chartered Accountant with a
background in corporate finance
and venture investing, and he
has extensive corporate
development and people
management experience.
Tim adds insight to Board
discussions ensuring that the
Board continues to focus on mid
to long-term value development.
Appointed: Jane was appointed
as a Non-executive Director in
September 2015 and became
the Senior Independent Director
in October 2018.
Previous appointments: Jane
co-founded the investment
management firm Ruffer in
1994, and served on its
management board until her
retirement in June 2014.
Current external appointments:
Jane is the chair of Odyssean
Investment Trust plc and is an
independent non-executive
director of Schroder UK Public
Private Trust plc and ICG
Enterprise Trust plc.
Skills and experience: Jane
has a wealth of investment
management expertise and her
experience as a non-executive
director on other boards means
she is well placed to bring
valuable market experience and
good business insight to the
Board in order to drive the
business forward. Jane’s
experience on other boards also
positions her well to serve as
Senior Independent Director.
Appointed: Rosemary was
appointed as a Non-executive
Director in June 2016.
Previous appointments:
Rosemary was previously Chief
Audit Officer of TSB Bank, and
has held senior regulatory roles
within the Bank of England, the
FSA and then the FCA.
Rosemary was formerly a
member of the Investment
Committee and Chair of the Risk
and Audit Committee of the
Pension Protection Fund (2016
to 2019) and Trustee and
member of the Audit, Risk and
Finance Committee of Shelter,
the homelessness charity.
Current external appointments:
Rosemary is a non-executive
director of Willis Limited,
St. James’s Place plc, Vitality
Life and Vitality Health. She is
also a member of the MBA
Advisory Board at Cass
Business School.
Skills and experience:
Rosemary is a qualified
accountant with expertise
in governance, business risk
and control, and has strong
knowledge of the asset
management, insurance and
banking sectors. Rosemary
provides support and challenge
to Record’s management, and in
doing so helps the Board
maintain its strong governance
framework.
Record plc Annual Report 2020
53
Strategic reportGovernanceFinancial statementsAdditional information Corporate governance report
Corporate governance overview
Compliance with the UK Corporate
Governance Code (the ”Code”)
The Board is supportive of the principles of
the Code and has been since its Admission
to the Official List of the UK Listing
Authority in December 2007, with the
Board complying as it deems appropriate
given the nature and size of the business.
The latest version of the Code was
published in July 2018 and is applicable
to accounting periods beginning on or after
1 January 2019.
Copies of the Code can be obtained from
the FRC’s website at www.frc.org.uk.
Listed companies are required under the
Financial Conduct Authority Listing Rules
either to comply with the provisions of the
Code or explain to investors in their next
annual report why they have not done so.
The Code consists of the 18 principles set
out in this table; each is cross-referenced
to the relevant section of this Annual
Report.
Section 1:
Board Leadership & Company Purpose
Section 2:
Division of Responsibilities
A. A successful company is led by an
effective and entrepreneurial board, whose
role is to promote the long-term sustainable
success of the company, generating value
for shareholders and contributing to wider
society.
Board of Directors, pages 52 and 53
Board structure, page 56
Our stakeholders, pages 12 and 13
B. The board should establish the
company’s purpose, values and strategy,
and satisfy itself that these and its culture
are aligned. All directors must act with
integrity, lead by example and promote the
desired culture.
Strategic priorities and goals, pages 22 to 25
C. The board should ensure that the
necessary resources are in place for the
company to meet its objectives and
measure performance against them.
The board should also establish a
framework of prudent and effective
controls, which enable risk to be
assessed and managed.
Key performance indicators, pages 26 to 29
Risk management, pages 38 to 45
Governance framework, pages 60 and 61
Audit and Risk Committee report, pages 64
to 69
D. In order for the company to meet
its responsibilities to shareholders and
stakeholders, the board should ensure
effective engagement with, and encourage
participation from, these parties.
Our stakeholders, pages 12 and 13
E. The board should ensure that workforce
policies and practices are consistent with
the company’s values and support its
long-term sustainable success. The
workforce should be able to raise any
matters of concern.
Our stakeholders, pages 12 and 13
Corporate Social Responsibility statement,
pages 46 to 49
F. The chair leads the board and is
responsible for its overall effectiveness
in directing the company. They should
demonstrate objective judgement
throughout their tenure and promote a
culture of openness and debate. In addition,
the chair facilitates constructive board
relations and the effective contribution of all
non-executive directors, and ensures that
directors receive accurate, timely and clear
information.
Board structure, page 56
Board activity, pages 58 and 59
G. The board should include an appropriate
combination of executive and non-executive
(and, in particular, independent
non-executive) directors, such that no
one individual or small group of individuals
dominates the board’s decision-making.
There should be a clear division of
responsibilities between the leadership of
the board and the executive leadership of
the company’s business.
Board structure, page 56
Nomination Committee report, pages 62
and 63
H. Non-executive directors should
have sufficient time to meet their board
responsibilities. They should provide
constructive challenge, strategic guidance,
offer specialist advice and hold
management to account.
Board structure, page 56
Nomination Committee report, pages 62
and 63
I. The board, supported by the company
secretary, should ensure that it has the
policies, processes, information, time and
resources it needs in order to function
effectively and efficiently.
Board structure, page 56
Board activity, pages 58 and 59
Governance framework, pages 60 and 61
54
Record plc Annual Report 2020
Corporate governance report
Section 3:
Composition, Succession & Evaluation
Section 4:
Audit, Risk & Internal Control
Section 5:
Remuneration
J. Appointments to the board should be
subject to a formal, rigorous and
transparent procedure, and an effective
succession plan should be maintained for
board and senior management. Both
appointments and succession plans should
be based on merit and objective criteria
and, within this context, should promote
diversity of gender, social and ethnic
backgrounds, cognitive and personal
strengths.
Nomination Committee report, pages 62
and 63
K. The board and its committees should
have a combination of skills, experience and
knowledge. Consideration should be given
to the length of service of the board as a
whole and membership regularly refreshed.
Nomination Committee report, pages 62
and 63
L. Annual evaluation of the board should
consider its composition, diversity and how
effectively members work together to
achieve objectives. Individual evaluation
should demonstrate whether each director
continues to contribute effectively.
Board effectiveness, page 59
Nomination Committee report, pages 62
and 63
The Board has reviewed the
appropriateness of the provisions to
determine whether they should be applied
or if departure is justified. All provisions of
the Code have been applied as necessary
as part of Record’s corporate governance
framework except for the following:
• Provision 9 of the Code recommends
that the chair should be independent
on appointment. Neil Record is deemed
to be a controlling shareholder and so
was not independent on appointment.
However, the Board is of the opinion
that the potential issue of
non-independence is outweighed
by the attributes of leadership and
guidance that Neil brings to the role.
M. The board should establish formal and
transparent policies and procedures to
ensure the independence and effectiveness
of internal and external audit functions and
satisfy itself on the integrity of financial and
narrative statements.
Audit and Risk Committee report, pages 64
to 69
Directors’ report, pages 86 to 88
Financial review, pages 34 to 37
Risk management, pages 38 to 45
N. The board should present a fair,
balanced and understandable assessment
of the company’s position and prospects.
Audit and Risk Committee report, pages 64
to 69
O. The board should establish procedures
to manage risk, oversee the internal control
framework, and determine the nature and
extent of the principal risks that the
company is willing to take in order to
achieve its long-term strategic objectives.
Audit and Risk Committee report, pages 64
to 69
Risk management, pages 38 to 45
P. Remuneration policies and practices
should be designed to support strategy
and promote long-term sustainable
success. Executive remuneration should
be aligned to company purpose and values,
and be clearly linked to the successful
delivery of the company’s long-term
strategy.
Remuneration report, pages 70 to 85
Q. A formal and transparent procedure for
developing policy on executive
remuneration and determining director and
senior management remuneration should
be established. No director should be
involved in deciding their own remuneration
outcome.
Remuneration report, pages 70 to 85
R. Directors should exercise independent
judgement and discretion when authorising
remuneration outcomes, taking account of
company and individual performance, and
wider circumstances.
Remuneration report, pages 70 to 85
• Provision 19 of the Code recommends
that the chair should not remain in post
beyond nine years from the date of first
appointment to the board. Neil Record
founded the Record Group in 1983 and
led the business until its IPO in
December 2007. At the time of the IPO
it was agreed Neil was best placed to
continue to chair the business, a role
he has undertaken ever since.
Neil is well-known and well respected
within the field of currency management
and his long established involvement
with the business, his ideas and
character have built the business to
what it is today. The Board is of the
opinion that Neil continues to add
considerable value and that retaining
him as Chairman is therefore justified
for the foreseeable future. Details of the
Nomination Committee’s review of the
tenure of the Chairman conducted in
2020 together with its conclusion are
provided on page 63.
• Provision 21 of the Code recommends
that the chair should consider having a
regular externally facilitated board
evaluation. In FTSE 350 companies
this should happen at least every three
years. As a non-FTSE 350 company the
triennial requirement for an external
assessment does not apply to Record
plc and to date has not been considered
necessary. Details of the evaluation
process conducted in 2020 are provided
on page 63.
• Provision 38 of the Code recommends
that the pension contribution rates for
executive directors, or payments in lieu,
should be aligned with those available to
the workforce. Historically, the pension
contribution rates for Executive Directors
have been higher than the rest of the
workforce; this discrepancy is now
being addressed. Details of how pension
contributions rates are being aligned
across the business are provided in
the Remuneration report on page 73.
Record plc Annual Report 2020
55
Strategic reportGovernanceFinancial statementsAdditional information Corporate governance report continued
Board structure
Board composition
The Board consists of seven members and is headed by Neil Record
(Chairman), with the Executive Directors, Leslie Hill (Chief Executive
Officer), Steve Cullen (Chief Financial Officer) and Bob Noyen (Chief
Investment Officer). There are currently three Non-executive
Directors, Jane Tufnell, being the Senior Independent Director,
Rosemary Hilary and Tim Edwards. The biographical details of
the Board members are set out on pages 52 and 53.
In February 2020 James Wood-Collins stepped down from the role
of CEO and was replaced by Leslie Hill. Further information on this
Board change is detailed in the Nomination Committee report on
page 62. There have been no new external appointments to the
Board during the year.
Code provision
The Code recommends that at least half the board, excluding
the chair, should be non-executive directors whom the board
considers to be independent. Prior to the restructure undertaken
in February 2020 the Board composition had remained unchanged
for a number of years with four Executive Directors and three
independent Non-executive Directors and this was considered
to be appropriate for the business at that time.
Following the re-structure in early 2020, the Board now consists
of three Executive Directors and three independent Non-executive
Directors meaning that Record now complies with this provision.
The Board considers that the current composition is appropriate
given the size and structure of the business.
The division of responsibilities between the Chairman and the
Chief Executive Officer is clearly established, set out in writing
and agreed by the Board.
Board responsibilities
The Board has a schedule of
matters specifically reserved for
its decision and approval, which
includes but is not limited to:
Chairman
The Chairman is responsible for leadership of the Board. He is also responsible for overseeing the activities
of the Chief Executive Officer and providing advice, guidance and support to the executive team. He works
with the Board to develop Group strategy and support its implementation. The Chairman is a principal
ambassador of Record and a guardian of the Group’s ethos and values.
• determining the Group’s
long-term strategy and
objectives;
• authorising significant capital
expenditure;
• approving the Group’s annual
and interim reports and
preliminary announcements;
•
the setting of interim and
special dividends and
recommendation of final
dividend payments;
• ensuring the effectiveness
of internal controls;
•
the authorisation of Directors’
conflicts or possible conflicts
of interest; and
• communication with
shareholders and the
stock market.
Chief Executive Officer
The Chief Executive Officer is responsible for the executive management of the Group to grow the business
profitably while acting in the interests of all stakeholders – clients, shareholders, employees and industry
regulators and upholding the core values of Record. Her statement on FY20 and the outlook for the Group
can be found on pages 6 to 9.
Chief Financial Officer
The Chief Financial Officer is responsible for the finance function, the financial management and control
of the business, and for developing and delivering appropriate internal and external financial reporting.
His financial review for FY20 can be found on pages 34 to 37.
Chief Investment Officer
The Chief Investment Officer is responsible for all research and investment strategy activity and for the
implementation of investment processes.
Senior Independent Director
The Senior Independent Director’s role is to act as a sounding board for the Chairman, oversee the evaluation of the Chairman’s performance
(see page 63) and serve as an intermediary for the other Directors if necessary. She is also available as an additional point of contact for
shareholders and other stakeholders should they wish to raise matters with her rather than the Chairman or the Chief Executive Officer.
Non-executive Directors
The Non-executive Directors are responsible for upholding high standards of integrity and probity; providing constructive challenge and helping to
develop proposals on strategy.
56
Record plc Annual Report 2020
Corporate governance report continued
Independence of the Non-executive Directors
In determining the independence of Non-executive Directors,
the Board has taken into consideration the guidance provided by
the Code. The Board considers Jane Tufnell, Rosemary Hilary and
Tim Edwards to be independent at the current time. Neil Record is
a Non-executive Chairman, although he is not considered to be
independent.
Director appointments and time commitment
The rules providing for the appointment, election, re-election and
the removal of Directors are contained in the Company’s Articles of
Association, these remain unchanged from the previous year and
are made available for inspection by the Company’s shareholders
at each AGM. The Company’s Articles of Association may be
amended by special resolution of the shareholders.
Under the Company’s current Articles of Association, the minimum
number of Directors is two and the maximum is twelve. Directors
appointed by the Board must offer themselves for election at the
next Annual General Meeting of the Company following their
appointment but they are not taken into account in determining the
Directors or the number of Directors who are to retire by rotation
and stand for re-election at that meeting. The minimum number of
Directors required to retire by rotation is one third.
Under the UK Corporate Governance Code July 2018, all directors
should be subject to annual election by shareholders. The Board
has reviewed the recommendation of the Code and the provisions
in the Articles and has determined that annual re-election of all
Directors is appropriate, and accordingly all seven Board Directors
will stand for re-election at the 2020 AGM. The Board has also
agreed that the Articles should be revised to align with the Code,
current legislation and market practice and a special resolution
regarding the amendment of the Articles will be put to shareholders
at the 2020 AGM.
The Board has agreed that all Directors standing for re-election
continue to make a valuable contribution to the Board’s
deliberations and recommends their re-election. As required by the
UK Listing Rules, the appointment of independent directors must
be approved by a simple majority of all shareholders and by a
simple majority of the independent shareholders. Further details
are set out in the 2020 Notice of AGM.
Non-executive Directors’ letters of appointment stipulate that they
are expected to commit sufficient time to discharge their duties.
Non-executive Directors are required to notify the Chairman before
taking on any additional appointments. Details of other roles held
by the Non-executives are set out in their biographies on pages
52 and 53. The Board is satisfied that all Directors continue to be
effective and demonstrate commitment to their respective roles.
The Executive Directors are employed on a full-time basis and do not
have any other significant commitments outside of the Record Group.
Neil Record, as Non-executive Chairman, works on a part-time basis.
For details of Executive Directors’ service contracts, termination
arrangements and Non-executive Directors’ letters of appointment,
please refer to the Remuneration report, page 84.
Board member diversity
The Board has approved a policy for ensuring Board member
diversity and has delegated the responsibility for addressing Board
diversity to the Nomination Committee. The Nomination Committee
reviews Board composition in the context of diversity and reports
its recommendations to the Board to ensure diversity is achieved.
The Board acknowledges the importance of diversity in the
boardroom in its broadest sense as a driver of board effectiveness.
Diversity encompasses diversity of perspective, experience,
background, psychological type and personal attributes. The
Board recognises that gender diversity is a significant aspect of
diversity and acknowledges the important role that women with the
right skills and experience can play in contributing to diversity of
perspective in the boardroom. The Group’s Board Diversity Policy
sets out that the Board will endeavour to ensure that the minority
gender on the Board represents at least one-third of the Board.
The Board currently has three female members in a board of seven
and thus women make up 43% of the Board. The Board’s opinion
is that the current composition of members comprises a good
mixture of skills, experience, knowledge and backgrounds and is
therefore appropriate for the business at the present time. Future
Executive Director succession planning will take into account the
benefits of diversity including gender diversity as set out in the
Group’s Board Diversity Policy. Diversity in the workplace is
described on page 48.
Record plc Annual Report 2020
57
Strategic reportGovernanceFinancial statementsAdditional information Corporate governance report continued
Board activity
Board focus and decision-making
The regular scheduled Board meetings have a set strategically
focused agenda and Board members are invited in advance of
each meeting to add any additional issues they wish to be
addressed. Material circulated in advance of the meetings includes:
Updates from the chairs of the Nomination Committee,
Remuneration Committee and Audit and Risk Committee
are provided at each meeting.
Ongoing matters discussed included Brexit planning,
the implementation of SMCR, global regulatory
developments and the covid-19 pandemic.
• Minutes of the previous Board meetings
• ExCom meeting minutes
• CEO report
• KPI data pack
•
Investment performance report
•
Investment Committee report
• Research activities report
• Compliance and risk report
• COO report
• Head of HR report
• Management information pack
During the year, the Board focused on the key matters
detailed below:
March 2020
• Group strategy and focus (Strategy)
• Budget FY21 (Strategy, Finance)
• Development of a Macro Fund
strategy (Strategy)
June 2019
• Going concern and long-term viability
review (Finance, Risk management))
• Annual Report and Accounts 2019
and dividend proposal (Finance)
• Corporate objectives review (Strategy)
February 2020
• Ratification of Impact Bonds
proposal (Strategy)
• Risk appetite statement and ICAAP
document (Risk management)
• Board structure and CEO change
(Strategy, Governance)
Key matters
considered by the
Board in the year to
31 March 2020
July 2019
•
IT strategy and budget (Strategy,
Finance, Risk)
• Code of Ethics Part I (Conduct)
• Conflicts of interest policy (Conduct)
• Pillar 3 Disclosure (Risk management)
November 2019
•
Interim Review and dividend
proposal (Finance)
• Board Diversity Policy (Governance)
September 2019
• Review of the Directors’ conflicts
of interest register (Conduct)
• Group Profit Share Scheme
Rules (Stakeholders)
58
Record plc Annual Report 2020
Corporate governance report continued
Meeting frequency and attendance
The Board met six times between 1 April 2019 and 31 March 2020
to review financial performance and to follow the schedule of
matters reserved for its decision and approval. Comprehensive
Board papers, comprising an agenda and formal reports and
briefing documents, are sent to Directors in advance of each
meeting. Directors are regularly informed by senior executives
and external advisers on the Group’s affairs, including commercial,
regulatory, legal, corporate governance and other relevant matters.
Appropriate and timely notice is given of all Board meetings and all
Directors receive information in advance so that if they are unable
to attend their input can be tabled and taken into consideration.
The Board has twice-yearly offsite strategy meetings and additional
meetings as required to address specific issues. Any concerns
raised by Directors which are not resolved are recorded in the
Board minutes. No such matters were noted during the year
ended 31 March 2020.
