TIDMPOLR
RNS Number : 7890F
Polar Capital Holdings PLC
19 November 2020
Polar Capital Holdings plc
("Polar Capital" or "the Group")
Unaudited interim results for six months ended 30 September
2020
Highlights
-- Assets under Management ("AuM") at 30 September 2020
GBP16.4bn (31 March 2020: GBP12.2bn) and at 31 October 2020
GBP16.9bn
-- Core operating profit , excluding performance fees, GBP22.0m (30 September 2019: GBP21.3m)
-- Pre-tax profit GBP27.0m (30 September 2019: GBP24.9m)
-- Basic earnings per share 23.4p (30 September 2019: 21.6p) and
adjusted diluted earnings per share 22.1p (30 September 2019:
19.8p)
-- Interim dividend per ordinary share of 9.0p (January 2020:
8.0p) declared to be paid in January 2021
-- Shareholders' funds GBP114.4m (30 September 2019: GBP103.6m)
including cash and investments of GBP111.3m (30 September 2019:
GBP108.7m)
The non-GAAP measures shown here are described on the Alternate
Performance Measures (APMs) page.
Gavin Rochussen, Chief Executive Officer, commented:
"Polar has demonstrated operational resilience since the initial
lockdown in March 2020 and all aspects of the firm have operated
effectively. The Board, my executive team and I are very grateful
for the commitment and dedication of all our colleagues in London
and other parts of the world during this extraordinary time."
"Given the market backdrop, the Polar fund strategies with a
clear growth/quality style profile have performed well. Our diverse
and differentiated range of sector and regional fund strategies,
and our performance led culture, gives us confidence in our ability
to withstand market turbulence in these uncertain times."
"There remains significant capacity in our strategies and we are
well positioned to continue delivering above average returns for
our clients and shareholders over the long term."
For further information please contact:
Polar Capital +44 (0)20 7227 2700
Gavin Rochussen (CEO)
John Mansell (Executive Director)
Samir Ayub (Finance Director)
Numis Securities- Nomad and Joint Broker +44 (0)20 7260 1000
Charles Farquhar
Stephen Westgate
Kevin Cruickshank (QE)
Peel Hunt - Joint Broker +44 (0)20 3597 8680
Andrew Buchanan
Rishi Shah
Camarco +44 (0)20 3757 4984
Ed Gascoigne-Pees
Georgia Edmonds
Monique Perks
Assets Under Management (AuM)
AuM split by Type
30 September 31 March 2020
2020
------------- --------------- ------------ ----------------
GBPbn % GBPbn %
------------- -------- ----- ------------ --------- -----
Long only 15.5 95% Long only 11.1 91%
Alternative 0.9 5% Alternative 1.1 9%
------------- -------- ----- ------------ --------- -----
Total 16.4 Total 12.2
------------- -------- ----- ------------ --------- -----
AuM split by Strategy
(in chronological order)
30 September 31 March 2020
2020
--------------------- --------------- -------------------- ----------------
GBPbn % GBPbn %
--------------------- -------- ----- -------------------- --------- -----
Technology 9.1 55% Technology 5.3 43%
Japan Value 0.1 1% Japan Value 0.2 2%
European Long/Short 0.1 1% European Long/Short 0.2 2%
Healthcare 2.7 16% Healthcare 1.8 15%
Insurance 1.3 8% Insurance 1.2 10%
Financials 0.2 1% Financials 0.3 2%
Emerging Markets Emerging Markets
Income 0.1 1% Income 0.1 1%
Convertibles 0.7 4% Convertibles 0.6 5%
North America 0.8 5% North America 1.0 8%
UK Absolute Return - - UK Absolute Return 0.3 2%
European Income 0.2 1% European Income 0.2 2%
UK Value 0.9 6% UK Value 0.9 7%
Emerging Market Emerging Market
and Asia 0.2 1% and Asia 0.1 1%
--------------------- -------- ----- -------------------- --------- -----
Total 16.4 Total 12.2
--------------------- -------- ----- -------------------- --------- -----
Chief Executive's Report
Markets
The six-month period to the end of September 2020 witnessed a
market recovery as a consequence of unprecedented global fiscal and
monetary stimulus. The market low point in March 2020, a month that
was the most volatile on record, provided a base for the dramatic
market recovery as COVID-19 case numbers were seen to be reducing
in some parts of the world. The recovery in developed markets was
led by the US with the UK and Europe also recovering, but at a
slower pace.
