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Last close As at 26/05/2023
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GBP174m
Research: Financials
In FY23, Record’s assets under management equivalent (AUME) increased by 5.5% to $87.7bn (FY22: $83.1bn). Full year inflows were strong at $9.1bn (FY22: $2.4bn), or 11% of opening AUME, although marginal outflows of $0.1bn were recorded in Q423. In its trading statement, management points to its expectation of continued growth in FY24 in a more normalised FX volatility environment and in delivering new and higher-margin revenue streams through product development.
Record |
Strong inflows in FY23 |
Q423 trading update |
Financial services |
4 May 2023 |
Share price performance
Business description
Next events
Analysts
Record is a research client of Edison Investment Research Limited |
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In FY23, Record’s assets under management equivalent (AUME) increased by 5.5% to $87.7bn (FY22: $83.1bn). Full year inflows were strong at $9.1bn (FY22: $2.4bn), or 11% of opening AUME, although marginal outflows of $0.1bn were recorded in Q423. In its trading statement, management points to its expectation of continued growth in FY24 in a more normalised FX volatility environment and in delivering new and higher-margin revenue streams through product development.
Year |
Revenue |
PBT |
EPS* |
DPS** |
P/E |
Yield |
03/21 |
25.4 |
6.2 |
2.73 |
2.30 |
32.6 |
2.6 |
03/22 |
35.2 |
10.9 |
4.37 |
3.60 |
20.3 |
4.0 |
03/23e |
44.8 |
14.8 |
6.10 |
4.10 |
14.6 |
4.6 |
03/24e |
45.5 |
15.0 |
5.72 |
4.20 |
15.6 |
4.7 |
Note: *EPS is diluted. **DPS excludes special dividends.
Strong inflows softened by market and FX moves
In its Q423 trading update, Record reported year-end (March) AUME of $87.7bn, up 5.5% from end March 2022. The net $9.1bn inflow was partly offset by a negative $4.5bn impact from market moves and foreign exchange movements and scaling in mandates with a volatility target. This brought the total change in AUME to $4.6bn. We note that Record’s high fee earning multi-product business swung into net inflows in Q4 ($0.8bn) after two consecutive quarters of net outflows. Record earned no performance fees in Q4, but for the whole year they amounted to £5.8m (£0.5m), a 10.6x increase.
Background and outlook
Record has continued to show promising growth, arguably benefiting from more turbulent market conditions. A rising interest rate environment continues to encourage volatility in the FX markets, and after several years of below-normal volatility, management remains confident that it will continue to experience growing demand for currency management products. This will be supported by the introduction of new and higher-margin revenue streams as the group continues to develop its asset management products. Record continues to invest in its proprietary technology, which is helping it onboard asset managers that it previously would not have been able to accommodate. Record retains its target of £60m in revenues by FY25, and management remains confident in its growth strategy to achieve this.
Valuation: Estimates adjusted for AUME and costs
Following the trading statement, we have adjusted our figures for the AUME, and have incorporated modest related changes in costs. This results in our revised forecasts for PBT and EPS, which we trim by 4% in FY23, and by 6% for FY24. The shares trade on prospective P/E multiples of 14.6x for FY23 and 15.6x for FY24. Excluding a special dividend, the dividend yield is 4.6% for FY23.
Changes in AUME
Exhibit 1 illustrates the progression of net flows on a quarterly basis, since the start of the financial year (March year-end), and the changes in AUME over relevant quarters.
Looking at fourth quarter net flows, we observe a second quarter of outflows in passive hedging and Q423 outflows in currency for return. In contrast, there were positive inflows for dynamic hedging and multi-product, Record’s higher fee segments. Overall, a modest net outflow of $0.1bn was recorded for the quarter.
In FY23 as a whole, Record experienced net positive flows across the board, apart from the currency for return product, where there was an outflow of $0.6bn. The most significant increases on a year-on-year basis were in dynamic hedging and passive hedging, which combined accounted for $9.1bn. There was also a notable Q4 and full year swing to the positive in multi-product (Record’s highest fee earner). Total net inflow for the year, before other movements, was $9.1bn (FY22: $2.4bn). In H223, the group experienced positive flows in market movements and foreign exchange and scaling for mandate volatility targeting; however, this was not sufficient to offset the negative movements in H123. As a result, the net total change in AUME for the year was $4.6bn.