Directors are expected to attend all meetings of the Board. Details
of Board meeting attendance are included in the table below:
Board effectiveness
Board induction and training
New Directors appointed to the Board receive advice as to the
legal obligations arising from the role of a director of a UK-listed
company as part of a tailored induction programme. This training
includes briefings with the Chairman, Executive Directors and
senior management to help new Directors to familiarise themselves
with their duties and the Group’s culture and values, strategy,
business model, businesses, operations, risks and governance
arrangements.
The Company Secretary, under the direction of the Chairman,
is responsible for maintaining an adequate continuing education
programme, reminding the Directors of their duties and obligations
on a regular basis, ensuring good information flow between the
Board, its Committees and management and assisting with
Directors’ continuing professional development needs.
On an on-going basis all Directors have access to independent
professional advice, when required, at the Company’s expense
as well as to the advice and services of the Company Secretary.
Meetings in the year: 6
Neil Record
Jane Tufnell
Rosemary Hilary
Tim Edwards
6/6
6/6
6/6
5/6
James Wood-Collins 4/5
Steve Cullen
Leslie Hill
Bob Noyen
6/6
6/6
6/6
Tim Edwards was unable to attend
the Board meeting held in March 2020
due to a prior commitment.
James Wood-Collins resigned
effective 13 February 2020; he did not
attend the February Board meeting.
Each Director unable to attend a meeting gave their apologies
in advance.
The Non-executive Directors met without the Executive Directors
on several occasions throughout the year, prior to scheduled
meetings.
Board performance evaluation
The Board is required by the Code to undertake an annual
evaluation of its performance. The Code states that “There should
be a formal and rigorous annual evaluation of the performance of
the board, its committees, the chair and individual directors”.
The Code recommends that evaluation of the board of FTSE 350
companies should be externally facilitated at least every three
years. Given the recent changes to the Board structure, the Board
agreed that an external evaluation of performance was not
appropriate at the current time and delegated responsibility for
the review to Jane Tufnell, Senior Independent Director and Chair
of the Nomination Committee. Board members were asked to
anonymously complete a survey focusing on Board structure,
information and dynamics and Jane also held individual private
meetings with all the Board members to canvas opinions.
The survey responses and the comments made during the
private sessions were recorded and collated into a report
which documented the observations made and also assessed
the activities and achievements of the Board and its Committees
during the period under review. Members were also invited to
separately approach the Chairman or Company Secretary with
any individual concerns or comments they had. No concerns
were raised directly to the Chairman or the Company Secretary.
As in previous evaluations, the review of the comments made
during the evaluation process identified no serious concerns over
the functioning of the Board, its members or its Committees.
Individual appraisal of each Director’s performance is undertaken
by the Chief Executive Officer and the Chairman. The Senior
Independent Director conducts an annual appraisal of the
performance of the Chairman with input from the other Board
members. The outcome of these appraisals in 2020 was positive
and all roles were considered to be undertaken effectively.
Record plc Annual Report 2020
59
Strategic reportGovernanceFinancial statementsAdditional information
Corporate governance report continued
Corporate governance framework
The Board has established a framework of committees and
sub-committees to ensure robust corporate governance practices
throughout the business. The Board is confident that this structure
is appropriate and that the delegation of responsibilities allows the
business to operate in a structured manner and to respond rapidly
when issues arise.
The diagram below gives an overview of the Group’s core
governance framework.
Board
Board Committees
Nomination
Remuneration
Audit and Risk
Operational Committees
Executive
Investment
Risk Management
Board Committees
The Board has established three Board Committees and delegated
authority to each Committee to enable it to execute its duties
appropriately. The annual reports of the three Committees provide
a statement of each Committee’s activities in the year:
• Nomination Committee – report set out on pages 62 and 63;
• Audit and Risk Committee – report set out on pages 64 to 69;
and
• Remuneration Committee – report set out on pages 70 to 85.
The Committees operate on written terms of reference, which are
reviewed annually and which are available on the Group’s website
or on request from the Company Secretary at the registered office
address. The Chair of each Committee reports regularly to the
Board.
The work undertaken by the Nomination, Audit and Risk
and Remuneration Committees was reviewed by the respective
Committee Chair to assess each Committee’s effectiveness
during the year. The reviews concluded that the Committees
were operating in an effective manner and no concerns were
raised and these conclusions were reported to the
Board accordingly.
Operational Committees
The Board has also established three Committees responsible for
operational oversight and decision making as follows:
Executive Committee
Role: The Executive Committee is the decision-making body for all
day-to-day operations as delegated by the Board and Record plc’s
subsidiaries.
Members: The Committee comprises the Chief Executive Officer
as Chair, the two other Executive Directors, the Chief Operating
Officer, a Managing Director and the Head of Human Resources.
Members of the Senior Management are invited to attend as
deemed appropriate.
The Head of Global Sales was appointed to the Committee in
April 2020.
Meetings: The Committee meets formally once a month and holds
regular operational update meetings. Standing agenda review
items for formal meetings include clients and client prospects,
the management accounts, departmental KPI data, compliance
issues, systems development, projects and resourcing. Operational
policy documents are regularly reviewed by the Committee prior to
formal approval by the Board or the appropriate Board Committee.
The Head of Compliance and Risk is a regular attendee of
meetings (attending eight out of twelve meetings in the year
under review).
Reporting: Minutes of all meetings are circulated to the Board for
review and comment.
60
Record plc Annual Report 2020
Corporate governance report continued
Investment Committee
Role: The Board has delegated the responsibility for authorising
changes to existing investment processes and for approving new
investment strategies to the Investment Committee.
Members: The Committee consists of the Chief Investment Officer,
the Chief Executive Officer, the Group Chairman, the Head of
Portfolio Management, and the Head of Investment Strategy.
Meetings: The Committee meets as necessary, responding both
to internal developments and external events.
Reporting: Reports on the activities of the Committee are
presented at each formal Board meeting for review and comment.
Risk Management Committee
Role: The Audit and Risk Committee has delegated to the Risk
Management Committee the task of overseeing and mitigating
risks arising across the activities of Record Currency Management
Limited, the regulated entity within the Group.
Members: The Chief Operating Officer, the Chief Financial Officer,
the Chief Technology Officer, the Head of Operations, the Head of
Portfolio Management, the Head of Portfolio Implementation, the
Head of Trading, the Head of Compliance and Risk and the Head
of Front Office Risk Management are all members of the
Committee.
Meetings: The Committee meets at least once a month and as
necessary in response to individual or specific events requiring
review.
Reporting: The minutes of meetings are circulated to the Audit
and Risk Committee and a report on the Risk Management
Committee’s activities is presented by the Chief Operating Officer,
as the Committee Chair, at each Audit and Risk Committee
meeting.
Internal control and risk management
The Board has overall responsibility for the Group’s systems of
internal control and the management of significant risks. The Board
sets appropriate policies on internal control which are reviewed
annually, and authority is delegated to the following Committees
and senior personnel to implement and apply those policies:
• the Executive Committee;
• the Audit and Risk Committee;
• the Investment Committee; and
• the Risk Management Committee.
The Board seeks ongoing assurance from these Committees and
senior management about the effectiveness of the internal controls,
which include operational and compliance controls, risk
management and the Group’s high-level internal control
arrangements. Such a system of internal controls is designed
to manage, rather than eliminate, risk of failure to meet business
objectives and can only provide reasonable and not absolute
assurance against material misstatements or loss.
Further information on the Group’s risk management framework is
provided on pages 38 to 45 of the Strategic report.
The Audit and Risk Committee has undertaken a review of the
effectiveness of internal controls for the year ended 31 March 2020
and is satisfied that the internal control environment is appropriate
(see “Internal controls and risk management” on pages 67 and 68).
Approved by the Board and signed on its behalf by:
Joanne Manning
Company Secretary
18 June 2020
Record plc Annual Report 2020
61
Strategic reportGovernanceFinancial statementsAdditional information Nomination Committee report
This year the Nomination
Committee has worked hard to
evolve the Board and I’m extremely
confident that our selection of
Leslie Hill as Chief Executive Officer,
will reap significant rewards for
the Record Group.
Jane Tufnell
Chair of the Nomination Committee
The Board considered the Committee’s recommendation at a later
meeting on 13 February and agreed that James would stand down
as CEO and all Record directorships with immediate effect and that
Leslie Hill would be appointed as CEO of Record plc with
immediate effect; CEO of Record Currency Management
Limited subject to approval by the FCA, which was confirmed
on 24 April 2020; Director of Record Group Services Limited
with immediate effect and CEO of Record Currency Management
(US) Inc.
The Committee looks forward to working with Leslie as CEO
going forward.
Extension of the appointment term for Rosemary Hilary
In May 2019 the Committee reviewed the extension of the
appointment term for Rosemary Hilary as a Non-executive Director
following its expiry after the initial three year term, Rosemary having
been appointed on 1 June 2016. Rosemary was not present for
this review. It was agreed that it was in the interest of both
Record plc and Record Currency Management Limited that
Rosemary be re-appointed on the same terms for a further
period of three years, which may be extended further at the sole
and absolute discretion of Record plc and Record Currency
Management Limited. A recommendation was put to the Board
accordingly and unanimously approved.
Board diversity
The Group’s Board Diversity Policy was last reviewed by the
Committee in November 2019. The Committee agreed the policy
remained appropriate. The Committee has also acknowledged that
future Executive Director succession planning should embrace the
benefits of diversity, including gender diversity, to ensure that any
individual selected will add to the Board’s mix of perspective,
experience, background and personal attributes.
The Committee is satisfied that the current composition of the
Board is appropriate and meets the gender target set in the
Group’s Board Diversity Policy.
Dear Shareholder
I am pleased to present the Nomination Committee report
for the year ending 31 March 2020.
Key responsibilities
The key responsibilities of the Committee are to:
• review the structure, size and composition of the Board
and Committees including the diversity and balance of skills
and experience;
• consider succession planning for Directors and other
senior management;
•
identify and nominate for the approval of the Board
candidates to fill Board vacancies; and
• review annually the time commitment required of
Non-Executive Directors.
Review of the period
The Committee met eight times during the year. The key
matters considered during these meetings were as follows:
Board composition
Chief Executive Officer
The Committee has been aware for some time of the need for
the business to be more responsive to the needs and demands
of clients in an ever evolving environment. The Committee met in
January and decided that the Chief Executive Officer role within
Record required a deep understanding of the Group’s ability to
address these clients’ demands and their currency exposures.
The Committee concluded that Leslie Hill has the necessary
insight and is ideally suited to lead the business in this client-led
changing environment.
Further meetings occurred in February at which the Committee
was assured that Leslie would accept this role and that James
Wood-Collins had agreed to resign. The Committee therefore
recommended to the Board on 13 February that Leslie Hill should
replace James Wood-Collins as Chief Executive Officer.
62
Record plc Annual Report 2020
Nomination Committee report
Role of the Committee
The role of the Nomination Committee is to ensure that
the Board has the optimal talents and experience to enable
the Company to grow, compete in its markets and manage
risks effectively.
The Committee serves both Record plc and the Group’s
FCA regulated entity, Record Currency Management Limited.
The Boards of the two companies are identical to facilitate
full regulatory oversight and common corporate governance
practices. References to the “Board” refer to the Boards of
both Record plc and Record Currency Management Limited.
Committee meeting
attendance
Jane Tufnell
Rosemary Hilary
Tim Edwards
Neil Record
8/8
8/8
8/8
7/8
Neil Record was unable
to attend the Committee
meeting held in
April 2019 due to a
prior commitment.
Tenure and effectiveness of the Chairman
The UK Corporate Governance Code recommends that the
Chair should not remain in post beyond nine years from the date
of their appointment to the Board. The Committee is aware that
Neil Record has been in post since Record’s IPO in 2007.
During its review of this tenure, the Committee has been mindful of:
a) discussion of the issue by the Committee Chair with
major shareholders; and
b) an appreciation of the performance and continuity of the Board
Chair during a period of transition of Chief Executive Officer.
The Committee concluded that Neil’s experience in the currency
industry as well as his leadership and challenge to the Board
during this time of transition of the executive team supported a
decision to retain him as Chair for the foreseeable future. The
Committee Chair conducted a review of the Board Chair with all
Board members in May 2020. The review concluded that Neil had
made a very positive contribution in the period and in particular
dealing with the departure of James as Chief Executive and the
appointment of Leslie.
The tenure of the Chair will continue to be reviewed by the
Committee on an annual basis.
Performance of the Directors and the Board
In September 2019 the Committee considered the
competency and performance review documents for 2019
completed in respect of the following Executive Directors and
senior managers who held significant influence function roles
at that time as defined by the FCA:
• James Wood-Collins, Chief Executive Officer
• Leslie Hill, Head of Client Team
• Bob Noyen, Chief Investment Officer
• Steve Cullen, Chief Financial Officer
• Joel Sleigh, Chief Operating Officer
• Dmitri Tikhonov, Managing Director
• Grady Laurie, Head of Compliance and Risk
• Kevin Ayles, Head of Human Resources
The Committee acknowledged it was content with the
competency assessments and performance evaluations made
and that it had no concerns regarding the performance of any of
the individuals reviewed.
In June 2020, the Committee reviewed the performance of the
Board and Board Committees. It concluded that the timetable of
meetings, the issues addressed and the time committed by
Non-executive Directors was appropriate. It also concluded that
the Board Committee Chairs continue to add value and therefore
should remain in post and this was recommended to the Board,
which gave its approval to continue the tenure of existing Chairs.
Approved by the Committee and signed on its behalf by:
Jane Tufnell
Chair of the Nomination Committee
18 June 2020
Record plc Annual Report 2020
63
Strategic reportGovernanceFinancial statementsAdditional information
Audit and Risk Committee report
I am grateful to my fellow
Committee members for their
continued commitment, enabling
us to challenge the operational and
regulatory activities of the Group
whilst also providing support and
advice to management.
Rosemary Hilary
Chair of the Audit and Risk Committee
The full terms of reference of the Committee comply with the UK
Corporate Governance Code (the “Code”) and are available on the
Group’s website or from the Company Secretary at the registered
office address.
Membership of the Committee
The Committee has been chaired by Rosemary Hilary since
September 2016. Rosemary is supported by the other
independent Directors: Jane Tufnell and Tim Edwards.
Given her accounting and regulatory background, the Board
considers that Rosemary is the most appropriate independent
Director for the role of Audit and Risk Committee Chair and this
view is supported by the other members of the Committee.
The Board is satisfied that by virtue of their previous experience
gained in other organisations, the Committee members collectively
have competence relevant to the sector in which the Group
operates. The biographical details of the Committee members
are set out on pages 52 and 53.
The composition of the Committee complies with the Code
provision for smaller companies requiring at least two independent
Non-executive Directors throughout the year. However, Record has
confirmed with the FCA that it will have at least three independent
Non-executive Directors serving on the Committee at all times and
the Committee membership has always satisfied this undertaking.
Dear Shareholder
I am pleased to present the Audit and Risk Committee report for
the year ending 31 March 2020.
Committee duties
Under its terms of reference the Committee is tasked with the
following:
• monitoring the integrity of the Group’s financial statements
including the review of this Annual Report and any other formal
announcements relating to the Group’s performance;
• overseeing whistleblowing arrangements by which staff may
raise concerns about possible improprieties in financial reporting
or other matters;
• reviewing the Group’s internal control and risk management
procedures;
• reviewing the operational conflicts of interest framework and
making recommendations to the Board and management as
appropriate;
• monitoring and reviewing the effectiveness of the Group’s
internal audit function;
• making recommendations relating to the appointment,
re-appointment and removal of the external auditor;
• overseeing the tender of external audit services;
• approving the remuneration and terms of engagement of the
external auditor;
• reviewing and monitoring the independence and objectivity of
the external auditor, and reviewing the effectiveness of the audit
process; and
• overseeing the provision of any non-audit services by the
external auditor.
64
Record plc Annual Report 2020
Audit and Risk Committee report
Role of the Committee
The role of the Audit and Risk Committee is to encourage
and safeguard a high standard of integrity in financial
reporting, risk management and internal controls for the
Group, having regard to laws and regulations applicable to
the Group and the provisions of the UK Corporate
Governance Code.
The Committee serves both Record plc and the Group’s
FCA regulated entity, Record Currency Management Limited.
The Boards of the two companies are identical to facilitate
full regulatory oversight and common corporate governance
practices. References to the “Board” refer to the Boards of
both Record plc and Record Currency Management Limited.
Committee meeting
attendance
Rosemary Hilary
Jane Tufnell
Tim Edwards
6/6
6/6
6/6
Committee Chair meetings
During the year the Chair of the Committee has had separate
discussions with the key people involved in the Company’s
governance, including the Board Chairman, the Chief Executive
Officer, the Chief Financial Officer, the Chief Operating Officer,
the Head of Compliance and Risk and also the external audit
partner and the internal audit partner to obtain updates and
insights into business activities.
Committee evaluation
An internal review of Committee effectiveness was overseen by the
Company Secretary in April 2020. The review was based on input
from Board members, senior management, the internal audit
partner and the external audit partner. The conclusion was that
the Committee was effective in carrying out its duties.
Committee meetings
The Committee met six times during the year ending
31 March 2020, being four quarterly meetings plus two additional
meetings ahead of results announcements. The meetings were
also attended by the Chief Executive Officer, the Head of
Compliance and Risk, the Chief Financial Officer and the Chief
Operating Officer. Representatives of the external auditor and the
internal auditor were present at all of the meetings. Minutes of the
meetings were documented by the Company Secretary and
retained on file.
In light of the covid-19 crisis, the Committee has met on a monthly
basis since the financial year end, resulting in four meetings being
held since 1 April 2020.
Committee member meeting attendance for the year ending
31 March 2020 is detailed above.
The Committee also separately met the Group’s external auditor
on four occasions and the internal auditor on three occasions,
providing an opportunity for them, privately and in confidence,
to raise matters of concern.
The Chair of the Committee reported regularly to the Board on
the Committee’s activities, identifying any matters on which the
Committee considered that action was required, and made
recommendations on the steps to be taken.
Record plc Annual Report 2020
65
Strategic reportGovernanceFinancial statementsAdditional information
Audit and Risk Committee report continued
Key areas of focus
Review of the regulatory landscape
Briefings on regulatory developments were provided to the
Committee at each meeting by Deloitte as internal auditor and
the Head of Compliance and Risk. Topics included the Senior
Managers and Certification Regime, Brexit, LIBOR transition, FCA
policy and discussion statements, FRC guidance and regulatory
changes in other jurisdictions relevant to Record.
Senior Managers and Certification Regime (“SMCR”)
The Committee was mindful of the implementation of the SMCR
regime for Record (there was a staged implementation with banks
first in 2016, then other companies e.g. insurance underwriters
next). Record was in the last phase of implementation, with effect
from 9 December 2019 and so, in the 12 months before the
implementation date, requested regular updates from the Head
of Compliance and Risk on the status of the SMCR project at
Record and the actions being taken by management. Input from
the CEO and the Head of Human Resources was taken into
account. The Committee also commissioned an internal audit
high level “inflight” review to appraise the SMCR project plan on
an ongoing basis and provide feedback on the assumptions and
actions being taken. Throughout the period the project remained
on track and compliance with the new regime was achieved by
the 9 December deadline.