In the period from 1 April 2020 to 31 October 2020, the S&P
500 advanced by 29% and is almost flat for the calendar year after
a 7% sell-off in the last two weeks of October 2020. By contrast,
the FTSE 100, dogged by rising COVID-19 cases in the UK and Brexit
uncertainty has risen by 2% in the period 1 April 2020 to end of
October 2020 and was down almost by 27% over the calendar year.
Over the period under review, leadership across equity markets
remained constant, with technology and consumer discretionary (the
sector in which Amazon sits) outperforming energy, financials and
utilities.
This profile was visible in the continued outperformance of
growth and quality versus value, and led to some eye-catching
facts, specifically that the market capitalisation of Apple exceeds
the value of the UK stock market, and that the US tech sector has a
larger market capitalisation than Europe. Equity investors placed
their bets firmly in favour of the disruptors, whose penetration of
consumer activity has accelerated as a result of quarantine and
social distancing, but it has been in the interest of governments
around the world to try and restart the 'traditional' consumer
economy by encouraging a return to work.
The second two weeks of October 2020 brought a rapid rise in new
COVID-19 cases across Europe, the UK and the US with regional
lockdowns taking place and the prospect of tighter social
distancing and national lockdowns in many countries ahead of
Christmas. The markets responded to this increased risk and
retreated materially in the latter two weeks of October 2020.
However, the outcome of the US election in November 2020 lifted
markets globally and news of positive vaccine trials gave rise to a
recovery in cyclical and value stocks and a rotation out of
momentum and growth.
COVID-19 and the remote office environment
As reported in June 2020 in the Annual Report, Polar
demonstrated operational resilience since the initial lockdown in
March 2020 and all aspects of the firm have operated
effectively.
While staff wellbeing is of paramount importance and has been
monitored closely, it has been noted that staff have been working
long and irregular hours to ensure processes and systems meet our,
and our clients, expectations. Holiday breaks over the summer were
encouraged and additional counselling support has been made
available to safeguard mental wellbeing.
The office at Palace Street was re-opened in July 2020 with up
to 25% of staff working in the office on midweek days. While the
number of staff in the office reduced in October 2020 as case
numbers in London increased, the office remained open for those
staff members who find working from home a challenge or less
efficient than working from the office.
The month-long lockdown imposed in November 2020 does not pose
any difficulty for our operations and we are confident that Polar
will continue to operate resiliently and meet all the expectations
of our clients. The Board, my executive team and I are very
grateful for the commitment and dedication of all our colleagues in
London and other parts of the world during this extraordinary
time.
Fund Performance
Given the market backdrop, the Polar fund strategies with a
clear growth/quality style profile have performed well.
As at 31 October 2020, 84% of Polar's UCITS fund AuM is ranked
in the top quartile and 86% is in the top two quartiles versus
peers over three years. 91% of AuM is ranked top quartile with 91%
ranked in the top two quartiles over five years. Since inception,
86% of AuM is ranked in the top quartile and 99% is ranked in the
top two quartiles.
Notable performers against benchmark in the calendar year to 30
September 2020 are Emerging Market Stars (+19%), Automation &
Artificial Intelligence and Asia Stars (each +17%), Biotechnology
(+12%), Global Absolute Return (+12%), China Mercury (+11%), Income
Opportunities (+9%), Global Technology (+9%) and Healthcare
Discovery (+9%). Conversely, strategies with an underlying value
style bias, such as European Forager, GEM Income, Japan Value and
North America have underperformed.