Exhibit 1: AUME progression Q423 and FY23
$bn |
AUME |
Net flows and other moves |
Total flows |
Total flows |
|||||||||||||
Year end March |
Q422 |
Q323 |
Q423 |
Q123 |
Q223 |
Q323 |
Q423 |
FY22 |
FY23e |
||||||||
Dynamic hedging |
10.6 |
13.4 |
14.7 |
1.5 |
0.2 |
1.8 |
0.7 |
1.4 |
4.2 |
||||||||
Passive hedging |
62.8 |
63.4 |
63.8 |
0.7 |
6.5 |
(1.3) |
(1.0) |
1.1 |
4.9 |
||||||||
Currency for return |
5 |
4.7 |
3.9 |
(0.3) |
0.0 |
0.3 |
(0.6) |
0.4 |
(0.6) |
||||||||
Multi-product |
4.5 |
4.3 |
5.2 |
0.1 |
(0.1) |
(0.2) |
0.8 |
(0.5) |
0.6 |
||||||||
Cash and futures |
0.2 |
0.2 |
0.1 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||||||||
Total |
83.1 |
86.0 |
87.7 |
2.0 |
6.6 |
0.6 |
(0.1) |
2.4 |
9.1 |
||||||||
Other movements: |
|||||||||||||||||
Markets |
(3.9) |
(0.9) |
0.3 |
0.7 |
0.3 |
(3.8) |
|||||||||||
FX and scaling for mandate volatility targeting |
(3.3) |
(2.8) |
4.3 |
1.1 |
0.3 |
(0.7) |
|||||||||||
Total change |
(5.2) |
2.9 |
5.2 |
1.7 |
3.0 |
4.6 |
|||||||||||
Source: Record, Edison Investment Research
Estimate changes
AUME of $87.7bn came in marginally ahead of our estimate ($87.3bn). Full year accounts will be published at end June 2023. At this point we make only slight changes in our forecasts to accommodate exchange rate movements and marginal impacts of inflation (modestly increasing FY23 costs) by nudging down FY23 and FY24 revenues by 1% and 4%, respectively, PBT by 4% and 6% and EPS by 4% and 6% (see Exhibit 2). We highlight that in FY23 Record earned an above-average £5.8m in performance fees, which elevated PBT and will have provided a tailwind to bottom-line profit. For FY24, we forecast a more normal £1.5m in performance fees, but we still see PBT growing slightly in FY24 as the group continues to grow AUME and build out new revenue streams.
We continue to estimate a core FY23 dividend of 4.1p, to which we add a special dividend per share of 2.2p. Based on our FY23 estimates, at the current share price, the core yield is 4.6% (7.1% including the special dividend).
Exhibit 2: Estimate changes
FY23e |
FY24e |
|||||
Old |
New |
Change |
Old |
New |
Change |
|
Revenue (£m) |
45.4 |
44.8 |
-1% |
47.2 |
45.5 |
-4% |
PBT (£m) |
15.5 |
14.8 |
-4% |
16.0 |
15.0 |
-6% |
EPS* (p) |
6.4 |
6.1 |
-4% |
6.1 |
5.7 |
-6% |
DPS** (p) |
4.1 |
4.1 |
0% |
4.2 |
4.2 |
0% |
Source: Edison Investment Research. Note: *EPS is diluted **Dividend excludes any special payment.
Valuation comparison
Exhibit 3 shows an updated version of our comparative valuation table, with a selection of quoted UK fund managers. Record trades at a premium to the 2023e price-to-earnings (P/E) ratio and 2022 EV/EBITDA calendarised multiples. Should Record achieve its FY25 growth target of £60m in revenues, the current P/E multiple would be 9.5x. Based on current prices, Record’s core dividend yield is 4.6% for FY23 (7.1% including the special dividend).