Brexit
The Committee closely monitored management’s Brexit
preparations and the contingency plan for a hard Brexit to ensure
Record was prepared for all possible outcomes. Ahead of the
Brexit date of 31 January 2020 the Committee was content that
Record was suitably prepared and that, in the event of a hard
Brexit, Record could continue to serve all of its existing EU27
clients under existing investment management agreements and
data protection wording. The Committee will continue to review
the position during the transition period and thereafter.
Cyber security
The Committee has remained conscious that cyber security presents
an ongoing significant risk to financial services companies and has
continued to monitor, review and challenge Record’s cyber and data
security processes, management’s approach to developments and
initiatives and management’s response to issues identified internally,
by the internal auditor and by third party advisers. The need to
remain vigilant is recognised and cyber security will continue to
be a focus for the Committee going forward.
Committee activities
The Committee discharged its responsibilities under its terms of
reference by the following actions:
• reviewing the form, content and integrity of financial information
prior to release, including the Annual and Interim Reports
(May 2019, November 2019 and June 2020);
• reviewing the content of each of the Interim Management
Statements for subsequent Board approval (April, July,
October 2019 and January 2020);
• reviewing the adequacy and effectiveness of the Group’s
internal controls and risk management systems (May 2019
and June 2020);
• considering the Risk Appetite statement, ICAAP document and
Pillar 3 disclosures prior to their recommendation for
acceptance by the Board (April, July 2019 and January 2020);
• receiving and reviewing internal audit reports and discussing the
findings and management’s responses (April, May, July,
October, November 2019 and January 2020);
• evaluating the performance and independence of the
internal auditor during the engagement period (May 2019
and June 2020);
• reviewing the independence of the Group’s external auditor
and the nature of non-audit services supplied by the auditor
(May 2019 and June 2020);
• reviewing the external auditor’s audit strategy for the interim
review and the final audit (October 2019);
• assessing the external auditor’s concluding report for the interim
review and the year end financial statements (May, November
2019 and June 2020);
• evaluating the performance of the external auditor over the
period (May 2019 and June 2020);
• reviewing regular reports by the Head of Compliance and Risk
detailing internal compliance and risk management activities
and issues (April, May, July, October, November 2019 and
January 2020);
• reviewing a “Risk Matrix” to ensure that key risks and risk
movements are identified and addressed (April, May, July,
October, November 2019 and January 2020);
• examining departmental KPI and KRI data to ensure operational
risks are identified and appropriately addressed by management
(April, May, July, October, November 2019 and January 2020);
• reviewing Risk Management Committee meeting minutes and
summary activity reports by the Chief Operating Officer as Chair
of the Risk Management Committee (April, May, July, October,
November 2019 and January 2020); and
• approving the Group’s whistleblowing policy, updated to
clarify examples of malpractice and reporting procedures
(October 2019).
66
Record plc Annual Report 2020
Audit and Risk Committee report continued
External audit tender
The Committee has been content with the level of external audit
service provided by PwC, but due to a significant increase in fees
over the two years to FY21 proposed by PwC in September 2019
(reflecting increased work and regulatory requirements),
the Committee agreed a tender process for the FY21
statutory audit should be performed.
In line with FRC guidance the evaluation criteria were:
Covid-19 response
The Committee has met on a monthly basis to receive business
updates, monitor management’s response to the covid-19 crisis
and to ensure that appropriate processes and controls have
remained in place during the period whilst all employees have
been working from home. The Committee has welcomed the
responsiveness of management to the situation and is supportive
of the initiatives implemented to ensure the business can continue
to operate under a strong control environment.
• Organisation and industry experience
• Resourcing and the engagement team
• Audit approach and delivery
•
Identification of specific technical issues
• Quality assurance and independence
• Value for money
This evaluation concluded that BDO LLP (“BDO”) offered an
improved proposition in terms of value for money when considering
Record’s size, sector and relative lack of complexity without any
expected detriment to service levels, experience or capability.
A proposal recommending the appointment of BDO to replace
PwC was put to the Board accordingly in February 2020.
The Board reviewed the selection rationale and confirmed the
recommendation to appoint BDO was appropriate and agreed that
shareholder approval of their appointment should be sought at the
AGM on 4 August 2020. It was agreed PwC’s resignation should
be effective as of the date of the AGM.
Third party assurance services
Due to changes to Ethical Standards relating to auditor
independence and the provision of non-audit services by the
auditor, the Committee decided to separate the provision of third
party assurance services (i.e. Reporting Accountant and
Independent Service Auditor (ISAE 3402/AT-C 320) reports on
internal controls) from the provision of audit and related services.
Following a search process the preferred supplier was RSM Risk
Assurance Services LLP (“RSM”). Consequently, RSM was
appointed to conduct the 2020 Reporting Accountant and
Independent Service Auditor (ISAE 3402/AT-C 320) reports
on internal controls, replacing PwC.
Record Currency Management (US) Inc. activities
During the year the implementation of the Dynamic Macro
Currency strategy resulted in trading activity being conducted by
the US subsidiary for the first time and increased the level of SEC
and CFTC regulatory activities being undertaken. The Committee
was keen to ensure that oversight of the US subsidiary and the
controls in place reflected its increased activity and, accordingly,
they sought and received assurances from management and the
Head of Compliance and Risk. The Committee will continue to
monitor the activity and assess whether the control environment,
management oversight and compliance oversight remain aligned
with the risk. An internal audit of US activity and its compliance
with regulatory obligations has been scheduled as part of the
2020/21 internal audit plan.
Financial reporting
The Committee has thoroughly reviewed the half-year and annual
results and the Annual Report, before recommending them to the
Board for approval.
During the year, the Committee also considered the significant
financial and regulatory reporting issues and judgements made in
connection with the financial statements and the appropriateness
of accounting policies. In particular, the Committee considered
management reports providing an assessment of the internal
controls environment, going concern and the viability statement.
The Committee is satisfied that all judgements made by
management which affect financial reporting have been made in
accordance with the Group’s accounting policies.
The Committee further considered reports from the external
auditor, in particular its independent assessment of financial
reporting and key controls, the audit opinion on the Annual
Report and the independent review report on the half-year results.
The Committee is satisfied that the financial reporting control
framework operated effectively after considering reports from
both management and the external auditor.
The Committee has reviewed the narrative statements in the report
and accounts to ensure they are fair, balanced and understandable
and consistent with the reported results, and also the auditor’s
findings report which identified no significant issues.
The Committee was satisfied with the content of the Annual Report,
confirmed there were no significant issues or concerns to be
addressed and recommended that it be approved by the Board.
Internal controls and risk management
A significant part of the work of the Committee is providing
oversight and independent challenge to the internal controls and
risk management systems of the Group.
A “Risk Matrix”, which identifies key risk areas that may impact
the Group, is used by the Committee and compared against a risk
assessment prepared by the internal auditor to ensure that material
risk areas are being appropriately identified and addressed by
management and that movements in risks and associated
business impact are identified promptly so that appropriate action
can be taken. The “Risk Matrix” continues to be enhanced to assist
risk monitoring and this is welcomed by the Committee.
The Committee reviews all minutes of Risk Management
Committee meetings and the Chief Operating Officer as Chair of
the Risk Management Committee was present at all meetings to
answer questions raised.
Record plc Annual Report 2020
67
Strategic reportGovernanceFinancial statementsAdditional information Audit and Risk Committee report continued
Internal controls and risk management continued
In January 2020 the Committee undertook a detailed review of the
Group’s ICAAP document and paid particular attention to the stress
test scenarios and agreed they were appropriate. The Committee
also reviewed a revised risk appetite statement, updated to better
align with the risk matrix, the underlying risk management framework
and the risk management section of the Annual Report.
The Committee welcomed and supported these changes.
The Committee has reviewed and evaluated the system of internal
controls and risk management operated within the Group, and is
satisfied that the internal control environment is appropriate. More
information on the Group’s risk management framework is given in
the Strategic report on pages 38 to 40.
Internal audit
The internal audit function undertakes a programme of reviews as
approved by the Committee, reporting the results together with its
advice and recommendations to the Committee. The function is
provided by Deloitte LLP (“Deloitte”) under an outsourcing contract
which commenced in May 2010. The objectives and responsibilities
of internal audit are set out in a charter reviewed and approved on
an annual basis. The charter was last reviewed and approved by the
Committee in June 2020. Deloitte reports directly to the Committee
and the relationship is subject to periodic review.
The Committee and the internal auditor have developed a planning
process to ensure that the audit work performed focuses on
significant risks. The plans include deep-dive thematic and
risk-based audits and also high level in-flight reviews of specific
projects as agreed by the Committee, Deloitte and management.
Each review is scoped at the start of the audit to ensure an
appropriate focus reflecting business activities, the market
environment and regulatory matters. The plans are periodically
reviewed to ensure they are adapted as necessary to capture
changes in the Group’s risk profile.
The Committee has received regular reports on the programme of
reviews and internal audit findings at each of its meetings during
the course of the year. The Committee has reviewed the findings
and recommendations made by the internal auditor and has aimed
to ensure that any issues arising are suitably addressed by
management in an effective and timely manner.
During the year to 31 March 2020, the following internal audit
reports conducted by Deloitte were reviewed by the Committee:
• Regulatory reporting review
• Discretionary management review
•
Inflight review of the SMCR implementation project (three
reports)
•
Inflight review of Record’s IT strategy project (two reports)
• Marketing and distribution review
The Committee has reviewed Deloitte’s work and discussed the
delivery of internal audit with management and is satisfied with the
internal audit work conducted and the coverage and standard of
the reports produced. The Committee is content that sufficient and
appropriate resources are dedicated to the internal audit function
and this has been reported to and noted by the Board.
External audit
PricewaterhouseCoopers LLP (“PwC”) was appointed in 2017 to
conduct the external audit of the Record Group. The fees and the
terms of the audit engagement letter are agreed by the Committee
on an annual basis.
The Committee has reviewed reports from the external auditor
on the audit plan (including the proposed materiality level for the
performance of the annual audit), the status of its audit work and
issues arising. The Committee discussed the findings with the
auditor and was satisfied with the conclusion reached by the
auditor that there was no evidence of material misstatements.
The Committee has confirmed that no material items remained
unadjusted in the financial statements.
An assessment of the quality and effectiveness of PwC’s FY20
audit was considered by way of a review completed by the
Committee with the assistance of senior members of the Finance
Team and with reference to the FRC’s practice aid on assessing
audit quality, published in December 2019. The Committee
evaluated the judgements; mindset and culture; skills, character
and knowledge; and quality control demonstrated by PwC
throughout the audit process and concluded that PwC had
provided a quality external audit service which was appropriate
for the Group given its size and structure.
External auditor independence
Policy on provision of non-audit services by the external auditor
During the year the Committee operated a policy covering the
provision of non-audit services by the external auditor to ensure
that the ongoing independence and objectivity of the external
auditor is not compromised. The policy ensured adherence to the
Financial Reporting Council’s revised Ethical Standard issued in
June 2016, which implemented EU audit regulations restricting the
supply of non-audit services to Public Interest Entities (“PIEs”) by
statutory auditors. The policy restricted the nature and value of
non-audit services that could be provided by the external auditor
using a “black list” of prohibited services, setting a cap on the level
of permitted non-audit services and establishing the requirement
that permitted services above a pre-determined limit should be
approved by the Committee before the assignment is undertaken.
In December 2019 the FRC published its revised Ethical Standard
2019, effective from 15 March 2020. The Committee has
considered the FRC’s revisions and approved changes to Record’s
policy regarding the provision of permitted non-audit services by
the external auditor in order to ensure compliance with the revised
Ethical Standard going forward.
Under the Ethical Standard the aggregate of fees for all non-audit
services, excluding audit related assurance services required under
regulation, may not exceed 70% of the average of the audit fees
for the preceding three year period. The Committee considers it
best practice to adhere to the fee cap on an annual basis, effective
from the first year of application for Record of the Ethical Standard
(i.e. the year ended 31 March 2018) and monitors fees accordingly.
68
Record plc Annual Report 2020
Audit and Risk Committee report continued
Non-audit services undertaken by the external auditor
The following permitted non-audit services, pre-approved by the
Committee and within a pre-determined cost limit, have been
undertaken by PwC in the year under review:
•
independent auditor report to the FCA on compliance with client
asset rules; and
• the interim review work performed on the half-year accounts.
Details of the total fees paid to PwC are set out in note 5 to the
accounts. Non-audit fees, excluding audit-related assurance
services required under law or regulation, were equivalent to 0%
(2019: 47%) of audit fees and were therefore within the permitted
cap of 70%.
Assessment of external auditor independence
The Committee was satisfied that the quantity and nature of
non-audit work undertaken during the year did not impair PwC’s
independence or objectivity and that its appointment for these
assignments was in the best interests of the Group and its
shareholders.
The Committee is satisfied that the external auditor has maintained
its independence and objectivity over the period of its engagement.
Looking forward
As well as considering the standing items of business, the
Committee will continue to focus on the following areas during the
year ahead:
• cyber security;
• response to the covid-19 crisis;
• risk monitoring;
• strategic focus, different product offerings and the use of new
financial instruments;
• the regulatory landscape in the UK and other jurisdictions
relevant to Record; and
• Brexit.
Approved by the Committee and signed on its behalf by:
Rosemary Hilary
Chair of the Audit and Risk Committee
Record plc Annual Report 2020
69
Strategic reportGovernanceFinancial statementsAdditional information Remuneration report
Our remuneration policy is
designed to act in the interests
of all our key stakeholders: our
clients, shareholders, employees
and regulators.
Tim Edwards
Chair of the Remuneration Committee
Chair of the Remuneration Committee’s statement
Introduction
I am pleased to present our Remuneration report and to introduce
our new Remuneration Policy for Directors. Our policy is designed
to promote the long-term, sustainable growth of the Group, and to
be consistent with the prudent management of risk.
Set out on subsequent pages are:
• the Remuneration Policy;
• the Annual Remuneration Report for 2019-20; and
• the role and activity of the Remuneration Committee.
Remuneration principles
Our approach to remuneration is driven by long-term thinking.
Identifying, developing and appropriately compensating our
high performers, at all levels of the business, is critical to
long-term business success and is aligned to both clients’
and shareholders’ interests.
Our key remuneration principles are:
• A consistent remuneration structure for all employees, not just
Directors, which is transparent and straightforward.
• Our remuneration structures should reward and incentivise
profitable business growth.
• Remuneration should comprise two components: (i) a fixed
salary and (ii) a variable component based on individual
performance.
• Directors’ remuneration should include a deferred element
which is satisfied by paying it in the form of equity.
Directors’ Remuneration Policy
As required after a three-year cycle, the Directors are presenting their
Remuneration Policy to shareholders for approval at this year’s AGM.
The policy will come into effect following shareholder approval
on 4 August 2020 and has been modified as follows. Whilst being
based on the Remuneration Policy already approved by
shareholders in 2017, there are four new features,
summarised below:
• Commission – a commission scheme for senior employees,
but not Directors, in which they are rewarded for the
introduction of sustainable new business.
• Pension – the alignment of pension contributions across all
employees of the Group by April 2022, at a level of 11%.
• GPS – a tighter gearing of the Group Profit Share Scheme to
the Company’s operating performance.
• Share Option Scheme – a holding requirement such that for any
options exercised between the third and fifth year, shares would
be held until the end of the fifth year.
In addition, the allocation of the Share Scheme (2% per annum
of the market capitalisation of Record plc being approximately
4 million shares) will be changed from a fixed 1% allocated to
Executive Directors and a fixed 1% being allocated to staff to
a more flexible arrangement under which the Remuneration
Committee and management will decide the allocation of share
option awards between Executive Directors and staff within the
scheme parameters described in the Remuneration Policy.
The Directors believe that this modified Remuneration Policy is
more closely aligned to the strategic objectives of the Board.
Background to modified policy, leadership and strategy
As announced on 13 February 2020, we appointed a new Chief
Executive Officer, Leslie Hill, as part of a leadership change better
suited to delivering the growth opportunities which the Company
anticipates. Leslie has proposed a new strategy for Record’s
sustainable long-term growth as set out on pages 6 to 9.
The Board has agreed corporate objectives for growth against
which Leslie and her team will be measured over the coming
year. Leslie Hill’s salary was increased to reflect her new
responsibilities and her variable remuneration will be measured
against these objectives.
Group performance for 2019-20
The year to 31 March 2020 has seen a 2.4% increase in revenue
whereas operating profit decreased by 2.9% with a 6.8% increase
in operating expenditure.
Our Group Profit Share Scheme pool was 31.4% of pre-GPS
underlying operating profit, which represented £3.5 million, directly
linking the Company’s financial performance to the size of the
variable remuneration pool. The value delivered under the Group
Profit Share Scheme increased by 3.8% compared to the
previous period.
70
Record plc Annual Report 2020
Remuneration report
Role of the Committee
The role of the Remuneration Committee is to review
and approve the remuneration strategies of the Group,
encompassing the Chair, the Executive Directors, and the
staff as a whole. The Committee also reviews and advises
on the remuneration policy and ensures that it promotes
good conduct consistent with sound and effective risk
management, and is properly disclosed to Stakeholders.
Committee meeting
attendance
Tim Edwards
Rosemary Hilary
Jane Tufnell
8/8
8/8
8/8
Directors were awarded profit share units by the Remuneration
Committee based on their individual level of performance
measured against their objectives. Some discretion was exercised
by the Committee in the allocation of these profit share units.
The Committee had set stretching targets for the year and some of
these targets were not fully met. However, following the change of
leadership, some profit share units were topped up to incentivise
the remaining Executive Directors during this transition. Details can
be found within the Annual Report on Remuneration.
The Committee also received input from the Head of Compliance
and Risk, who reports any legal or compliance issues that relate to
Directors who are due to receive awards under the Scheme.
Payments were made in accordance with the Group Profit Share
Scheme rules and were approved by the Committee.
Option awards were made to Directors during the year and details
can be found on page 81 and all awards were made in accordance
with the Scheme rules. Management used the full allocation for
granting options to staff below Board Director level this year and
made awards in accordance with the Share Scheme rules.
No options vested for Directors during the year as the performance
conditions had not been met. Details can be found on page 80.
Alignment with shareholders
As at 31 March 2020, 44.5% of the Company’s shares were
held by the Chairman and Directors, and each of the current
Executive Directors has a shareholding significantly greater
than 1.5 times their salary. In addition, 69% of the Company’s
employees are shareholders.
With effect from 1 August 2020 and to encourage share
ownership, any new Executive Director would be encouraged
to build a shareholding of at least 1.5 times base salary, for
example through the use of GPS and share option schemes,
within a reasonable period of being appointed.
At the end of his/her employment, an Executive Director would
need to retain a shareholding previously built up through the use
of remuneration schemes, but excluding any shares acquired for
cash, of a total of 1.5 times base salary, with half of this total
being held for a period of one year and half of this total being
held for a period of two years.