In the calendar year to 31 October 2020, 80% of our AuM
outperformed benchmark with 84% and 89% outperforming benchmark
over three and five years respectively.
AuM and Fund Flows
In the six months to 30 September 2020, AuM increased by
GBP4.2bn from GBP12.2bn to GBP16.4bn, an increase of 34% over the
period, albeit from a depressed base after the March 2020 sell-off.
The increase in AuM of GBP4.2bn comprised net subscriptions of
GBP907m offset by outflows from a previously reported fund closure
of GBP301m and an increase of GBP3.6bn relating to market movement
and fund performance.
In the six months to 30 September 2020, the largest
beneficiaries of net inflows were the technology suite of funds
with GBP1.2bn into the Global Technology Fund, GBP66m of
subscriptions through new share issuances by the Technology
Investment Trust and GBP55m of net inflows into the Automation
& Artificial Intelligence Fund. The Healthcare Opportunities
Fund and Biotechnology Fund benefited from GBP120m and GBP198m of
net inflows respectively. Notwithstanding the muted investor
appetite for emerging market equities generally, the excellent
performance and ESG credentials of our Emerging Market Stars Fund
are helping it to gain market share. Net inflows in the six months
were GBP55m and the rate of daily net inflows is steadily
increasing, albeit from a low base.
Net outflows from our Japan Value Fund were GBP81m in the six
months compared to net outflows of GBP485m from our Japan
strategies in the prior 12 months. The North America Fund continued
with challenging performance given its style bias also faced
headwinds with investors opting for passive rather than active
exposure to north American equities. Net outflows in the six months
were GBP415m compared to net outflows of GBP1.1bn in the previous
12 months. Our UK Value Opportunities Fund had a challenging March
2020 for performance and has gradually recovered. Given the lack of
investor appetite for UK equities, particularly small and mid-cap
equities, this fund has experienced net outflows of GBP108m in the
six months, but following the vaccine trial news in November 2020
the fund has received net inflows.
Results
Average AuM over the six months to 30 September 2020 increased
by 4% to GBP14.7bn from GBP14.1bn in the comparable prior half year
period and net management fees, after commission and rebates
payable, increased by 4% to GBP61.8m against the comparable
six-month period.
Operating costs were 1% lower compared to the prior half year
period.
Other income has increased materially when compared to the prior
six-month period as a result of gains on seed investments, which in
turn were due mainly to the strong performance against benchmark of
the GEM Stars and Global Absolute Return funds.
Six months Six months Six months
30 September 31 March 30 September
2020 2020 2019
GBP GBP GBP
------------- ---------- -------------
Average AuM 14.7bn 14.0bn 14.1bn
Core operating profit 22.0m 20.3m 21.3m
Performance fee profit 0.5m 5.5m 3.3m
Other income<DELTA> 4.9m (0.3)m 0.8m
------------- ---------- -------------
Profit before share-based payments
on preference shares and tax 27.4m 25.5m 25.4m
Share-based payments on preference
shares (0.4)m 0.4m (0.5)m
------------- ---------- -------------
Profit before tax 27.0m 25.9m 24.9m
------------- ---------- -------------
Profit after tax attributable
to shareholders 21.8m 20.3m 19.9m
------------- ---------- -------------
Basic earnings per share 23.4p 21.9p 21.6p
------------- ---------- -------------
Adjusted diluted earnings per
share
(non-GAAP measure) 22.1p 20.9p 19.8p
------------- ---------- -------------
The non-GAAP alternative performance measures shown here are
described on the APM page.
<DELTA> A reconciliation to reported results is given on the APM page.
Core operating profit (excluding performance fees and other
income) was up 3% to GBP22.0m compared to the comparable prior half
year period and up 8% from GBP20.3m in the immediately preceding
six-month period to 31 March 2020.
Profit before tax increased by 8% to GBP27.0m against the
comparable prior half year period and increased by 4% compared to
the immediately preceding six-month period. Adjusted diluted
earnings per share of 22.1p is a 12% increase compared to the
comparable six-month period to 30 September 2019.