Exhibit 3: Comparing Record’s valuation with UK fund managers
Price |
Market cap |
P/E 2023e |
EV/EBITDA 2022 (x) |
Dividend yield (%) |
|
Ashmore |
240 |
1,694 |
16.2 |
8.8 |
7.1 |
City of London Investment Group |
436 |
219 |
N/A |
N/A |
7.6 |
Impax Asset Management |
794 |
1,044 |
17.5 |
13.6 |
3.5 |
Jupiter |
128 |
693 |
10.5 |
3.5 |
6.6 |
Liontrust |
866 |
558 |
9.0 |
5.0 |
8.3 |
Man Group |
214 |
3,228 |
8.0 |
8.3 |
5.8 |
Polar Capital |
477 |
476 |
11.6 |
2.9 |
9.7 |
Schroders |
472 |
7,548 |
13.2 |
11.3 |
4.5 |
Average |
12.3 |
7.6 |
6.6 |
||
Record |
89 |
177 |
15.3 |
10.6 |
4.6 |
Source: Refinitiv, Edison Investment Research. Note: P/E and EV/EBITDA are on a calendar-year basis. Record’s (FY23) dividend yield excludes the special dividend. Priced at 4 May 2023.
Exhibit 4: Financial summary
Year end 31 March (£'000s) |
|
|
2019 |
2020 |
2021 |
2022 |
2023e |
2024e |
PROFIT & LOSS |
|
|
|
|
|
|
|
|
Revenue |
|
|
24,973 |
25,563 |
25,412 |
35,152 |
44,778 |
45,529 |
Operating expenses |
|
|
(17,089) |
(17,996) |
(19,333) |
(23,945) |
(30,074) |
(30.873) |
Other income/(expense) |
|
|
(8) |
82 |
41 |
(372) |
(40) |
(40) |
Operating profit (before amort. and except.) |
|
|
7,876 |
7,649 |
6,120 |
10,835 |
14,664 |
14,616 |
Finance income |
|
|
113 |
88 |
33 |
21 |
128 |
362 |
Profit before tax |
|
|
7,989 |
7,737 |
6,153 |
10,856 |
14,792 |
14,978 |
Taxation |
(1,559) |
(1,365) |
(802) |
(2,225) |
(2,810) |
(3,745) |
||
Minority interests |
|
|
0 |
48 |
0 |
0 |
0 |
0 |
Attributable profit |
|
|
6,430 |
6,420 |
5,351 |
8,631 |
11,981 |
11,234 |
Revenue/AUME (excl. perf fees) bps |
|
|
4.9 |
4.9 |
4.8 |
5.6 |
5.6 |
6.0 |
Operating margin (%) |
|
|
31.5 |
29.9 |
24.1 |
30.8 |
32.7 |
32.1 |
Average number of shares outstanding (m) |
|
|
198.1 |
197.1 |
196.2 |
197.3 |
196.4 |
196.4 |
Basic EPS (p) |
|
|
3.27 |
3.26 |
2.75 |
4.52 |
6.31 |
5.92 |
EPS - diluted (p) |
|
|
3.25 |
3.26 |
2.73 |
4.37 |
6.10 |
5.72 |
Dividend per share (p) |
|
|
2.30 |
2.30 |
2.30 |
3.60 |
4.10 |
4.20 |
Special dividend per share (p) |
|
|
0.69 |
0.41 |
0.45 |
0.92 |
2.20 |
1.70 |
Total dividend (p) |
|
|
2.99 |
2.71 |
2.75 |
4.52 |
6.30 |
5.90 |
BALANCE SHEET |
|
|
|
|
|
|
|
|
Non-current assets |
|
|
2,161 |
4,868 |
5,153 |
6,084 |
6,318 |
6,028 |
Intangible Assets |
|
|
288 |
470 |
420 |
562 |
1,211 |
1,561 |
Tangible Assets |
|
|
761 |
751 |
683 |
401 |
345 |
165 |
Investments |
|
|
1,112 |
2,472 |
3,046 |
3,447 |
3,606 |
3,606 |
Other |
|
|
0 |
1,175 |
1,004 |
1,674 |
1,156 |
696 |
Current assets |
|
|
31,427 |
31,149 |
28,045 |
27,141 |
31,398 |
29,549 |
Debtors |
|
|
7,562 |
8,704 |
8,006 |
9,883 |
12,572 |
13,076 |
Cash |
|
|
12,966 |
14,294 |
6,847 |
3,345 |
18,815 |
16,462 |
Money market instruments |
|
|
10,735 |
7,958 |
12,932 |
13,913 |
0 |
0 |
Other |
|
|
164 |
193 |
260 |
0 |
11 |
11 |
Current liabilities |
|
|
(6,158) |