Engaging with employees
The Committee takes an active involvement in remuneration for the
whole Company. Record staff participate in both the Group Profit
Share Scheme and the Share Option Scheme and the Committee
reviews all GPS and option awards. A significant proportion of our
colleagues are shareholders, so are able to express their views in
the same way as other shareholders.
When determining Executive Director remuneration arrangements
the Committee takes into account pay conditions throughout the
Group to ensure that the structure and quantum of Executive
Directors’ pay remains appropriate in this context.
The Committee seeks the views of the wider workforce through
the use of employee surveys about their working experience at
Record. Certain questions in the employee survey are specifically
about remuneration, which allows the Committee to gain detailed
feedback from staff on an anonymous basis.
I have also taken on the role of Employee Engagement Director,
leading our workforce engagement initiatives, and through
meetings and conversations with staff at various events I am
able to seek employee views directly.
Shareholder consultation
It remains our policy to discuss any substantive proposed changes
to the Group’s remuneration structures with key external
shareholders in advance of any implementation. The Remuneration
Committee takes into account shareholder views received in relation
to resolutions to be considered at the AGM each year, and values
shareholder feedback when forming remuneration policy.
Looking ahead to 2020-21
With a focus on maintaining profitability and managing costs,
no Company-wide salary increases were made in April 2020 and,
with the exception of Leslie Hill on her promotion to CEO, none of
the Executive Directors received a salary increase.
Tim Edwards
Chair of the Remuneration Committee
18 June 2020
Record plc Annual Report 2020
71
Strategic reportGovernanceFinancial statementsAdditional information
Remuneration report continued
Remuneration Policy
The Directors’ Remuneration Policy, modified as described in the Remuneration Committee Chair’s statement and set out in full below,
is proposed by the Remuneration Committee and the Board. Shareholders will be asked to approve the new policy at the 2020 AGM on
4 August 2020. This policy will take effect for Directors from the date of its approval and is expected to be applied for the next three years.
Summary remuneration structure
The table below illustrates the remuneration structures that we have in place for Directors.
Options
Struck at market price with performance conditions
1/3 vests but
held until year 5
1/3 vests but
held until year 5
1/3 vests
Group Profit
Share Scheme
Shares
1/3 shares
released from
lock up
1/3 shares
released from
lock up
1/3 shares
released from
lock up
Share Scheme
Cash
Pension and
benefits
Cash
Salary
Cash
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Note, Directors are required to take one third of their Group Profit Share
payment in shares, which are locked up and released over three years.
Directors can elect to take a further third of their Group Profit Share payment
in shares, and these have no lock up.
Group Profit Share
The Group Profit Share Scheme is our variable structure that all
staff, including Directors, participate in. The purpose is to ensure
that there is a transparent link between our business strategy and
individual objectives, that the assessment of individual performance
is clear, and that variable pay rewards high levels of performance.
Annual corporate objectives are agreed by the Board and the CEO’s
performance is measured against these objectives. Objectives are
agreed for Executive Directors and all staff. GPS awards relate
directly to each individual’s performance against objectives.
The Group Profit Share pool is linked to profitability and can vary
between 25% to 35% of operating profits. The actual size is currently
determined by the accumulation of the individual’s performance but
the Committee intends to transition towards determining the size of
the pool with a balanced scorecard approach.
Group Profit Share payments for Directors are determined by the
Remuneration Committee, who also approved the pool size.
The Scheme is discretionary and there is no contractual right to
receive an award.
Profit Share payments are made in cash and in shares. To ensure
that the interests of management and shareholders are aligned,
Directors and senior managers are required to take a proportion
(initially a third) in shares, subject to a three year “lock up” period.
These shares are released from lock up in three equal tranches
on the first, second and third anniversary of the payment date.
Additionally, Directors and senior managers are offered the
opportunity to elect for up to a further third of their Profit Share
to be paid in shares, which has no lock up. The remaining third
is paid in cash.
Share Scheme
It is of great importance for the long term success of the business
that the Group retains and motivates its current and future key
employees, and that they are incentivised over the longer term in
a manner which aligns their interests with shareholders. The Share
Scheme has been designed to award share options to Directors
and staff of Record. The Remuneration Committee can grant
HMRC approved options (“Approved Options”) as well as
unapproved options (“Unapproved Options”).
In total the size of the Share Scheme will be limited to 2%
per annum of the market capitalisation of Record plc (being
approximately 4 million shares). The 2% can be awarded to
Directors and staff, within the limits described below.
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 Unapproved Options, which
may be granted with any exercise price (including nil), although
the Committee’s policy is for Unapproved Options awarded to
Executive Directors to be granted with an exercise price equal
to the market value of the shares on the date of grant.
The terms of options for Directors differ to those for all other staff.
For Directors, the Remuneration Committee will limit the value of
shares over which an option is granted to any Director in any year
to a maximum of 200% of that Director’s salary for that year.
72
Record plc Annual Report 2020
Remuneration report continued
All Director option awards will be subject to a performance
condition based on Record’s annual cumulative EPS growth.
EPS is used as a performance measure in line with the industry
standard and shareholder interests. One third of the award will vest
on each of the third, fourth and fifth anniversaries of the date of
grant, subject to an EPS hurdle linked to the annualised EPS
growth for the respective three, four and five year periods from
date of grant. Awards that vest on the third and fourth year are
required to be held until the fifth year.
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% and 75% to 100% vesting if EPS
growth exceeds RPI plus 13% per annum over the same period.
Options under both the Approved and Unapproved schemes will
be granted with an exercise price equal to the market value of the
shares on the date of grant and the exercise price per share of
Approved Options must be no lower than the market value of a
share on the dealing day.
For staff below Director level, Approved Options become
exercisable on the fourth anniversary of grant subject to the
employee remaining in employment with the Group and, should
they have been set, any other performance conditions being met.
One quarter of any Unapproved Option becomes exercisable each
year for four years, subject to the employee remaining in
employment and, should they have been set, any other
performance conditions being met.
The Remuneration Committee retains the power to grant options
under the Share Scheme, and granted options to Board Directors
during the year, although it can and has delegated to management
the task of identifying suitable recipients of options and the number
of shares to be put under option for those below Board level.
Commission scheme
We will introduce a commission scheme with effect from June
2020 both to reward and incentivise our staff to grow the business.
Directors will not be participants, but Code staff (namely Executive
Committee members who are not Directors) and other staff will be
able to participate. The terms of the scheme have been outlined in
the Remuneration Policy, even though Directors will not participate.
Any participant is required to meet their individual performance
objectives to be eligible for a payment. Any payment will be made
in shares to Code staff, to be held for a year, and in cash for other
staff. There is a robust process in place to ensure there are no
conflicts. All payments will be reviewed by the Remuneration
Committee after input from the Head of Compliance and Risk.
Change to Directors’ pensions
We are committed to aligning Director pension contributions with
those of the majority of staff by 2022. Contributions to Directors
will be decreased this year from 15.5% to 13.5% and further
changes will be made so that by April 2022 we will have alignment
across the Group at a single rate of 11%. Directors are able to
contribute to a pension scheme or may receive payment in lieu if
they have opted out of the pension scheme.
Remuneration Policy: comparison table for
Executive Directors and staff
The table below provides a summary of the policy for each
component part of remuneration for Executive Directors, subject to
approval at the forthcoming AGM. The approach for all staff is also
included to provide context for the remuneration for the entire
workforce. There is a separate table for the Chairman and
Non-executive Directors.
Element, purpose and
link to strategy
Base salary
Fixed remuneration that reflects the role,
responsibilities, experience and knowledge
of the individual.
Current operation for employees
Policy for Executive Directors
Paid monthly and reviewed annually
by management.
The Remuneration Committee reviews salaries
for Executive Directors on an annual basis.
Any review will take into account market rates,
business performance and individual
contribution.
Any review will take into account market rates,
business performance and individual
contribution.
Commission
The Commission scheme is to reward and
incentivise contributions to new business from
the next generation. Any payments are
authorised by the CEO and Head of Global
Sales and approved by the Remuneration
Committee after input from the Head of
Compliance and Risk.
The scheme operates within a risk
management framework to ensure products
are appropriate for clients and any payment is
made from profits.
Benefits
To provide a benefits package that provides
for the wellbeing of our colleagues.
There is no prescribed maximum salary.
However, increases are normally expected
to be in line with the typical level of increase
awarded across the Group.
Executive Directors are not eligible to
participate in the commission scheme.
All staff can participate.
Staff will only receive a payment if they
are meeting their individual performance
objectives.
Code staff receive any payment in shares,
locked up for a period of one year, whereas
other staff will receive any payment in cash.
A range of benefits are offered including,
but not limited to, private medical insurance,
dental insurance, permanent health insurance,
life assurance, personal accident insurance
and annual holiday.
Executive Directors receive benefits on
the same basis as all other employees,
at the prevailing rates and nothing else.
Record plc Annual Report 2020
73
Strategic reportGovernanceFinancial statementsAdditional information Remuneration report continued
Remuneration Policy continued
Remuneration Policy: comparison table for Executive Directors and staff continued
Element, purpose and
link to strategy
Share Incentive Plan
The Group has an approved Share Incentive
Plan (“SIP”). All staff are able to buy shares
from pre-tax salary up to an HMRC-approved
limit (£1,800 for the financial year ended
31 March 2020), which is matched at a
rate of 50%.
Pension
To provide an appropriate retirement income.
Current operation for employees
Policy for Executive Directors
All staff members are eligible to participate
in the SIP.
Executive Directors may participate in the
SIP on the same basis as other employees.
All staff are entitled to join the Group Personal
Pension Scheme. This is a defined
contribution plan to which the Group makes
employer contributions and staff can choose
to make additional personal contributions.
Executive Directors receive an employer
pension contribution of 13.5% of salary which
can be paid into the Group Personal Pension
Scheme or delivered as a cash allowance,
aligned with that of the senior managers.
Senior managers receive an employer
contribution of 13.5% and staff receive
between 7.75% and 9%.
The Company is committed to aligning
employer pension contributions for all staff,
including Executive Directors, by 2022.
Group Profit Share Scheme
Variable remuneration scheme that allocates
25% to 35% of operating profits to a Group
Profit Share Pool, allocated to participants
based on their role and individual level of
performance.
All staff participate in the Group Profit
Share Scheme.
Executive Directors are eligible to participate
in the Group Profit Share Scheme.
Profit Share payments relate to the
responsibilities of the role and the individual
level of performance against objectives for the
relevant period.
The Remuneration Committee approves all
payments to Executive Directors, which are
based on individual performance against
objectives for the relevant period.
Share Scheme
The Share Scheme allows the Remuneration
Committee to grant options over up to 2% of
the market capitalisation of Record plc (being
approximately 4 million shares) per annum.
Staff members can take their Profit Share in
cash or elect for up to a third in shares.
Senior managers are required to take
one-third of their payment in shares subject to
lock-up conditions of one to three years and
in addition are offered the opportunity for up
to a further third of the Profit Share to be paid
in shares. The remaining amount is in cash.
Executive Directors are required to take one
third of their payment in shares subject to
lock-up conditions of one to three years.
In addition they are offered the opportunity for
up to a further third of their Profit Share to be
paid in shares. The remaining amount will be
paid in cash.
Whilst the Profit Share pool is capped based
on the profitability of the Group and range
stated above, there is no individual maximum
entitlement set within this limit.
Malus and clawback provisions apply to all
awards. Further details are set out below.
The Committee has discretion in the
treatment of leavers as set out below.
All staff members are eligible to participate in
the Share Scheme.
Executive Directors are eligible to participate
in the Share Scheme.
Any share option grants are awarded by
management on a discretionary basis.
The Remuneration Committee limits the value
of shares over which an option is granted to
any Director in any year to a maximum of
200% of that Director’s salary for that year.
All share options awarded to Executive
Directors are granted with an exercise price
equal to the market value of the shares on the
date of grant and are subject to a
performance condition based on Record’s
cumulative annual EPS growth with vesting
on a stepped basis after three, four and five
years. Awards that vest on the third and fourth
year are required to be held until the fifth year.
Malus and clawback provisions apply to all
awards. Further details are set out below.
The Committee has discretion in the treatment
of leavers as set out below.
74
Record plc Annual Report 2020
Remuneration report continued
Remuneration policy for the Chairman and the Non-executive Directors
The table below sets out the remuneration policy for the Chairman and the Non-Executive Directors. In summary, they only receive fixed
pay and benefits.
Element, purpose and
link to strategy
Current operation for Chairman and
Non-executive Directors
Further information
Fees/salary
Fixed remuneration that reflects the role, skills
and experience
Benefits
To enable the Chairman and Non-executive
Directors to carry out their roles
The Chairman’s salary is determined by the
Remuneration Committee.
The Non-executive Directors’ fees are
approved by the Board.
Increases are normally expected to be in line
with the typical level of increase awarded across
the Group.
The Chairman receives benefits on the same
basis as other Executive Directors, including
pension, private medical insurance, dental
insurance, permanent health insurance, life
assurance, personal accident insurance and
annual holiday.
Salaries and fees are reviewed annually.
Any review will take into account market
rates, business performance and
individual contribution.
The Non-executive Directors receive expenses
but do not receive any additional benefits.
Group Profit Share Scheme, Share
Scheme, Commission and SIP
The Chairman and the Non-executive
Directors do not participate in any of
these schemes.
Service contracts and loss of office payment policy
We provide all Executive Directors with service agreements.
None of the service agreements are for a fixed term and all include
provisions for termination on six months’ notice by either party.
Service agreements do not contain any contractual entitlement to
receive bonuses, nor to participate in the Group Profit Share
Scheme or the Group Share Scheme, nor to receive any fixed
provision for termination compensation.
Engaging with employees and shareholders, decision
making processes and general employee pay and conditions
The Group’s approach to engaging with employees and
shareholders are detailed in the Chair of the Remuneration
Committee’s statement. The Group’s remuneration
decision-making processes are also summarised in that
statement and detailed further above in the Remuneration Policy,
as well as the general approach to employee pay and conditions.
Non-executive Directors are appointed for an initial three-year
period and are required to provide at least six months’ notice of
their intention to resign. Their continued engagement is subject to
annual re-election by shareholders at the Company’s AGM.
The terms and conditions of appointment of the Executive
Directors and Non-executive Directors are available for inspection
at the Company’s registered office.
When an Executive Director leaves the Group, the Remuneration
Committee will review the circumstances and apply the appropriate
treatment. Any payments that are made will be in line with
contractual entitlements and statutory requirements only. Where
applicable, the broad aim in making termination payments is to
avoid rewarding poor performance.
Salary and benefits will continue to be paid throughout the notice
period although the Committee has the discretion to make a
payment in lieu of notice.
The treatment of payments for the Group Profit Share Scheme
and the Share Scheme will be in accordance with the relevant
scheme rules and discretion as set out in those plans at the
time the Director leaves.
Malus and clawback
Clawback provisions enable variable remuneration to be reclaimed
under exceptional circumstances, as follows:
• GPS – malus and clawback provisions are in place in the event
of adverse restatement of accounts or material misconduct,
at the discretion of the Remuneration Committee.
• Share Options – clawback provisions are in place for all options
should there be any restatement of accounts or breach of
contract, at the discretion of the Remuneration Committee.
• Commission – clawback provisions are in place in the event of
adverse restatement of accounts or breach of contract for all
commission payments.
Source and funding of shares
Share awards under the Group Profit Share Scheme are covered
wherever possible through market purchases by the Company’s
Employee Benefit Trust (“EBT”) rather than through the issue of
new shares, and this has been the case since the inception of the
Scheme in 2007. It remains our intention to continue to operate in
this manner in order to minimise potential dilution of shareholders’
interests. Similarly, options under the Share Scheme are not
normally satisfied by the issue of new shares, in order to minimise
potential dilution. The Company provides funds to the EBT to allow
it to purchase shares in the market with which to satisfy the
exercise of options. The number of shares purchased by the Group
to hedge the award of options is based on an appropriate hedge
ratio at each grant date, as calculated by management and
approved by the Remuneration Committee.
Record plc Annual Report 2020
75
Strategic reportGovernanceFinancial statementsAdditional information Remuneration report continued
Remuneration Policy continued
Approach to remuneration for new Executive Directors
On the recruitment of a new Executive Director the level of fixed
remuneration will be appropriate to the candidate’s skills and
experience and the responsibility that they will be undertaking.
New Executive Directors would be eligible to join the Group
Profit Share Scheme and would be eligible to be considered
for the Share Scheme as deemed appropriate by the
Remuneration Committee, subject to the applicable policy
at the time.
Regulation
We continue to review our Remuneration Policy in line with
regulatory changes and good practice and to ensure compliance
with the principles of the Remuneration Code of the UK financial
services regulator, as applicable to the Group. There is some
uncertainty ahead arising from new European legislation such as
the Investment Firm Regulation and Directive and the impact of the
UK exiting the European Union which may or may not apply to us.
We may have to revisit our Remuneration Policy once the
application of these rules has been clarified.
The Remuneration Committee recognises that a new Executive
Director may forfeit remuneration as a result of leaving a previous
employer and the Committee will consider mitigating that loss or
part of that loss by making an award in addition to the
remuneration outlined above. The Committee will consider any
relevant factors including any performance conditions attached to
any previous incentive arrangements and the likelihood of these
conditions being met and will take reasonable steps to ensure that
any payment is at an appropriate level.
When recruiting a new Non-executive Director, fees will be in line
with the prevailing fee schedule paid to other Board members and
Non-executive Directors at that time.
Remuneration Policy – illustrations
The charts below show the lowest, highest and average
remuneration for the Executive Directors over the past three-years.
Fixed remuneration is comprised of salary, pension contributions,
other benefits and any cash alternative. Variable remuneration
comprises Group Profit Share, including cash and share payments,
as well as any gains on share options. As variable remuneration is
not capped at the individual level, we have used the three-year
average, highest and lowest remuneration as an indication of the
Executive Director’s earnings potential. Future remuneration will be
determined based on profitability and performance as described in
the Remuneration Policy.
Leslie Hill (appointed CEO 13 February 2020)
James Wood-Collins
(resigned as CEO on 13 February 2020)
Minimum
100%
£521,901
3-year
low
3-year
high
3-year
average
48%
48%
52%
£690,137
52%
£742,894
47%
53%
£718,557
3-year
low
3-year
high
3-year
average
50%
50%
£582,620
48%
52%
£695,595
48%
52%
£655,745
£
0
100k 200k 300k 400k 500k 600k
700k
800k
900k
1,000k
£
0
100k 200k 300k 400k 500k 600k
700k
800k
900k
1,000k
Bob Noyen
Steve Cullen
Minimum
100%
£331,622
Minimum
100%
£152,055
3-year
low
3-year
high
3-year
average
51%
48%
49%
49%
£656,128
52%
£689,458
51%
£673,569
3-year
low
3-year
high
3-year
average
63%
37%
£235,238
62%
38%
£245,090
63%
37%
£239,924
£
0
100k 200k 300k 400k 500k 600k
700k
800k
900k
1,000k
£
0
100k 200k 300k 400k 500k 600k
700k
800k
900k
1,000k
Key:
Fixed
Variable
The above charts exclude the value of options granted to Directors.