In accordance with the stated dividend policy of paying half of
the first half's core earnings, the Board has declared an interim
dividend of 9.0p to be paid in January 2021 (January 2020: 8.0p).
Under normal circumstances, the total dividend for a full financial
year is generally within a range of 55% to 85% of adjusted total
earnings, with the exact quantum being dependant on the scale of
performance fee profits in any given year but also on the
short-term trading conditions of the Group.
Cash and investments (seed capital in funds) as at 30 September
2020 were GBP111.3m, up from GBP108.7m as at the end of September
2019.
Current trading
October 2020 and early November 2020 has brought heightened
volatility in markets with declines in most equity indices of
around 5% in the final week of October 2020 and a recovery of
similar magnitude in November 2020 following the US election and
positive news of vaccine trials.
We had net inflows amounting to GBP158m in the month of October
2020 and the pipeline for the remainder of the financial year is
encouraging.
With the UK and many countries in continental Europe entering
second national lockdowns, we are well prepared for another phase
of complete remote working until the pandemic is brought under
control.
In October 2020, we announced the completion of the acquisition
from the Los Angeles based asset manager First Pacific Advisors LP
of its International Value and World Value team. Polar Capital now
has a US 40 Act Mutual Fund range which will, over time, enable the
attraction of US clients into our specialist fund strategies.
Outlook
Our diverse and differentiated range of sector and regional fund
strategies, and our performance led culture, gives us confidence in
our ability to withstand market turbulence in these uncertain
times. Our strategy of growth with diversification has begun
producing benefits with new channels to market developing and the
broadening of our client base. There remains significant capacity
in our strategies and we are well positioned to continue delivering
above average returns for our clients and shareholders over the
long term.
Gavin Rochussen
Chief Executive
18 November 2020
Alternate Performance Measures (APMs)
The Group uses the Non-GAAP APMs listed below to provide users
of the interim report and accounts supplemental financial
information that helps explain its results for the current
accounting period.
Core operating profit
Definition: Profit before performance fee profits, other income
and tax.
Reconciliation: APM reconciliation page.
Reason for use: to present users of the interim report and
accounts with a clear view of what the Group considers to be the
results of its underlying operations before items which may either
be volatile, non-recurring or non-cash in nature and taxation.
Performance fee profit
Definition: Gross performance fee income less performance fee
interests due to staff.
Reconciliation: APM reconciliation page.
Reason for use: to present users of the interim report and
accounts with a clear view of the net amount of performance fees
earned by the Group after accounting for staff remuneration payable
that is directly attributable to performance fee revenues
generated.
Net management fee
Definition: Gross management fee income less commissions and
fees payable.
Reconciliation: APM reconciliation page.
Reason for use: to present a subtotal of fee revenue after
accounting for items without which some of the revenue would not
have been earned.
Profit before share-based payments on preference shares
Definition: Profit before tax but excluding cost of share-based
payments on preference shares.
Reconciliation: APM reconciliation page.
Reason for use: the Group believes that as preference share
awards have been designed to be earnings enhancing to shareholders
adjusting for this non-cash item provides a better understanding of
the financial performance of the Group.
Adjusted, and adjusted diluted, earnings per share
Definition: Profit after tax but (a) excluding cost of
share-based payments on preference shares and (b) allowing for the
net cost of deferred staff remuneration, and in the case of
adjusted diluted earnings per share, divided by the weighted
average number of ordinary shares.
Reconciliation: Note 6.
Reason for use: to present users of the interim report and
accounts with a clear view of what the Group considers to be the
distributions from its underlying operations. The Group believes
that (a) as the preference share awards have been designed to be
earnings enhancing to shareholders adjusting for this non-cash item
provides a better understanding of the financial performance of the
Group and (b) comparing staff remuneration and profits generated in
the same time period (rather than deferring remuneration over a
longer vesting period) allows users of the accounts to gain a
better understanding of the Group's results and their comparability
period on period.