(6,955) |
(5,992) |
(6,210) |
(7,359) |
(7,127) |
Creditors |
|
|
(2,736) |
(3,009) |
(3,426) |
(4,721) |
(5,667) |
(5,905) |
Financial liabilities |
|
|
(2,621) |
(2,191) |
(1,696) |
0 |
0 |
0 |
Other |
|
|
(801) |
(1,755) |
(870) |
(1,489) |
(1,682) |
(1,222) |
Non-current liabilities |
|
|
(29) |
(901) |
(407) |
(1,085) |
(960) |
(960) |
Net assets |
|
|
27,401 |
28,161 |
26,799 |
25,930 |
29,397 |
27,491 |
Minority interests |
|
|
60 |
132 |
0 |
0 |
0 |
0 |
Net assets attributable to ordinary shareholders |
|
27,341 |
28,029 |
26,799 |
25,930 |
29,397 |
27,491 |
|
No of shares at year end |
|
|
199.1 |
199.1 |
199.1 |
199.1 |
199.1 |
199.1 |
NAV per share (p) |
|
|
13.7 |
14.1 |
13.5 |
13.0 |
14.8 |
13.8 |
CASH FLOW |
|
|
|
|
|
|
|
|
Operating cash flow |
|
|
7,026 |
6,543 |
6,798 |
11,355 |
11,778 |
11,555 |
Capex |
|
|
(72) |
(243) |
(230) |
(75) |
(300) |
(170) |
Cash flow from other investing activities |
|
|
(561) |
1,513 |
(6,210) |
(3,392) |
13,739 |
(138) |
Dividends |
|
|
(5,517) |
(5,888) |
(5,290) |
(6,512) |
(9,250) |
(12,640) |
Other financing activities |
|
|
(613) |
(943) |
(2,368) |
(5,019) |
(688) |
(960) |
Other |
|
|
205 |
346 |
(147) |
141 |
190 |
0 |
Net cash flow |
|
|
468 |
1,328 |
(7,447) |
(3,502) |
15,470 |
(2,353) |
Opening cash/(net debt) |
|
|
12,498 |
12,966 |
14,294 |
6,847 |
3,345 |
18,815 |
Closing net (debt)/cash |
|
|
12,966 |
14,294 |
6,847 |
3,345 |
18,815 |
16,462 |
Closing net (debt)/cash inc money market instruments |
23,701 |
22,252 |
19,779 |
17,258 |
18,815 |
16,462 |
||
AUME ($bn) |
|
|
|
|
|
|
|
|
Opening |
|
|
62.2 |
57.3 |
58.6 |
80.1 |
83.1 |
87.7 |
Net new money flows |
|
|
(4.5) |
4.6 |
9.7 |
2.4 |
10.3 |
3.9 |
Market/other |
|
|
(0.4) |
(3.3) |
11.8 |
0.6 |
(6.1) |
0.9 |
Closing |
|
|
57.3 |
58.6 |
80.1 |
83.1 |
87.7 |
92.6 |
Source: Record accounts, Edison Investment Research
|
|
Research: Healthcare
Shield Therapeutics reported its FY22 preliminary results and Q123 business update, the key emphasis of which was the growing traction of Accrufer in the US following the December 2022 co-commercialisation deal with Viatris. The FY22 revenue of £4.5m (+194% y-o-y) was driven by Accrufer US sales (£2.9m vs £0.1m in FY21) and underpinned by a material q-o-q growth in prescriptions during FY22 (25,200 vs 2,500 in FY21). Encouragingly, this trend has continued in Q123 (10,500 prescriptions; +12% q-o-q growth) despite initial operational disruptions related to the integration. With the salesforce approaching full strength (total 100 people) by May, we anticipate H223 to be a vital period for sales traction and market coverage. We have updated our FY23–24 pricing and costs estimates for the FY22 results but maintain our long-term Accrufer growth assumptions. Our revised valuation is £388.9m (£403.4m previously).
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