76
Record plc Annual Report 2020
Remuneration report continued
Annual report on remuneration
This part of the report has been prepared in accordance with Schedule 8 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 (as amended), and relevant sections of the Listing Rules. The Annual Report on Remuneration
will be put to an advisory shareholder vote at the 2020 AGM. The information on pages 77 to 85 has been audited, where required, under
the regulations and is indicated as audited information where applicable.
Directors’ remuneration as a single figure (audited information)
The remuneration of the Directors for the year ended 31 March 2020 is detailed below together with their remuneration for the
previous year.
Leslie Hill
(appointed CEO on
13 February 2020)
James Wood-Collins
(resigned as CEO
on 13 February 2020)
Bob Noyen
Steve Cullen
2020
£
2019
£
2020
£
2019
£
2020
£
2019
£
2020
£
2019
£
306,529
285,913
249,096
285,913
285,913
285,913
129,997
129,997
2,150
2,044
809
926
1,393
1,365
1,908
47,512
44,316
38,610
44,316
44,316
44,316
20,150
1,971
20,150
Executive Directors
Salaries and fees
Benefits1
Pensions2
Total Fixed Pay
356,191
332,273
288,515
331,155
331,622
331,594
152,055
152,118
Short-term incentive
(GPS cash)
Short-term incentive
(GPS shares)3
257,801
238,576
194,669
238,576
228,999
238,576
58,260
61,981
Total Variable Pay5
386,703
357,864
292,005
357,864
343,500
357,864
128,902
119,288
97,336
119,288
114,501
119,288
29,129
87,389
30,991
92,972
Total
742,894
690,137
580,520
689,019
675,122
689,458
239,444
245,090
Neil Record
Jane Tufnell
Rosemary Hilary
Tim Edwards
Non-executive
Directors
2020
£
2019
£
2020
£
2019
£
2020
£
2019
£
2020
£
2019
£
Salaries and fees
79,310
79,310
63,500
53,498
49,862
49,862
43,497
43,497
Benefits1
Pensions2
Total
2,490
12,293
94,093
2,258
12,293
93,861
—
—
—
—
182
—
—
—
—
—
—
—
63,500
53,498
50,044
49,862
43,497
43,497
1. This value includes matching shares on SIP scheme, medical benefits, payments made in lieu of medical benefits, overtime payments and reimbursement of
taxable travel expenses.
2. This includes payments made in lieu of pension contributions.
3. Short term incentive payments are subject to individual performance conditions summarised in the objectives table below. The shares vest immediately but are
subject to lock up restrictions and are calculated based on the overall profitability of the Group.
4. The Remuneration Committee exercised discretion and James Wood-Collins was determined to be a good leaver for the GPS. GPS relates to the period to
13 August 2020.
5. The table excludes any value derived from share options. The only Director who had a gain in the year was James Wood-Collins (£2,100).
Payments for loss of office and payments made to former Directors
James Wood-Collins left the Board of Directors on 13 February 2020 and was placed on garden leave for the duration of his six months’
notice period until 13 August 2020. The payment to be made for loss of office of £97,000 will be paid in line with statutory compensation
requirements and the current Remuneration Policy which contained no post-employment shareholding requirements. James was treated
as a good leaver under the Group Profit Share Scheme and Share Scheme rules and Remuneration Policy. In addition, the Company paid
£50,000 towards outplacement support.
Payments totalling £94,136 were made to James Wood-Collins after 13 February 2020, when he resigned from the Board of Directors.
These payments comprised £36,816 salary, £119 medical benefits, £34,330 short-term incentive (GPS cash), £17,165 short-term
incentive (GPS shares) and £5,706 pensions. No other payments were made to former Directors.
Pensions (audited information)
Executive Directors are entitled to join the Group Personal Pension Scheme. This is a defined contribution plan and for the financial year
ending 31 March 2020, the Group made contributions of 15.5% of each Director’s salary which could either be paid into the Group
Personal Pension Scheme, taken as cash or a combination of the two.
All Directors who make personal contributions into the Company pension scheme via salary sacrifice receive an amount equivalent to
the employer’s national insurance saved by the Company into their pension as an additional contribution.
The employer pension contributions for the financial years ending 31 March 2019 and 31 March 2020 are detailed in the tables above.
Record plc Annual Report 2020
77
Strategic reportGovernanceFinancial statementsAdditional information
Remuneration report continued
Annual report on remuneration continued
Allocation of the Profit Share pool to Executive Directors
The Remuneration Committee is able to exercise discretion over the level of base Group Profit Share units that are awarded to
Executive Directors based on the role and level of responsibility. The final allocation is adjusted based on an assessment of individual
Director’s performance compared to their objectives. On two occasions during the year, the Committee approved awards to the
Directors after considering the role and performance of each individual Director for the relevant six-month period. The overall
performance for the year for each Executive Director is summarised below. The Committee also receives reports from the Head of
Compliance and Risk, regarding any legal or compliance issues relevant to the award.
James Wood-Collins
James Wood-Collins met the majority of his objectives for the year and his GPS award was 100%. He resigned from the Board on
13 February 2020 and was considered to be a good leaver.
Leslie Hill
Objectives
Outcomes
Strategic
Revenue: At least double-digit annualised percentage revenue growth
on a constant currency basis.
Client retention in the face of sustained fee pressure: Retain 90%+
of attributable run rate revenue, with attribution to be determined on a
client-by-client basis.
Revenues have fallen by 1% (based on data as at mid-March 2020
when objectives were assessed) and this was a 1% increase on an
unadjusted basis.
For the clients that Leslie was solely or jointly responsible for there was
a retention rate of 94% of attributable run rate revenue.
Leveraging client relationships: £2 million annualised revenue,
in partnership with colleagues.
Increase in annualised revenue from March 2019 to March 2020
of £1.2 million.
Operational
Compliance: Ensure compliance with policies and procedures, to
ensure Record meets its obligations to clients and to regulators.
This was achieved.
People
Innovation and new initiatives: Encourage ideas from across the firm,
ensure each is assessed, support implementation as appropriate –
includes potential strategic partnerships as well as organic initiatives.
This was achieved with new initiatives being encouraged during the
year, particularly in technology, with Leslie driving the importance of
new ideas and products arising from tangible and commercial needs.
Recruitment: Recruit, develop and retain high performing colleagues
as part of Record plc leadership and participation.
This was achieved, with the recruitment of a new Head of Sales and
the development and retention of high performers in the team.
Award: Stretching targets were set for the year, and while not all targets were fully met, the Committee applied discretion to make an award of
105% of base units to Leslie Hill to ensure that she was incentivised during the period of leadership change and her promotion to CEO.
78
Record plc Annual Report 2020
Remuneration report continued
Bob Noyen
Objectives
Outcomes
Strategic
Investment products and services: Initiate investment research
to retain clients, produce new products and services with improved
success rates.
Client retention in the face of sustained fee pressure: Retain 90%+
of attributable run rate revenue, with attribution to be determined on a
client-by-client basis.
Enhanced Passive Hedging generated performance fees in the period.
Investment decisions have added value, as measured by the
Investment Committee.
For the clients that Bob was solely or jointly responsible for there was a
retention rate of 100% of attributable run rate revenue.
Leveraging client relationships: £2 million annualised revenue,
in partnership with colleagues.
Increase in annualised revenue from March 2019 to March 2020 of
£1.2 million.
Operational
Compliance: Ensure compliance with policies and procedures, to
ensure Record meets its obligations to clients and to regulators.
This has been met.
Resource allocation: Effectively help manage and coordinate research
resources across fundamental, quantitative and applied research
teams.
Increased visibility of research activity to senior management and
rotating chairs of research priorities has helped improve management
and coordination of research efforts.
People
Support client and client services teams: Improve engagement on
client presentations and adherence to deadlines, including in
collaboration with client teams.
Bob is noted for his creativity, dedication and outstanding client
commitment. There has been some improvement on working with
other teams and adherence to deadlines.
Award: Objectives were mostly met for the period and the Committee made an award of 100% of base units, applying discretion to ensure that
Bob was incentivised during the period of leadership change.
Steve Cullen
Objectives
Outcomes
Strategic
Commercial alignment of Finance team: Identify and implement
opportunities for Finance team to become more commercial, including
both greater client alignment, cost savings and productivity
enhancements.
Operational
Cost discipline and accountability: Ensure maintenance of cost
discipline across the business through adherence to approved budget,
and expenditure authorisation policy and procedures.
Risk management: Ensure suitable systems and controls in place
within Finance to minimise potential errors/breaches in Finance.
Reporting: Ensure timely delivery of key reporting metrics, including
the Annual Report, internal audit relationship, investor relations.
People
External relationships: Continue to develop relationships with external
auditors, internal auditors. company brokers and investor relations.
Information: Lead the standardisation and measurement of individual
objectives and GPS determination. Ensure consistency of approach
and fairness in the interpretation of employee survey results.
Some progress in this area with the implementation of an automated
system for debit cards and expense management and increased
automation of the processes for invoice production.
Cost discipline was maintained throughout the financial year.
No material errors or breaches in the team.
Refreshed approach to the Annual Report in 2019 with more
management meetings earlier and improvements made to the style
of the report. Closeout meeting identified improvements that will be
worked on this year.
Relationships improved with internal and external auditors and periodic
meetings being organised to discuss ongoing issues. Increased
involvement with brokers and investor relations.
Objectives for team set and measured.
Award: Objectives were mostly met for the period and the Committee made an award of 97.5% of base units, applying discretion to ensure that
Steve was incentivised during the period of leadership change.
Record plc Annual Report 2020
79
Strategic reportGovernanceFinancial statementsAdditional information
Remuneration report continued
Annual report on remuneration continued
Directors’ share options and share awards (audited information)
During the financial year ended 31 March 2020 option awards were made to all the Executive Directors in accordance with the
scheme rules.
All of the Executive Directors have previously been awarded share options and the table below sets out details of Executive Directors’
outstanding share option awards, which may vest on a stepped basis over three, four and five years subject to continued service and
performance conditions, as well as any options that have lapsed or been exercised.
Total
options at
1 April 2019
Options
granted
in period
Date of grant
Leslie Hill
27/11/14
210,000
(appointed
CEO on
13 February
2020)
01/12/15
300,000
27/01/16
66,667
30/11/16
550,000
26/01/18
280,000
—
—
—
—
—
21/08/19
—
575,000
18/11/13
James
Wood-Collins 27/11/14
(resigned
as
CEO on
13 February
2020)
27/01/16
01/12/15
30/11/16
26/01/18
116,667
210,000
300,000
66,667
550,000
1,300,000
—
—
—
—
—
—
21/08/19
—
575,000
Bob Noyen
27/11/14
210,000
01/12/15
300,000
27/01/16
66,667
30/11/16
550,000
26/01/18
280,000
—
—
—
—
—
21/08/19
—
575,000
Steve Cullen
27/11/14
90,000
01/12/15
300,000
27/01/16
66,667
30/11/16
550,000
26/01/18
125,000
—
—
—
—
—
21/08/19
—
260,000
Options
lapsed
in period
(210,000)
(150,000)
(33,333)
(183,333)
—
—
—
(210,000)
(150,000)
(33,333)
(183,333)
—
—
(210,000)
(150,000)
(33,333)
(183,333)
—
—
(90,000)
(150,000)
(33,334)
(183,333)
—
—
Options
exercised
in period
—
—
—
—
—
—
(116,667)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
options at
31 March
2020
—
Exercise
price
35.86p
Earliest
exercise
n/a
Latest
exercise
n/a
150,000
28.875p
01/12/20
30/11/21
33,334
24.50p
27/01/20
26/01/22
366,667
34.0718p
30/11/19
29/11/22
280,000
575,000
43.50p
26/01/21
25/01/24
31.10p
21/08/22
20/08/25
—
—
30.00p
35.86p
n/a
n/a
n/a
n/a
150,000
28.875p
01/12/20
30/11/21
33,334
24.50p
27/01/20
26/01/22
366,667
34.0718p
30/11/19
29/11/22
1,300,000
43.50p
26/01/21
25/01/24
575,000
31.10p
21/08/22
20/08/25
—
35.86p
n/a
n/a
150,000
28.875p
01/12/20
30/11/21
33,334
24.50p
27/01/20
26/01/22
366,667
34.0718p
30/11/19
29/11/22
280,000
575,000
43.50p
26/01/21
25/01/24
31.10p
21/08/22
20/08/25
—
35.86p
n/a
n/a
150,000
28.875p
01/12/20
30/11/21
33,333
24.50p
27/01/20
26/01/22
366,667
34.0718p
30/11/19
29/11/22
125,000
260,000
43.50p
26/01/21
25/01/24
31.10p
21/08/22
20/08/25
The outstanding share options above vest subject to performance conditions which are detailed below.
James Wood-Collins had a gain on share options of £2,100 in the year ended 31 March 2020. No other Directors had gains on
share options.
There were no gains on share options by Directors in the year ended 31 March 2019.
Vesting of awards made to Executive Directors is on a stepped basis and is linked to Record’s average annualised EPS growth over the
relevant period since grant as follows:
Record’s annualised EPS growth over the period from grant to vesting
Percentage of shares subject to the award which vest
>RPI growth + 13%
>RPI growth + 10%, =RPI growth + 7%, =RPI growth + 4%, = 3 months
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Corporation tax liabilities
Lease liabilities
Financial liabilities
Derivative financial liabilities
Total current liabilities
Non‑current liabilities
Deferred tax liabilities
Provisions
Lease liabilities
Total non‑current liabilities
Total net assets
Equity
Issued share capital
Share premium account
Capital redemption reserve
Retained earnings
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Approved by the Board on 18 June 2020 and signed on its behalf by:
Neil Record
Chairman
Steve Cullen
Chief Financial Officer
Company registered number: 1927640
The notes on pages 103 to 130 are an integral part of these consolidated financial statements.
Note
11
12
13
14
16
17
18
18
19
19
12
20
17
15
12
21
2020
£’000
470
1,175
751
2,472
4,868
8,704
193
7,958
14,294
31,149
36,017
2019
£’000
288
—
761
1,112
2,161
7,562
164
10,735
12,966
31,427
33,588
(3,009)
(2,736)
(601)
(544)
(692)
—
(2,191)
(2,621)
(610)
(109)
(6,955)
(6,158)
(86)
(200)
(615)
(901)
(29)
—
—
(29)
28,161
27,401
50
2,259
26
25,694
28,029
132
50
2,243
26
25,022
27,341
60
28,161
27,401
Record plc Annual Report 2020
97
Strategic reportGovernanceFinancial statementsAdditional information
Consolidated statement of changes in equity
Year ended 31 March 2020
Called-up
share capital
£’000
Note
As at 1 April 2019
IFRS 16 opening adjustment
Profit and total comprehensive
income for the year
Dividends paid
Issue of shares in subsidiary
Own shares acquired by EBT
Release of shares held by EBT
1
9
Share-based payment reserve movement
Transactions with shareholders
As at 31 March 2020
Year ended 31 March 2019
50
—
—
—
—
—
—
—
—
50
Called-up
share capital
£’000
Note
As at 1 April 2018
Profit and total comprehensive
income for the year
Dividends paid
9
Issue of shares in subsidiary
Own shares acquired by EBT
Release of shares held by EBT
Share-based payment reserve movement
Transactions with shareholders
As at 31 March 2019
50
—
—
—
—
—
—
—
50
Capital
redemption
reserve
£’000
Retained
earnings
£’000
Equity
attributable
to equity
holders of
the parent
£’000
Non-
controlling
interests
£’000
26
—
—
—
—
—
—
—
—
26
25,022
27,341
(98)
(98)
6,420
(5,888)
—
6,420
(5,888)
—
(1,020)
(1,020)
971
287
987
287
(5,650)
(5,634)
25,694
28,029
60
—
(48)
—
120
—
—
—
120
132
Capital
redemption
reserve
£’000
Retained
earnings
£’000
Equity
attributable
to equity
holders of
the parent
£’000
Non-
controlling
interests
£’000
26
—
—
—
—
—
—
—
26
24,238
26,551
6,430
(5,517)
—
(893)
677
87
6,430
(5,517)
—
(893)
683
87
(5,646)
(5,640)
25,022
27,341
—
—
—
60
—
—
—
60
60
Share
premium
account
£’000
2,243
—
—
—
—
—
16
—
16
2,259
Share
premium
account
£’000
2,237
—
—
—
—
6
—
6
2,243
Total
equity
£’000
27,401
(98)
6,372
(5,888)
120
(1,020)
987
287
(5,514)
28,161
Total
equity
£’000
26,551
6,430
(5,517)
60
(893)
683
87
(5,580)
27,401
The notes on pages 103 to 130 are an integral part of these consolidated financial statements.
98
Record plc Annual Report 2020
Consolidated statement of cash flows
Year ended 31 March
Net cash inflow from operating activities
Cash flow from investing activities
Purchase of intangible software
Purchase of property, plant and equipment
Purchase of securities
Sale/(purchase) of money market instruments with maturity > 3 months
Interest received
Net cash inflow/(outflow) from investing activities
Cash flow from financing activities
Lease repayments
Subscription for shares in subsidiary
Purchase of own shares
Dividends paid to equity shareholders
Cash outflow from financing activities
Net increase in cash and cash equivalents in the year
Effect of exchange rate changes
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Closing cash and cash equivalents consist of:
Cash
Cash equivalents
Cash and cash equivalents
The notes on pages 103 to 130 are an integral part of these consolidated financial statements.
Note
25
9
2020
£’000
6,543
(311)
(243)
(1,113)
2,777
160
1,270
(576)
120
(487)
(5,888)
(6,831)
982
346
12,966
14,294
8,004
6,290
18
14,294
2019
£’000
7,026
(134)
(72)
—
(537)
110
(633)
—
40
(653)
(5,517)
(6,130)
263
205
12,498
12,966
2,150
10,816
12,966
Record plc Annual Report 2020
99
Strategic reportGovernanceFinancial statementsAdditional information
Company statement of financial position
As at 31 March
Non‑current assets
Right-of-use assets
Investments
Total non‑current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Corporation tax liabilities
Lease liabilities
Total current liabilities
Non‑current liabilities
Lease liabilities
Provisions
Total non‑current liabilities
Total net assets
Equity
Issued share capital
Share premium account
Capital redemption reserve
Retained earnings
Total equity
Note
12
14
18
19
19
21
2020
£’000
1,096
3,516
4,612
142
2,241
2,383
6,995
(10)
(2)
(495)
(507)
(584)
(200)
(784)
2019
£’000
—
5,567
5,567
—
3
3
5,570
(55)
(14)
—
(69)
—
—
—
5,704
5,501
50
1,809
26
3,819
5,704
50
1,809
26
3,616
5,501
The Company’s total comprehensive income for the year (which is principally derived from intra-group dividends) was £6,098,249
(2019: £6,681,076).
Approved by the Board on 18 June 2020 and signed on its behalf by:
Neil Record
Chairman
Steve Cullen
Chief Financial Officer
Company registered number: 1927640
The notes on pages 103 to 130 are an integral part of these consolidated financial statements.