Summary of non-GAAP financial performance and reconciliation of
APMs to reported results
The summary below reclassifies the line by line impact on
consolidation of seed investments to provide a clearer
understanding of the Group's core business operation of fund
management and also reconciles key APMs the Group measures to its
reported results for the current period.
Any seed investments in newly launched or nascent funds, where
the Group is determined to have control, are consolidated. As a
consequence, the statement of profit or loss of the fund is
consolidated into that of the Group on a line by line basis. Any
seed investments that are not consolidated are fair valued through
a single line item (other income) on the Group consolidated
statement of profit or loss.
Interim Reclassification Interim
reported on consolidation Non-GAAP
results of seed investments results
GBP'm GBP'm GBP'm APM's
--------- -------------------- --------- ------------------
Management fees Note 2 67.9 0.1 68.0
Statement
Commissions and of Profit
fees payable or Loss (6.1) - (6.1)
--------- -------------------- --------- ------------------
Net Management
61.8 0.1 61.9 fees
Loss on forward
currency contracts Note 2 (0.1) - (0.1)
Core operating
costs 1 (40.1) 0.3 (39.8)
--------- -------------------- --------- ------------------
Core operating
21.6 0.4 22.0 profits
Performance fees Note 2 1.1 - 1.1
Performance fee
interests 1 (0.6) - (0.6)
--------- -------------------- --------- ------------------
Performance
fee
0.5 - 0.5 profits
Statement
of Profit
Other income or Loss 5.3 (0.4) 4.9
--------- -------------------- --------- ------------------
Profit for the
year before
share-based
payments on
27.4 - 27.4 preference shares
Share-based payments
on preference shares
1 Note 5 (0.4) - (0.4)
--------- -------------------- --------- ------------------
Profit for the
year before tax 27.0 - 27.0
--------- -------------------- --------- ------------------
1 The total of these line items (figures quoted under interim
reported results) reconciles to the operating costs line item
presented on the face of the Consolidated Statement of Profit or
Loss.
Interim Consolidated Statement of Profit or Loss
For the six months to 30 September 2020
(Unaudited) (Unaudited)
Six months Six months
to 30 September to 30 September
2020 2019
GBP'000 GBP'000
-------------------------------------- ---------------- ----------------
Revenue 68,826 71,322
Other income 5,290 768
-------------------------------------- ---------------- ----------------
Gross income 74,116 72,090
Commissions and fees payable (6,055) (5,548)
-------------------------------------- ---------------- ----------------
Net income 68,061 66,542
Operating costs (41,020) (41,593)
Profit for the period before tax 27,041 24,949
Taxation (5,216) (5,017)
-------------------------------------- ---------------- ----------------
Profit for the period attributable to
ordinary shareholders 21,825 19,932
-------------------------------------- ---------------- ----------------
Earnings per share
Basic 23.4p 21.6p
Diluted 22.5p 20.0p
Adjusted basic (Non-GAAP measure) 23.0p 21.4p
Adjusted diluted (Non-GAAP measure) 22.1p 19.8p
-------------------------------------- ---------------- ----------------
Interim Consolidated Statement of Other Comprehensive Income
For the six months to 30 September 2020
(Unaudited) (Unaudited)
Six months Six months
to 30 September to 30 September
2020 2019
GBP'000 GBP'000
--------------------------------------------------- ---------------- ----------------
Profit for the period attributable to ordinary
shareholders 21,825 19,932
Other comprehensive income - items that
will be reclassified to income statement
in subsequent periods:
Net movement on the fair valuation of cash
flow hedges 1,167 (583)
Deferred tax effect (222) 99
--------------------------------------------------- ---------------- ----------------
945 (484)
Exchange differences on translation of
foreign operations (668) 680
--------------------------------------------------- ---------------- ----------------
Other comprehensive income for the period 277 196
--------------------------------------------------- ---------------- ----------------
Total comprehensive income for the period,
net of tax, attributable to ordinary shareholders 22,102 20,128
--------------------------------------------------- ---------------- ----------------
All of the items in the above statements are derived from
continuing operations.