100
Record plc Annual Report 2020
Company statement of changes in equity
Year ended 31 March 2020
As at 1 April 2019
IFRS 16 opening adjustment
Profit and total comprehensive income for the year
Dividends paid
Share option reserve movement
Transactions with shareholders
As at 31 March 2020
Year ended 31 March 2019
As at 1 April 2018
Profit and total comprehensive income for the year
Dividends paid
Share option reserve movement
Transactions with shareholders
As at 31 March 2019
Note
9
Note
9
Called-up
share
capital
£’000
50
—
—
—
—
—
50
Called-up
share
capital
£’000
50
—
—
—
—
50
Share
premium
account
£’000
1,809
—
—
—
—
—
1,809
Share
premium
account
£’000
1,809
—
—
—
—
1,809
Capital
redemption
reserve
£’000
Retained
earnings
£’000
Total
shareholders’
equity
£’000
26
—
—
—
—
—
26
3,616
(91)
6,098
(5,888)
84
(5,804)
3,819
5,501
(91)
6,098
(5,888)
84
(5,804)
5,704
Capital
redemption
reserve
£’000
26
—
—
—
—
26
Retained
earnings
£’000
2,312
6,681
Total
shareholders’
equity
£’000
4,197
6,681
(5,517)
(5,517)
140
(5,377)
3,616
140
(5,377)
5,501
The notes on pages 103 to 130 are an integral part of these consolidated financial statements.
Record plc Annual Report 2020
101
Strategic reportGovernanceFinancial statementsAdditional information
Company statement of cash flows
Year ended 31 March
Net cash inflow/(outflow) from operating activities
Cash flow from investing activities
Dividends received
Investment in subsidiaries
Redemption of seed funds
Interest received
Net cash inflow from investing activities
Cash flow from financing activities
Lease repayments
Dividends paid to equity shareholders
Cash outflow from financing activities
Net increase in cash and cash equivalents in the year
FX revaluation
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Closing cash and cash equivalents consist of:
Cash
Cash equivalents
Cash and cash equivalents
The notes on pages 103 to 130 are an integral part of these consolidated financial statements.
Note
25
2020
£’000
452
2019
£’000
(1,043)
6,030
6,600
(80)
2,247
2
(40)
—
1
8,199
6,561
9
(517)
(5,888)
(6,405)
2,246
(8)
3
2,241
2,241
—
18
2,241
—
(5,517)
(5,517)
1
—
2
3
3
—
3
102
Record plc Annual Report 2020
Notes to the financial statements
For the year ended 31 March 2020
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, and are shown in blue text.
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 and Company have prepared their financial statements under International Financial Reporting Standards (“IFRSs”) as adopted by the
European Union. IFRSs comprise standards and interpretations approved by the International Accounting Standards Board (“IASB”) and the IFRS
Interpretations Committee (“IFRS IC”) as adopted in the European Union as at 31 March 2020. The financial statements have been prepared on a
historical cost basis, modified to include fair valuation of derivative financial instruments.
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 in detail the impact of the covid-19 pandemic on the Group, the market it operates in
and its stakeholders. For this reason the financial statements have been prepared on a going concern basis. Please refer to the Directors’ report
on page 88 for more detail on going concern, and also see management’s detailed review of the impact of covid-19 on page 40.
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.
Impact of new accounting standards
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 April 2019:
•
IFRS 16 “Leases”
• Prepayment Features with Negative Compensation – Amendments to IFRS 9
• Long-term Interests in Associates and Joint Ventures – Amendments to IAS 28
• Annual Improvements to IFRS Standards 2015 – 2017 Cycle
• Plan Amendment, Curtailment or Settlement – Amendments to IAS 19
•
Interpretation 23 Uncertainty over Income Tax Treatments.
The Group had to change its accounting policies as a result of adopting IFRS 16.
The impact of the adoption of the leasing standard, IFRS 16 – “Leases”, and the new accounting policy are disclosed below with further detail
provided in note 12. The other amendments to standards did not have any impact on the Group’s accounting policies and did not require
retrospective adjustments and are not expected to significantly affect the current or future periods.
IFRS 16 – “Leases”
IFRS 16 – “Leases” is effective for annual periods beginning on or after 1 January 2019 and replaces IAS 17 – “Leases” and related interpretations.
This introduces a comprehensive model for the identification of lease arrangements and accounting treatment for both lessors and lessees, which
distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. IFRS 16 requires operating
leases, where the Group is the lessee, to be included on the Group’s statement of financial position, recognising a right-of-use (“ROU”) asset and
a related lease liability representing the present value obligation to make lease payments. The ROU asset is assessed for impairment annually
(incorporating any onerous lease assessments) and depreciated on a straight-line basis, adjusted for any re-measurements of the lease liability.
The lease liability will subsequently be adjusted for lease payments and interest, as well as the impact of any lease modifications. IFRS 16 also
requires extensive disclosures detailing the impact of leases on the Group’s financial position and results.
The Group has elected to recognise the cumulative effect of initially applying the standard to its leases retrospectively on the date of initial
application (1 April 2019), and has not restated comparative information. The cumulative effect of initially applying this Standard results in an
adjustment to the opening balance of retained earnings on the date of initial application.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as “operating leases”
under the principles of IAS 17 – “Leases”. These liabilities were measured at the present value of the remaining lease payments, discounted using
the Group’s assumed incremental borrowing rate as of 1 April 2019. The assumed weighted average incremental borrowing rate applied to the
lease liabilities on 1 April 2019 was 4%.
The Group had three lease agreements relating to its premises in Windsor, New York and Zürich respectively, which were previously recognised
as operating leases.
For each lease, a right-of-use asset has been recognised at its carrying amount as if the standard had been applied since the commencement
date of each lease.
There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
Full disclosure on leases is provided in note 12.
Record plc Annual Report 2020
103
Strategic reportGovernanceFinancial statementsAdditional information Notes to the financial statements continued
For the year ended 31 March 2020
1. Accounting policies continued
a. Accounting convention continued
Impact of new accounting standards continued
IFRS 16 – “Leases” continued
The change in accounting policy affected the following items in the balance sheet on 1 April 2019:
•
•
right-of-use assets – increase by £1,560,371;
lease liabilities – increase by £1,672,994;
• prepayments – reduce by £129,401; and
• accruals – reduce by £144,527.
The net impact on retained earnings on 1 April 2019 was a decrease of £97,497 after adjusting prepayments and accrual balances pertaining to
the leases which were recognised under the previous accounting policy.
The decrease in retained earnings will be offset over time by a lower annual Group income statement charge, as the total charge over the life of
each lease is the same as under the previous IAS 17 requirements.
Earnings per share increased by 0.01 pence per share for the year ended 31 March 2020 as a result of the adoption of IFRS 16.
There has been no other new or amended standard adopted in the financial year beginning 1 April 2019 which had a material impact on the
Group or Company.
Future accounting developments
The Group did not implement the requirements of any other standards or interpretations that were in issue but were not required to be adopted
by the Group at the year end date. No other standards or interpretations have been issued that are expected to have a material impact on the
Group’s financial statements.
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 2020. 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.
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.
At the end of the financial year, the Group held investments in two seed funds. These funds are held by Record plc and represent seed capital
investments by the Group.
Significant judgement
The Group uses judgement to determine whether investments in its seed funds constitute controlling interests in accordance with IFRS 10
– “Consolidated Financial Statements”. The Group considers all relevant facts and circumstances in assessing whether it has control over
specific funds or other entities. This includes consideration of the extent of the Group’s exposure to variability of returns as an investor and the
Group’s ability to direct the relevant activities, through exercising its voting rights as an investor, or as investment manager. We consider that
the Group exerts such control in cases where (either in isolation or together with its related parties) it holds a majority of units in the fund.
If the Group is in a position to be able to control a fund, then the fund is consolidated within the Group financial statements. Such funds are
consolidated either on a line-by-line basis, or if the fund meets the definition of a disposal group held for sale it is classified and accounted for on
that basis. In the case that the Group does not control a fund for the complete reporting period, then the fund is consolidated only for the part of
the reporting period for which the Group has control over the entity.
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 the
Company apart from those of the seed funds which have accounting reference dates of 30 September. The consolidated financial statements
incorporate the financial performance of the seed funds in the year ended 31 March 2020 and the financial position of the seed funds as at
31 March 2020.
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 Group’s total comprehensive income for the year includes
a profit of £6,098,249 attributable to the Company (2019: £6,681,076).
All intra-Group 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 re-measurement of monetary items at year-end
exchange rates are recognised in the statement of comprehensive income under “other income or expense”.
104
Record plc Annual Report 2020
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.
Areas of significant judgement – consolidation of seed funds
Note 1b describes the basis which the Group uses to determine whether it controls seed funds; further detail on consolidation of seed funds is
provided in note 14.
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.
3. Segmental analysis
The Directors, who together are the entity’s Chief Operating Decision Maker, consider that its services comprise one operating segment
(being the provision of currency 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. Further information on
the Group’s operations and principal activities is provided in the Business model section on page 10. Revenue analysed by product is provided
in note 4.
Record plc Annual Report 2020
105
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
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 or performance fees and both are accounted for in accordance with IFRS 15 – “Revenue from
contracts with customers”.
Management fees are recorded on a monthly basis as the underlying currency management 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.
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.
Revenue by product type
Management fees
Passive Hedging
Dynamic Hedging
Currency for Return
Multi-Product
Total management fee income
Performance fee income
Other currency services income
Total revenue from contracts with customers
2020
£’000
2019
£’000
12,026
11,610
3,995
1,982
5,130
4,598
1,775
4,325
23,133
22,308
1,819
611
2,333
332
25,563
24,973
b. Contract receivables
The payment terms for invoiced revenue vary but are typically 30 days from receipt of invoice. Accrued income is recognised to account for
income earned but not yet invoiced. Accrued income is the only component of contract assets.
The Group has recognised the following receivables, assets and liabilities in relation to contracts with customers.
Amount receivable from contracts with customers
Accrued income from contracts with customers
Total contract receivables and assets
The ageing of contract receivables is provided in note 23.
There are no contract liabilities arising in relation to contracts with customers.
2020
£’000
5,192
2,264
7,456
2019
£’000
4,654
1,888
6,542
c. 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 turnover
originated in the UK.
Revenue by geographical region
Management and performance fee income
UK
US
Switzerland
Other
Total revenue
106
2020
£’000
2019
£’000
2,328
6,209
11,377
5,649
25,563
2,239
6,439
11,401
4,894
24,973
Record plc Annual Report 2020
d. Major clients
During the year ended 31 March 2020, three clients individually accounted for more than 10% of the Group’s revenue. The three largest clients
generated revenues of £3.9 million, £3.5 million and £3.1 million in the year (2019: three largest clients generated revenues of £4.4 million,
£3.9 million and £3.6 million in the year).
5. Operating profit
Operating profit for the year is stated after charging/(crediting):
Staff costs
Depreciation of property, plant and equipment
Depreciation of leased property
Operating lease rentals: land and buildings
Amortisation of intangibles
Auditor fees
Fees payable to the Group’s auditor for the audit of the Company’s annual accounts
Fees payable to the Group’s auditor for the audit of subsidiary undertakings
Fees payable to the Group’s auditor for the audit of consolidated funds
Auditor fees total
Fees payable to the Group’s auditor and its associates for other services:
Audit-related assurance services required by law or regulation
Other non-audit services
Loss on forward FX contracts held to hedge cash flow
Loss on derivative financial instruments held by seed funds
Exchange (gains)/losses on revaluation of external holding in seed funds
Other exchange (gains)/losses
6. Staff costs
The average number of employees, including Directors, employed by the Group during the year was:
Corporate
Client relationships
Investment research
Operations
Risk management
Support
Annual average
The aggregate costs of the above employees, including Directors, were as follows:
Wages and salaries
Social security costs
Pension costs
Other employment benefit costs
Aggregate staff costs
2020
£’000
2019
£’000
12,087
11,574
253
504
—
129
64
53
43
160
33
—
509
323
(115)
(515)
221
—
604
74
49
42
40
131
27
61
242
—
(67)
(178)
2020
2019
8
16
16
24
5
13
82
2020
£’000
9,356
1,278
514
939
9
16
15
26
5
14
85
2019
£’000
8,900
1,239
468
967
12,087
11,574
Other employment benefit costs include share-based payments, share option costs, and costs relating to the Record plc Share Incentive Plan.
Detail on payments made to Directors for loss of office are provided on page 77.
Record plc Annual Report 2020
107
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
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.
The total charge for the year can be reconciled to the accounting profit as follows:
Profit before taxation
Taxation at the standard rate of tax in the UK of 19% (2019: 19%)
Tax effects of:
Other disallowable expenses and non-taxable income
Capital allowances for the year higher than depreciation
Higher tax rates on subsidiary undertakings
Adjustments recognised in current year in relation to the current tax of prior years
Adjustments recognised in current year in relation to Research and Development claims in respect of prior years
Other temporary differences
Total tax expense
The tax expense comprises:
Current tax expense
Deferred tax expense
Total tax expense
2020
£’000
7,737
1,470
4
(51)
17
—
(143)
68
2019
£’000
7,989
1,518
16
(20)
10
2
(93)
126
1,365
1,559
1,309
56
1,365
1,445
114
1,559
The standard rate of UK corporation tax for the year is 19% (2019: 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 tax charge for the year ended 31 March 2020 was 17.6% of profit before tax (2019: 19.5%).
8. Earnings per share
Basic earnings per share is calculated by dividing the profit 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.
Weighted average number of shares used in calculation of basic earnings per share
Effect of potential dilutive ordinary shares – share options
Weighted average number of shares used in calculation of diluted earnings per share
Basic earnings per share
Diluted earnings per share
2020
2019
196,679,874 196,655,224
390,156
1,462,554
197,070,030 198,117,778
pence
3.26
3.26
pence
3.27
3.25
The potential dilutive shares relate to the share options granted in respect of the Group’s Share Scheme (see note 22). There were share options
in place at the beginning of the year over 12,291,703 shares. During the year 1,691,068 share options were exercised, and a further
2,640,120 share options lapsed or were forfeited. The Group granted 3,935,000 share options with a potentially dilutive effect during the year.
Of the 11,895,515 share options in place at the end of the period, 5,913,648 have a dilutive impact at the year end.
108
Record plc Annual Report 2020
9. Dividends
Interim and special dividends are recognised when paid and final dividends when approved by shareholders.
The dividends paid by the Group during the year ended 31 March 2020 totalled £5,887,541 (2.99 pence per share) which comprised a final
dividend in respect of the year ended 31 March 2019 of £2,261,970 (1.15 pence per share), a special dividend in respect of the year ended
31 March 2019 of £1,357,182 (0.69 pence per share) and an interim dividend for the year ended 31 March 2020 of £2,268,389
(1.15 pence per share).
The dividends paid by the Group during the year ended 31 March 2019 totalled £5,516,896 (2.80 pence per share) which comprised a final
dividend in respect of the year ended 31 March 2018 of £2,266,379 (1.15 pence per share), a special dividend in respect of the year ended
31 March 2018 of £985,382 (0.50 pence per share) and an interim dividend for the year ended 31 March 2019 of £2,265,135 (1.15 pence
per share).
For the year ended 31 March 2020, a final ordinary dividend of 1.15 pence per share has been proposed and a special dividend of 0.41 pence
per share has been declared, totalling £2.3 million and £0.8 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
straight-line 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 amortised 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. The carrying amounts can be analysed as follows:
2020
Cost
At 1 April 2019
Additions
Disposals
At 31 March 2020
Amortisation
At 1 April 2019
Charge for the year
Disposals
At 31 March 2020
Net book amounts
At 31 March 2020
At 1 April 2019
Software
£’000
Total
£’000
1,592
1,592
311
—
311
—
1,903
1,903
1,304
1,304
129
—
129
—
1,433
1,433
470
288
470
288
Record plc Annual Report 2020
109
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
11. Intangible assets continued
2019
Cost
At 1 April 2018
Additions
Disposals
At 31 March 2019
Amortisation
At 1 April 2018
Charge for the year
Disposals
At 31 March 2019
Net book amounts
At 31 March 2019
At 1 April 2018
Software
£’000
Total
£’000
1,458
1,458
134
—
134
—
1,592
1,592
1,230
1,230
74
—
74
—
1,304
1,304
288
228
288
228
The annual contractual commitment for the maintenance and support of the above software is £187,454, (2019: £183,976). 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 of three to
six years but they may have extension 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.
Until the financial year ended 31 March 2019, these leases met the criteria to be classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.
From 1 April 2019, following the adoption of IFRS 16 as described in note 1, 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. Lease liabilities 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 2020, 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 1 September 2022.
On 16 March 2016, the Group signed a lease on premises in New York City, at an average annual commitment of $125,840. The lease expired on
31 May 2019.
On 1 June 2017, the Group signed a five year lease on premises in Zürich, at an annual commitment of CHF 49,680.
Record assesses whether a contract is or contains a lease at the inception of the contract.
Right-of-use (“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).
110
Record plc Annual Report 2020
Net book value of right‑of‑use assets
Year ended 31 March 2020
Net book value on transition at 1 April 2019
Addition
Depreciation
FX revaluation
Net book value at 31 March 2020
Lease liabilities
Current
Non-current
Lease payments
At 31 March 2020, the undiscounted operating lease payments on an annual basis are as follows:
Maturity of lease liability at 31 March 2020
Within 1 year
1-2 years
2-3 years
After 3 years
Total lease liability before discounting
Group
£’000
1,560
114
(504)
(5)
Company
£’000
1,435
114
(453)
—
1,175
1,096
Group
£’000
Company
£’000
544
615
495
584
1,159
1,079
Group
£’000
Company
£’000
568
568
100
—
508
508
94
—
1,236
1,110
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.
Operating leases
Total operating lease commitment under IAS 17 as at 31 March 2020 was £nil. The prior year operating lease commitments under IAS 17 primarily
include the agreements for lease contracts for the Morgan House premises in Windsor (expiring in 2022) with an annual commitment of £507,603,
the New York office with an annual commitment of $125,840 (expired in May 2019) and the Zürich office with an annual commitment of CHF
49,680 (expiring in 2022).
Up until 31 March 2019, the Group considered the risks and rewards of ownership of the leased properties, and considered that they remained
with the lessors. Consequently, all property leases were recognised as operating leases.
The Group had commitments under non-cancellable operating leases relating to land and buildings as set out below:
31 March
2020
£’000
31 March
2019
£’000
Within 1 year
1-5 years
After 5 years
Total operating lease liability
The Group’s closing operating lease commitments can be reconciled to the opening lease liability as detailed in the table below.
Operating lease commitments as at 31 March 2019
Adjustment for discounting at the lessee’s incremental borrowing rate at date of initial application
Finance lease liability as at 1 April 2019
Record plc Annual Report 2020
—
—
—
—
562
1,310
—
1,872
£’000
1,872
(199)
1,673
111
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
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 straight-line 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
• 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:
2020
Cost
At 1 April 2019
Additions
Disposals
At 31 March 2020
Depreciation
At 1 April 2019
Charge for the year
Disposals
At 31 March 2020
Net book amounts
At 31 March 2020
At 1 April 2019
2019
Cost
At 1 April 2018
Additions
Disposals
At 31 March 2019
Depreciation
At 1 April 2018
Charge for the year
Disposals
At 31 March 2019
Net book amounts
At 31 March 2019
At 1 April 2018
Leasehold
improvements
£’000
Computer
equipment
£’000
Fixtures
and fittings
£’000
692
—
—
692
271
126
—
397
295
421
711
241
—
952
484
89
—
573
379
227
325
2
—
327
212
38
—
250
77
113
Leasehold
improvements
£’000
Computer
equipment
£’000
Fixtures
and fittings
£’000
661
31
—
692
150
121
—
271
421
511
671
40
—
711
425
59
—
484
227
246
324
1
—
325
171
41
—
212
113
153
Total
£’000
1,728
243
—
1,971
967
253
—
1,220
751
761
Total
£’000
1,656
72
—
1,728
746
221
—
967
761
910
The Group’s tangible non-current assets are located predominantly in the UK.
112
Record plc Annual Report 2020
14. Investments
Investment in subsidiaries at cost
Capitalised investment in respect of share based payments
Investment in funds
Investment in impact bonds
Total investments
Group
2020
£’000
—
—
—
2,472
2,472
2019
£’000
—
—
1,112
—
Company
2020
£’000
166
1,279
2,071
—
1,112
3,516
2019
£’000
86
1,195
4,286
—
5,567
Company
Investments in subsidiaries
Investments in subsidiaries are shown at cost less impairment losses. The capitalised investment in respect of share-based payments offered by
subsidiaries is equal to the cumulative fair value of the amounts payable to employees recognised as an expense by the subsidiary.
Investment in subsidiaries (at cost)
Record Currency Management Limited
Record Group Services Limited
Record Portfolio Management Limited
Record Currency Management (US) Inc.
Record Currency Management (Switzerland) GmbH
Trade Record Ltd
Record Fund Management Limited
N P Record Trustees Limited
Total investment in subsidiaries (at cost)
Capitalised investment in respect of share‑based payments
Record Group Services Limited
Record Currency Management (US) Inc.
Record Currency Management (Switzerland) GmbH
Total capitalised investment in respect of share‑based payments
Total investment in subsidiaries
Particulars of subsidiary undertakings
Name
Nature of business
2020
£’000
2019
£’000
10
10
10
—
16
120
—
—
166
10
10
10
—
16
40
—
—
86
1,186
1,108
89
4
1,279
1,445
85
2
1,195
1,281
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
Trade Record Ltd
Record Portfolio Management Limited
Record Fund Management Limited
N P Record Trustees Limited
Prize competition allowing subscribers to trade virtual money across
asset classes
Dormant
Dormant
Dormant trust company
The Group’s interest in the equity capital of subsidiary undertakings is 100% of the ordinary share capital in all cases except for Trade Record Ltd
(“Trade Record”) in which the Group’s interest is 40% of the ordinary share capital. Record Currency Management (US) Inc. is incorporated in
Delaware (registered office: Corporation Service Company, 251 Little Falls Drive, Wilmington, DE 19808) and Record Currency Management
(Switzerland) GmbH is incorporated in Zürich (registered office: Münsterhof 14, 8001 Zürich). Trade Record is registered in England and Wales with
its registered office at 1 Poultry, London EC2R 8JR. Record plc and all its other subsidiaries are registered in England and Wales, each with the
registered office at Morgan House, Madeira Walk, Windsor, Berkshire, SL4 1EP, UK.
Record plc Annual Report 2020
113
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
14. Investments continued
Company continued
Investment in Trade Record Ltd (“Trade Record”)
Record plc owns 40% of Trade Record alongside two of its Directors each owning a further 20%. Trade Record was incorporated in February
2019 and was considered an opportunity with the potential to create shareholder value and significant diversification from Record’s established
currency management business.
Investment in seed funds
In addition to the subsidiaries listed above, the Company holds investments in seed funds. These funds are seed investments, which have various
investment objectives and policies and are subject to the terms and conditions of their offering documentation. The principal activity of each is to
invest capital from investors in a portfolio of assets in order to provide a return for those investors.
The seed fund investments are presented within investments in the Company statement of financial position, and all seed fund entities are
sub-funds of the Record Umbrella Fund, an open-ended umbrella unit trust authorised in Ireland. Two of the four funds, Record Currency – FTSE
Index Fund and Record Currency – Emerging Market Currency Fund, were closed in March 2020. The Company’s investment in seed funds is
shown in the table below.
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.
Investment in Trade Record
Record plc in conjunction with two of its Directors, controls 80% of the ordinary share capital, giving the Company rights over variable returns and
the power to affect returns. Therefore the Company has the ability to control Trade Record, which is consequently recognised as a subsidiary.
In accordance with IFRS 10, the financial results of Trade Record are consolidated on a line-by-line basis within the financial statements of the
Group.
Investment in seed funds
The Group has controlled the Record Currency – Strategy Development Fund and Record – Currency Multi-Strategy Fund throughout both
the year ended 31 March 2020 and the comparative year. Both funds were consolidated in full, on a line-by-line basis in the Group’s financial
statements throughout these periods.
The Group was in control of the Record Currency – FTSE FRB10 Index Fund throughout the comparative year ended 31 March 2019 and until
its closure in March 2020. This fund was consolidated in full, on a line-by-line basis in the Group’s financial statements until its closure.
Investment in funds
Record Currency – FTSE FRB10 Index Fund
Record Currency – Emerging Market Currency Fund
Record Currency – Strategy Development Fund
Record – Currency Multi-Strategy Fund
Total investment in funds
Group
2020
£’000
—
—
—
—
—
2019
£’000
—
1,112
—
—
1,112
Company
2020
£’000
—
—
1,181
890
2,071
2019
£’000
1,162
1,112
1,046
966
4,286
The Record Currency – Emerging Market Currency Fund was closed in March 2020. The Group did not control the Record Currency – Emerging
Market Currency Fund at any point during the year ended 31 March 2020 or the comparative year, and therefore it did not consolidate this fund in
the Group’s financial statements.
Investment in impact bonds
In January 2020, the Group invested £2,287,241 in impact bonds; the fair value at the year end was £2,472,241 (prior year: £nil).
114
Record plc Annual Report 2020
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 amount 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.
Charge to income statement in year
(Liability)/asset brought forward
(Liability) carried forward
The deferred tax (liability)/asset consists of the tax effect of temporary differences in respect of:
Deferred tax allowance on unvested share options
Excess of taxation allowances over depreciation on fixed assets
Total
2020
£’000
(57)
(29)
(86)
2020
£’000
1
(87)
(86)
2019
£’000
(115)
86
(29)
2019
£’000
6
(35)
(29)
At the year end there were share options not exercised with an intrinsic value for tax purposes of £7,357 (2019: £44,534). 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. There is no unprovided
deferred taxation.
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.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses (“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. Accrued income relates to accrued management and performance fees earned but not
yet invoiced.
An analysis of the Group’s receivables is provided below:
Trade receivables
Accrued income
Other receivables
Prepayments
Total
2020
£’000
5,192
2,264
308
940
2019
£’000
4,654
1,888
108
912
8,704
7,562
All amounts are short-term. 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 2020. 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 and contract assets 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. Contract assets relate to accrued management and performance fees earned but not yet
invoiced and have substantially the same risk characteristics as the trade receivables. The Group has therefore concluded that the ECLs for trade
receivables are a reasonable approximation of the loss rates for the contract assets. The Group does not expect to incur any credit losses and has
not recognised any ECLs in the current year (2019: £nil).
Record plc Annual Report 2020
115
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
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.
Derivative financial assets
Forward foreign exchange contracts held to hedge non-sterling based assets
Forward foreign exchange contracts held for trading
Foreign exchange options held for trading
Total
Derivative financial liabilities
Forward foreign exchange contracts held to hedge non-sterling based assets
Forward foreign exchange contracts held for trading
Total
2020
£’000
—
178
15
193
2020
£’000
(316)
(294)
(610)
2019
£’000
106
58
—
164
2019
£’000
—
(109)
(109)
Derivative financial instruments held to hedge non-sterling based assets
At 31 March 2020 there were outstanding contracts with a principal value of £10,993,268 (31 March 2019: £5,940,246) 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 2020. 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:
Derivative financial instruments held to hedge non-sterling based assets
Net loss on forward foreign exchange contracts at fair value through profit or loss
2020
£’000
509
2019
£’000
242
Derivative financial instruments held for trading
The Record – Currency Multi-Strategy Fund and the Record Currency – Strategy Development Fund may use a variety of instruments including
forward foreign exchange contracts, options and futures in order to achieve a return. The Record Currency – FTSE FRB10 Index Fund used
forward foreign exchange contracts in order to achieve a return until its closure in March 2020.
All derivative financial instruments held by the Record – Currency Multi-Strategy Fund, the Record Currency – Strategy Development Fund
and the Record Currency – FTSE FRB10 Index Fund were classified as held for trading throughout the period or up until the date of closure,
where relevant.
At 31 March 2020 there were outstanding contracts with a principal value of £23,425,316 (31 March 2019: £24,323,080).
The net gain or loss on derivative financial instruments held for trading for the year was as follows:
Derivative financial instruments held for trading
Net loss on forward foreign exchange contracts and foreign exchange options at fair value through profit or loss
2020
£’000
323
2019
£’000
—
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 short-term 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 short-term cash
commitments rather than for investment or other purposes.
116
Record plc Annual Report 2020
In the Group’s judgement, bank deposits and treasury bills with maturities in excess of 3 months do not meet the definition of short-term or highly
liquid and are held for purposes other than meeting short-term 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.
Assets managed as cash
Bank deposits with maturities > 3 months
Treasury bills with maturities > 3 months
Money market instruments with maturities > 3 months
Cash
Bank deposits with maturities <= 3 months
Cash and cash equivalents
Total assets managed as cash
Cash and cash equivalents
Cash and cash equivalents – sterling
Cash and cash equivalents – USD
Cash and cash equivalents – CHF
Cash and cash equivalents – other currencies
Total cash and cash equivalents
Group
2020
£’000
7,958
—
7,958
8,004
6,290
14,294
22,252
Group
2020
£’000
2019
£’000
10,735
—
10,735
2,150
10,816
12,966
23,701
2019
£’000
10,426
10,624
3,654
2,180
161
53
73
89
Company
2020
£’000
2019
£’000
—
—
—
2,241
—
2,241
2,241
Company
2020
£’000
2,241
—
—
—
—
—
—
3
—
3
3
2019
£’000
3
—
—
—
3
14,294
12,966
2,241
The Group cash and cash equivalents balance incorporates the cash and cash equivalents held by any fund deemed to be under control of
Record plc (refer to notes 1 and 14 for explanation of accounting treatment). As at 31 March 2020, the cash and cash equivalents held by the
seed funds over which the Group had control totalled £2,731,819 (31 March 2019: £5,107,670) and the money market instruments with
maturities > 3 months held by these funds were £1,599,741 (31 March 2019: £675,577). As at 31 March 2020, the cash and cash equivalents
held by Trade Record over which the Group had control was £110,130 (31 March 2019: £80,000). At 31 March 2020, Trade Record did not hold
any money market instruments with maturities > 3 months (2019: £nil).
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.
Trade and other payables
Trade payables
Amounts owed to Group undertaking
Other payables
Other tax and social security
Accruals
Total
Group
2020
£’000
425
—
11
443
2,130
3,009
2019
£’000
294
—
4
257
2,181
2,736
Company
2020
£’000
2019
£’000
—
10
—
—
—
10
—
55
—
—
—
55
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
Current tax liabilities
Corporation tax
Group
Company
2020
£’000
601
2019
£’000
692
2020
£’000
2
2019
£’000
14
Record plc Annual Report 2020
117
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
20. Financial liabilities
Record plc has made investments in a number of seed funds where it is in a position to be able to control those funds by virtue of the size of its
holding. When Record plc is not the only investor in such funds and the external investment instrument does not meet the definition of an equity
instrument under IAS 32 then the instrument is classified as a financial liability. The financial liabilities are measured at cost plus movement in value
of the third-party investment in the fund.
Record has seeded four funds which were active during the year ended 31 March 2020. Both the Record Currency – FTSE FRB10 Index Fund
and the Record Currency – Emerging Market Currency Fund were closed in March 2020.
The Record – Currency Multi-Strategy Fund and the Record Currency – Strategy Development Fund were considered to be under control of the
Group as the combined holding of Record plc and its Directors constituted a majority interest throughout the current and prior years.
The mark-to-market value of units held by investors in these funds other than Record plc are shown as financial liabilities in the Group financial
statements, in accordance with IFRS.
Mark-to-market value of external holding in seed funds consolidated into the accounts of the Record Group
Record Currency – FTSE FRB10 Index Fund
Record – Currency Multi-Strategy Fund
Record Currency – Strategy Development Fund
Total financial liabilities
2020
£’000
—
2,191
—
2,191
2019
£’000
479
2,142
—
2,621
The financial liabilities relate only to the fair value of the external investors’ holding in the seed funds, and are in no sense debt.
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.
Authorised
Ordinary shares of 0.025p each
Called‑up, allotted and fully paid
Ordinary shares of 0.025p each
2020
2019
£’000
Number
£’000
Number
100 400,000,000
100 400,000,000
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 share-based 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.
Record plc shares held by EBT as at 31 March 2018
Adjustment for net purchases by EBT
Record plc shares held by EBT as at 31 March 2019
Adjustment for net purchases by EBT
Record plc shares held by EBT as at 31 March 2020
Number
2,393,432
592,604
2,986,036
233,351
3,219,387
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 share-based compensation plans and relevant transactions made during the year is included in
note 22.
118
Record plc Annual Report 2020
22. Share-based payments
During the year ended 31 March 2020 the Group has managed the following share-based compensation plans:
a) The Group Profit Share Scheme: share awards issued under the Group Profit Share Scheme are classified as share-based payments with
cash alternatives under IFRS 2.
b) The Record plc Share Scheme: share options issued under the Record plc Share Scheme are classified as equity-settled share-based
payments under IFRS 2.
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 tax-approved scheme offering attractive tax savings for employees retaining their
shares in the scheme over the medium to long term.
All obligations arising from the three schemes have been fulfilled through purchasing shares in the market.
a. Group Profit Share 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 amounts 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 Group Profit Share 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 profit share pool between 25% and 35% of
operating profits. Directors and senior employees receive one third of their profit share 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 £838,483 (2019: £804,422). 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 Group Profit Share 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 Group Profit Share Scheme rules contain clawback provisions allowing for the repayment of profit share 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
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 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 3,935,000 shares were granted under the Share Scheme during the year (2019: 935,000), which were all granted
as Unapproved options (2019: 370,000 granted as Unapproved options and 565,000 as Approved options). All options were granted with an
exercise price per share equal to the share price prevailing at the time of grant.
The 1,985,000 Unapproved options issued to employees on 21 August 2019 each become exercisable in three equal tranches on the third,
fourth and fifth 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 1,950,000 Unapproved options issued to employees on 18 March 2020 each become exercisable 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.
Record plc Annual Report 2020
119
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
22. Share-based payments continued
b. The Record plc Share Scheme continued
Equity‑settled share‑based payments continued
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 2020, 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:
Model input
Share price
Exercise price
Expected volatility
Option life
Risk-free interest rate (%)
Expected volatility is based on historical volatility.
Weighted average value
31.1p
31.1p
34%
4 years
0.65%
The Group share-based payment expense in respect of the Share Scheme was £83,799 for the year ended 31 March 2020 (2019: £140,236).
Outstanding share options
At 31 March 2020, the total number of ordinary shares of 0.025p outstanding under Record plc share compensation schemes was 11,895,515
(2019: 12,291,703). 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:
Granted
Exercised
Lapsed/ At 31 March
2020
forfeited
Earliest
vesting date
Latest
vesting date1
Exercise
price
Date of grant
18/11/13
26/11/14
24/03/15
24/03/15
01/12/15
27/01/16
27/01/16
27/01/16
27/01/16
30/11/16
30/11/16
30/11/16
31/01/17
26/01/18
26/01/18
26/01/18
26/01/18
29/03/19
29/03/19
21/08/19
18/03/20
At 1 April
2019
116,667
720,000
114,000
334,750
1,200,000
562,500
657,597
218,334
48,334
288,574
1,042,500
2,200,000
78,947
1,461,500
328,000
52,000
1,933,000
565,000
370,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(116,667)
—
—
(720,000)
(114,000)
(334,750)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
£0.3000
£0.3586
£0.3450
£0.3450
—
(600,000)
600,000
01/12/20
01/12/20
£0.2888
(456,250)
—
106,250
27/01/20
27/01/20
£0.2450
(321,901)
(91,632)
244,064
27/01/20
27/01/20
£0.2450
—
—
—
(347,500)
(109,167)
109,167
27/01/21
27/01/21
£0.2450
(24,167)
24,167
27/01/21
27/01/21
£0.2450
—
—
288,574
30/11/20
30/11/20
£0.34072
695,000
30/11/19
30/11/20
£0.34072
—
—
—
—
—
—
—
—
—
—
(733,332)
1,466,668
30/11/20
30/11/21
£0.34072
(78,947)
—
—
—
£0.3800
(151,500)
1,310,000
26/01/22
26/01/22
£0.4350
(91,375)
236,625
26/01/20
26/01/22
£0.4350
—
—
52,000
26/01/21
26/01/23
£0.4350
1,933,000
26/01/21
26/01/23
£0.4350
(40,000)
525,000
29/03/23
29/03/23
£0.2830
—
—
—
370,000
29/03/20
29/03/23
£0.2830
1,985,000
21/08/22
21/08/24
£0.3110
1,950,000
18/03/21
18/03/24
£0.28902
—
—
1,985,000
1,950,000
Total options
12,291,703
3,935,000
(1,691,068)
(2,640,120) 11,895,515
Weighted average
exercise price of options
£0.35
£0.30
£0.30
£0.33
£0.34
1. Under the terms of the deeds of grants, options are exercisable for twelve months following the vesting date.
During the year 1,691,068 options were exercised. The weighted average share price at date of exercise was £0.35. At 31 March 2020 a total of
869,189 options had vested and were exercisable.
120
Record plc Annual Report 2020
The Directors’ interests in the combined share schemes are as follows:
Record plc Group Profit Share Scheme (interest in restricted share awards)
Leslie Hill (appointed CEO on 13 February 2020)
James Wood-Collins (stepped down as CEO on 13 February 2020)
Bob Noyen
Steve Cullen
Record plc Share Scheme (interest in unvested share options)
Leslie Hill (appointed CEO on 13 February 2020)
James Wood-Collins (stepped down as CEO on 13 February 2020)
Bob Noyen
Steve Cullen
Ordinary shares held as at
31 March
2020
31 March
2019
613,458
802,837
—
318,832
311,296
318,832
142,648
264,286
1,405,001
1,406,667
2,425,001
2,426,667
1,405,001
1,406,667
935,000
1,131,667
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.