Interim Consolidated Balance Sheet
As at 30 September 2020
(Audited)
(Unaudited) 31 March
30 September
2020 2020
GBP'000 GBP'000
----------------------------------------- ------------- ---------
Non-current assets
Property and equipment 5,651 6,271
Deferred tax assets 2,737 2,157
----------------------------------------- ------------- ---------
8,388 8,428
----------------------------------------- ------------- ---------
Current assets
Assets at fair value through profit or
loss 49,729 38,654
Trade and other receivables 30,118 14,815
Other financial assets 68 2,322
Current tax asset 1,438 1,008
Cash and cash equivalents 82,474 107,753
163,827 164,552
----------------------------------------- ------------- ---------
Total assets 172,215 172,980
----------------------------------------- ------------- ---------
Non-current liabilities
Provisions and other liabilities 4,775 5,387
Deferred tax liabilities 1,243 512
----------------------------------------- ------------- ---------
6,018 5,899
----------------------------------------- ------------- ---------
Current liabilities
Liabilities at fair value through profit
or loss 6,360 3,457
Trade and other payables 43,063 45,102
Other financial liabilities 2,348 2,444
51,771 51,003
----------------------------------------- ------------- ---------
Total liabilities 57,789 56,902
----------------------------------------- ------------- ---------
Net assets 114,426 116,078
----------------------------------------- ------------- ---------
Capital and reserves
Issued share capital 2,462 2,417
Share premium 19,139 19,101
Investment in own shares (26,129) (24,139)
Capital and other reserves 9,177 8,341
Retained earnings 109,777 110,358
--------------------------------------------------- -------- --------
Total equity attributable to ordinary shareholders 114,426 116,078
--------------------------------------------------- -------- --------
Interim Consolidated Statement of Changes in Equity
For the six months to 30 September 2020
Issued Investment
share Share in own Capital Other Retained Total
capital premium shares reserves reserves earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- -------- ---------- --------- --------- --------- --------
As at 1 April 2020
(audited) 2,417 19,101 (24,139) 695 7,646 110,358 116,078
Profit for the period - - - - - 21,825 21,825
Other comprehensive
income - - - - 277 - 277
------------------------ --------- -------- ---------- --------- --------- --------- --------
Total comprehensive
income - - - - 277 21,825 22,102
Dividends paid to
shareholders - - - - - (23,494) (23,494)
Issue of shares 45 38 - - - (44) 39
Own shares acquired - - (4,277) - - - (4,277)
Release of own shares - - 2,287 - - (1,150) 1,137
Share-based payment - - - - - 2,282 2,282
Current tax in respect
of employee share
options - - - - 145 - 145
Deferred tax in respect
of employee share
options - - - - 414 - 414
------------------------ --------- -------- ---------- --------- --------- --------- --------
As at 30 September
2020 (unaudited) 2,462 19,139 (26,129) 695 8,482 109,777 114,426
------------------------ --------- -------- ---------- --------- --------- --------- --------
As at 1 April 2019
(audited) 2,365 19,059 (17,930) 695 8,372 97,120 109,681
Effect of adoption
of IFRS 16 - - - - - (318) (318)
------------------------ ----- ------ -------- --- ----- -------- --------
As at 1 April 2019
(adjusted) 2,365 19,059 (17,930) 695 8,372 96,802 109,363
Profit for the period - - - - - 19,932 19,932
Other comprehensive
income - - - - 196 - 196
------------------------ ----- ------ -------- --- ----- -------- --------
Total comprehensive
income - - - - 196 19,932 20,128
Dividends paid to
shareholders - - - - - (23,249) (23,249)
Issue of shares 46 - - - - (46) -
Own shares acquired - - (7,133) - - - (7,133)
Release of own shares - - 2,153 - - (1,087) 1,066
Share-based payment - - - - - 3,129 3,129
Current tax in respect
of employee share
options - - - - 629 - 629
Deferred tax in respect
of employee share
options - - - - (331) - (331)
------------------------ ----- ------ -------- --- ----- -------- --------
As at 30 September
2019 (unaudited) 2,411 19,059 (22,910) 695 8,866 95,481 103,602
------------------------ ----- ------ -------- --- ----- -------- --------
Interim Consolidated Cash Flow Statement