Record’s average EPS growth
>RPI growth + 13%
>RPI growth + 10%, =RPI growth + 7%, =RPI growth + 4%, = 3 months
Cash and cash equivalents
Total financial assets
2020
£’000
5,192
2,264
308
193
7,958
14,294
30,209
2019
£’000
4,654
1,888
108
164
10,735
12,966
30,515
122
Record plc Annual Report 2020
The debtors’ age analysis is also evaluated on a regular basis for potential doubtful debts. It is management’s opinion that no provision for
doubtful debts is required. The table below is an analysis of trade receivables and accrued income by due date:
At 31 March 2020
Trade receivables
Accrued income
Total
At 31 March 2019
Trade receivables
Accrued income
Total
Carrying
amount
£’000
5,192
2,264
7,456
Carrying
amount
£’000
4,654
1,888
6,542
Neither
impaired nor
past due
£’000
0-3 months
past due
£’000
More than
3 months
past due
£’000
5,041
2,264
7,305
98%
5
—
5
0%
146
—
146
2%
Neither
impaired nor
past due
£’000
0-3 months
past due
£’000
More than
3 months
past due
£’000
4,369
1,888
6,257
96%
285
—
285
4%
—
—
—
0%
The Group offers standard credit terms of 30 days from invoice date. It is the Group’s policy to assess debtors for recoverability 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. 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 62 debtors’ balances (2019: 57). The largest individual debtor corresponds to 15% of the total balance (2019:
19%). Debtor days, based on the generally accepted calculation of debtor days, is 74 days (2019: 68 days). This reflects the quarterly billing cycle
used by the Group for the vast majority of its fees. As at 31 March 2020, 2% of debt was overdue (2019: 4%). 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 29 days (2019: 21 days).
The impact of covid-19 has been considered, and management believe that the Group’s ability to meet its obligations is unaffected.
Contractual maturity analysis for financial liabilities:
At 31 March 2020
Trade payables
Accruals
Derivative financial liabilities
Total
At 31 March 2019
Trade payables
Accruals
Derivative financial liabilities
Total
Carrying
amount
£’000
425
2,130
610
3,165
Carrying
amount
£’000
294
2,181
109
2,584
Due or due Due between Due between
3 months
in less than
and 1 year
1 month
£’000
£’000
1 and
3 months
£’000
425
67
148
640
—
1,793
462
2,255
—
270
—
270
Due or due Due between Due between
3 months
in less than
and 1 year
1 month
£’000
£’000
1 and
3 months
£’000
294
40
33
367
—
1,041
76
1,117
—
1,100
—
1,100
Record plc Annual Report 2020
123
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
23. Financial risk management continued
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 short-term 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
At 31 March 2020
Financial assets
Trade receivables
Accrued income
Other receivables
Derivative financial assets at fair value through profit or loss
Money market instruments with maturities > 3 months
Cash and cash equivalents
Total financial assets
Financial liabilities
Trade payables
Accruals
Derivative financial liabilities at fair value through profit or loss
Financial liabilities
Total financial liabilities
At 31 March 2019
Financial assets
Trade receivables
Accrued income
Other receivables
Derivative financial assets at fair value through profit or loss
Money market instruments with maturities > 3 months
Cash and cash equivalents
Total financial assets
Financial liabilities
Trade payables
Accruals
Derivative financial liabilities at fair value through profit or loss
Financial liabilities
Total financial liabilities
Fixed rate
£’000
Floating rate
£’000
No
interest rate
£’000
Total
£’000
5,191
2,264
308
193
7,958
14,294
30,208
5,191
2,264
308
193
—
—
7,956
(425)
(425)
(2,130)
(2,130)
(610)
(2,191)
(5,356)
No
interest rate
£’000
4,654
1,888
108
164
—
—
6,814
(610)
(2,191)
(5,356)
Total
£’000
4,654
1,888
108
164
10,735
12,966
30,515
(294)
(294)
(2,181)
(2,181)
(109)
(2,621)
(5,205)
(109)
(2,621)
(5,205)
—
—
—
—
7,958
6,271
14,229
—
—
—
—
—
—
—
—
—
—
8,023
8,023
—
—
—
—
—
Fixed rate
£’000
Floating rate
£’000
—
—
—
—
10,735
10,816
21,551
—
—
—
—
—
—
—
—
—
—
2,150
2,150
—
—
—
—
—
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.
124
Record plc Annual Report 2020
During the year ended 31 March 2020, the Group invoiced the following amounts in currencies other than sterling:
Swiss franc (CHF)
US dollar (USD)
Euro (EUR)
Australian dollar (AUD)
Canadian dollar (CAD)
Swedish krona (SEK)
Singapore dollar (SGD)
Local
currency
value
‘000
Value in
reporting
currency
£’000
14,416
11,533
9,217
3,028
1,520
742
1,476
25
7,274
2,644
804
436
101
14
22,806
The value of revenues for the year ended 31 March 2020 that were denominated in currencies other than sterling was £22.8 million
(31 March 2019: £21.4 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.
Sterling weakening by 10% against the dollar
Sterling strengthening by 10% against the dollar
Sterling weakening by 10% against the Swiss franc
Sterling strengthening by 10% against the Swiss franc
Impact on profit after tax
for the year ended 31 March
Impact on total equity
as at 31 March
2020
£’000
334
(334)
622
(622)
2019
£’000
346
(346)
565
(565)
2020
£’000
334
(334)
622
(622)
2019
£’000
346
(346)
565
(565)
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 = $1.27 this would result in sterling weakening to £1 = $1.15 and sterling strengthening to £1 = $1.41.
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 1.25 this would result in sterling weakening to £1 = CHF 1.14 and sterling strengthening to £1 = CHF 1.39.
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.
Record plc Annual Report 2020
125
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
23. Financial risk management continued
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 on page 38.
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.
Loss of largest client
As part of the Group’s ICAAP process, several more severe scenarios are considered.
Impact on profit after tax
for the year ended 31 March
Impact on total equity
as at 31 March
2020
£’000
2,214
2019
£’000
2,490
2020
£’000
2,214
2019
£’000
2,490
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 assets or liabilities;
• Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and
• Level 3: inputs for the 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:
2020
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Financial assets at fair value through profit or loss
Impact bonds
2,472
2,472
Forward foreign exchange contracts used by seed funds
Foreign exchange options used by seed funds
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging
Forward foreign exchange contracts used by seed funds
178
15
(316)
(294)
—
—
—
—
Total
2,055
2,472
—
178
15
(316)
(294)
(417)
—
—
—
—
—
—
Financial assets at fair value through profit or loss
Investments in funds
Forward foreign exchange contracts used for hedging
Forward foreign exchange contracts used for seed funds
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging
Total
There have been no transfers between levels in the reporting period (2019: none).
2019
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
1,112
1,112
106
58
(109)
1,167
—
—
—
1,112
—
106
58
(109)
55
—
—
—
—
—
126
Record plc Annual Report 2020
Basis for classification of financial instruments classified as level 1 within the fair value hierarchy
Impact bonds are classified as level 1. These bonds are valued using the market price and coupon rate.
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.
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
At 31 March 2020
Impact bonds
Trade and other receivables (excludes prepayments)
Money market instruments with maturities > 3 months
Cash and cash equivalents
Derivative financial assets at fair value through profit or loss
Trade payables
Accruals
Derivative financial liabilities at fair value through profit or loss
Total
At 31 March 2019
Trade and other receivables (excludes prepayments)
Money market instruments with maturities > 3 months
Cash and cash equivalents
Derivative financial assets at fair value through profit or loss
Trade payables
Accruals
Derivative financial liabilities at fair value through profit or loss
Note
14
16
18
18
17
19
19
17
Note
16
18
18
17
19
19
17
Financial
Assets at
liabilities
amortised measured at
cost amortised cost
£’000
£’000
Assets at
fair value
through
profit or loss
£’000
Liabilities at
fair value
through profit
or loss
£’000
—
7,764
7,958
14,294
—
—
—
—
—
—
—
—
—
(425)
(2,130)
—
2,472
—
—
—
193
—
—
—
30,016
(2,555)
2,665
—
—
—
—
—
—
—
(610)
(610)
Financial
liabilities
Assets at
amortised measured at
cost amortised cost
£’000
£’000
Assets at
fair value
through
profit or loss
£’000
Liabilities at
fair value
through profit
or loss
£’000
6,650
10,735
12,966
—
—
—
—
—
—
—
—
(294)
(2,181)
—
—
—
—
164
—
—
—
—
—
—
—
—
—
(109)
(109)
Total
30,351
(2,475)
164
Record plc Annual Report 2020
127
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
25. Cash flow from operating activities
Group
This note should be read in conjunction with the cash flow statements. It provides a reconciliation to show how operating profit, which is based on
accounting rules, translates to cash flows.
Operating profit
Adjustments for non-cash movements:
Depreciation of right-of-use assets
Depreciation of property, plant and equipment
Amortisation of intangible assets
Net release of shares previously held by EBT
Share-based payments
Other non-cash movements
Changes in working capital
Increase in receivables
Increase in payables
(Increase)/decrease in other financial assets
Increase in other financial liabilities
Cash inflow from operating activities
Interest paid
Corporation taxes paid
Net cash inflow from operating activities
Company
Operating profit
Adjustment for:
Depreciation of right-of-use assets
Loss/(gain) on investments
Other
Changes in working capital
Increase in receivables
Increase/(decrease) in payables
Cash inflow/(outflow) from operating activities
Corporation taxes paid
Net cash inflow/(outflow) from operating activities
2020
£’000
7,649
504
253
129
452
286
(710)
8,563
(1,281)
618
(30)
72
7,942
—
(1,399)
6,543
2020
£’000
125
453
25
(162)
(271)
299
469
(17)
452
2019
£’000
7,876
—
221
74
443
87
(172)
8,529
(772)
106
102
234
8,199
(22)
(1,151)
7,026
2019
£’000
99
—
(26)
(73)
—
(1,038)
(1,038)
(5)
(1,043)
128
Record plc Annual Report 2020
26. 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.
Amounts due to subsidiaries
Net dividends received from subsidiaries
2020
£’000
132
6,030
2019
£’000
(55)
6,600
Amounts owed to and by related parties will be settled in cash. No guarantees have been given or received. No provisions for doubtful debts have
been raised against amounts outstanding (2019: £nil). No expense has been recognised during the year in respect of bad or doubtful debts due
from related parties.
Investment in Trade Record
In March 2019, Record plc subscribed £40,000 for 40% of the ordinary share capital of Trade Record. In May 2019, Record plc invested a further
£80,000 in Trade Record in a subsequent fundraising round.
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
Short-term employee benefits
Post-employment benefits
Share-based payments
Total
Key management personnel dividends
The dividends paid to key management personnel in the year ended 31 March 2020 totalled £3,113,776 (2019: £2,981,053).
Directors’ remuneration
Emoluments (excluding pension contribution)
Pension contribution (including payments made in lieu of pension contributions)
Total
2020
£’000
5,627
242
909
2019
£’000
5,411
204
889
6,778
6,504
2020
£’000
2,328
163
2,491
2019
£’000
2,421
165
2,586
During the year, one Director of the Company (2019: one) participated in the Group Personal Pension Plan, a defined contribution scheme.
Further detail on Directors’ remuneration is provided in the Remuneration report on pages 70 to 85, including detail on payments made to
Directors for loss of office.
Transactions with Trade Record Ltd
In March 2019, Record plc Directors Leslie Hill and Bob Noyen each subscribed £20,000 for 20% of the ordinary share capital of Trade Record.
In May 2019, Record plc Directors Leslie Hill and Bob Noyen each invested a further £40,000 in Trade Record in a subsequent fundraising round.
The Directors of Trade Record are Leslie Hill, Director of Record plc, and Rebecca Venis, an existing employee of one of Record’s subsidiary
companies and who also owns 20% of the ordinary share capital of Trade Record.
Transactions with seed funds
From time to time, the Group injects capital into funds operated by the Group to trial new products (seed capital). If the Group is able to exercise
control over such a seed fund by holding a majority interest (whether the majority interest is held by Record plc alone, or by combining the
interests of Record plc and its Directors), then the fund is considered to be a related party.
Record Currency – FTSE FRB10 Index Fund, Record Currency – Strategy Development Fund and Record – Currency Multi-Strategy Fund are all
related parties on this basis.
The only transaction between the Company and these funds during the year was a redemption of £1,071,306 of the Record Currency – FTSE
FRB10 Index Fund on its closure.
During the year, Record plc Director Leslie Hill redeemed £100,000 from the Record – Currency Multi-Strategy Fund.
Record plc Annual Report 2020
129
Strategic reportGovernanceFinancial statementsAdditional information
Notes to the financial statements continued
For the year ended 31 March 2020
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 set by the UK Financial Conduct Authority.
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. 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 debt-to-adjusted capital ratio.
The Group’s capital is managed within the categories set out below:
Regulatory capital
Other operating capital
Operating capital
Seed capital
Total capital
2020
£m
9.4
16.5
25.9
2.1
28.0
2019
£m
9.3
13.7
23.0
4.3
27.3
Operating capital is intended to cover the regulatory capital requirement plus capital required for day-to-day operational purposes and other
investment purposes. The Directors consider that the other operating capital significantly exceeds the actual day to day operational requirements.
Seed capital is the capital deployed to support the growth of new funds. Seed capital is limited to 25% of the Group’s total capital.
For regulatory capital purposes, Record plc is subject to consolidated financial supervision by the Financial Conduct Authority (“FCA”).
Our regulatory capital requirements are in accordance with FCA rules and consistent with the Capital Requirements Directive. Our financial
resources have exceeded our financial resource requirements (regulatory capital requirements) at all times during the year. Further information
is provided in the Financial review on page 37.
28. Ultimate controlling party
As at 31 March 2020 the Company had no ultimate controlling party, nor at 31 March 2019.
29. Post reporting date events
No adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorisation.
130
Record plc Annual Report 2020
Five year summary
Year ended 31 March
Management fees
Performance fees
Other revenue
Revenue
Cost of sales
Gross profit
Operating expenses
Other income/(expenditure)
Operating profit
Net interest
Profit before taxation
Taxation
Profit after taxation
Basic EPS (pence)
Ordinary dividend (pence)
Special dividend (pence)
Information for shareholders
Restated
Audited
2016
£’000
2017
£’000
2018
£’000
2019
£’000
2020
£’000
20,941
22,718
23,497
22,308
23,133
315
163
—
234
—
337
2,333
332
1,819
611
21,419
22,952
23,834
24,973
25,563
(221)
(298)
(311)
(385)
(255)
21,198
22,654
23,523
24,588
25,308
(14,123)
(15,067)
(16,424)
(16,704)
(17,741)
(154)
6,921
143
7,064
(1,523)
5,541
2.55
1.65
—
157
7,744
112
7,856
(1,540)
6,316
2.91
2.00
0.91
173
7,272
56
7,328
(1,182)
6,146
3.03
2.30
0.50
(8)
7,876
113
7,989
(1,559)
6,430
3.27
2.30
0.69
82
7,649
88
7,737
(1,365)
6,372
3.26
2.30
0.41
Record plc
Record plc is a public limited
company incorporated in the UK.
Registered in England and Wales
Company No. 1927640
Registered office
Morgan House
Madeira Walk
Windsor
Berkshire
SL4 1EP
United Kingdom
Tel: +44 (0)1753 852 222
Fax: +44 (0)1753 852 224
Principal UK trading subsidiaries
Record Currency Management Limited
Registered in England and Wales
Company No. 1710736
Record Group Services Limited
Registered in England and Wales
Company No. 1927639
Both principal UK trading subsidiaries are
based in Windsor.
Further information on Record plc
can be found on the Group’s website:
www.recordcm.com
Dates for 2020 dividend
Ex-dividend date
Record date
2 July 2020
3 July 2020
Annual General Meeting
4 August 2020
Final dividend payment date 11 August 2020
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Further information about the
Registrar is available on their website
www.linkassetservices.com
Record plc Annual Report 2020
131
Strategic reportGovernanceFinancial statementsAdditional information
Definitions
“AIFMD”
“Articles”
“AUME”
“Board”
“bps”
Alternative Investment Fund Managers Directive
The Articles of Association of the Company
Assets Under Management Equivalents
Company’s Board of Directors
Basis point = 100th of a per cent
“Companies Act”
Every statute (including any orders, regulations or other subordinate legislation made under it) from time to time in
force concerning companies in so far as it applies to the Company
“Company”
Record plc
“$” or “dollars”
All references to dollars or $ symbol are to the currency of the US unless stated otherwise
“EBT”
“EM”
“EPS”
“ESG”
“ETF”
“EU”
“FRB”
Employee Benefit Trust
Emerging Markets
Earnings per share
Environmental, social and governance
Exchange traded fund
European Union
Forward Rate Bias
“Group” or “Record”
The Company and/or any one of its subsidiary undertakings
“IAS”
International Accounting Standards
“IFRS” or “IFRSs”
International Financial Reporting Standards
“IPO”
“KPI”
“KRI”
“LGPS”
Initial Public Offering
Key Performance Indicator
Key Risk Indicator
Local Government Pension Schemes
“London Stock Exchange”
London Stock Exchange plc
“MIFID”
“Official List”
“TIPS”
“US”
Markets in Financial Instruments Directive
The official list of the Financial Conduct Authority
US government treasury inflation protected securities
United States of America
AUME definition
The basis for measuring AUME differs for each product and is detailed below:
• Dynamic Hedging mandates – total amount of clients’ investment portfolios denominated in liquid foreign currencies, and hence capable
(under the terms of the relevant mandate) of being hedged;
• Passive Hedging mandates – the aggregate nominal amount of passive hedges actually outstanding in respect of each client;
• Currency for Return mandates – the maximum aggregate nominal amount of outstanding forward contracts for each client;
• Multi-product mandates – the chargeable mandate size for each client;
• Cash – the total set aside by clients and managed and/or “equitised” using futures by Record.
132
Record plc Annual Report 2020
This report is printed on Munken Lynx Smooth, an EU Ecolabel, EMAS, ISO-14001, FSCTM (FSC-C022692) and PEFCTM
(PEFC/05-33-99) certified paper. Arctic Paper Munkedals AB is one of the most environmentally-friendly paper mills in the world
and meets the requirements for FSC® Chain-of-Custody (“CoC”) certification. FSC CoC certification assures that products sold
with an FSC claim originate from well-managed forests, controlled sources, and/or reclaimed materials in their supply chain.
It confirms that throughout the production process there is: respect for human rights, adherence to all local applicable timber
legislation and no involvement in the destruction of high conservation areas. Arctic Paper Munkedals’ Munkedal mill is
committed to reducing its long-term environmental impact and has the lowest water consumption per kilogram of paper in
the entire industry, whilst the company’s energy usage is within or below the EU’s Best Available Techniques.
Designed and produced by
Printed by CPI Colour, an FSC® and ISO 14001 accredited company.
www.lyonsbennett.com
recordcm.com
Record plc
Morgan House
Madeira Walk
Windsor
Berkshire SL4 1EP
T: +44 (0)1753 852 222
marketing@recordcm.com
www.recordcm.com
R
e
c
o
r
d
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
0
R
e
c
o
r
d
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
0