For the six months to 30 September 2020
(Unaudited) (Unaudited)
Six months Six months
to 30 September to 30 September
2020 2019
GBP'000 GBP'000
--------------------------------------------- ---------------- ----------------
Operating activities
Cash generated from operations 5,718 13,819
Tax paid (5,069) (10,825)
Interest on lease (65) (78)
--------------------------------------------- ---------------- ----------------
Net cash flow from operating activities 584 2,916
--------------------------------------------- ---------------- ----------------
Investing activities
Interest received and similar income 37 139
Investment income 137 139
Sale of assets at fair value through profit
or loss 18,166 2,998
Purchase of assets at fair value through
profit or loss (18,357) (15,787)
Purchase of property and equipment (50) (71)
Net cash outflow from investing activities (67) (12,582)
--------------------------------------------- ---------------- ----------------
Financing activities
Dividends paid to shareholders (23,494) (23,249)
Issue of shares 9 -
Purchase of own shares (3,900) (7,133)
Lease payments (648) (893)
Third-party subscriptions into consolidated
funds 2,501 479
Third-party redemptions from consolidated
funds (94) (15)
Net cash outflow from financing activities (25,626) (30,811)
--------------------------------------------- ---------------- ----------------
Net decrease in cash and cash equivalents (25,109) (40,477)
Cash and cash equivalents at start of period 107,753 111,734
Effect of exchange rate changes on cash
and cash equivalents (170) 309
--------------------------------------------- ---------------- ----------------
Cash and cash equivalents at end of period 82,474 71,566
--------------------------------------------- ---------------- ----------------
Notes to the Unaudited Interim Consolidated Financial
Statements
For the six months to 30 September 2020
1. General Information, Basis of Preparation and Accounting Policies
1.1 General information
Polar Capital Holdings plc ("the Company") is a public limited
Company registered in England and Wales.
1.2 Basis of Preparation
The unaudited interim condensed consolidated financial
statements to 30 September 2020 have been prepared in accordance
with IAS 34: Interim Financial Reporting.
The unaudited interim condensed consolidated financial
statements do not include all the information and disclosures
required in annual financial statements and should be read in
conjunction with the Group's annual financial statements as at 31
March 2020, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union and the Companies Act 2006 applicable to
companies reporting under IFRS.
The accounting policies adopted and the estimates and judgements
used in the preparation of the unaudited interim condensed
consolidated financial statements are consistent with the Group's
annual financial statements for the year ended 31 March 2020.
1.3 Group information
The Group is required to consolidate seed capital investments
where it is deemed to control them. There has been no change to the
consolidation of the Group since 31 March 2020.
1.4 Going concern
The impact of COVID-19 on global economies and markets looks
likely to continue for some time and recovery will be dependent on
the extent and effectiveness of measures taken by governments
globally.
The Group's business model has continued to demonstrate its
resilience through the challenging period since March 2020 and
continues to prioritise the health and wellbeing of its staff and
commitment to delivering long-term value for its clients.
The Directors have undertaken a detailed going concern
assessment by using the information available to the date of issue
of these condensed interim consolidated financial statements and
considered the following key areas:
-- Analysis of the Group's budget for the year ending March
2021, longer term financial projections and its regulatory capital
position and forecasts, including various viability stress testing
scenarios.
-- Cash flow forecasts to 30 September 2021 and an analysis of
the Group's liquid assets, which include cash and cash equivalents
and seed investments.
-- The operational resilience of the Group and its ability to
meet client servicing demands across all areas of the Group's
business, including outsourced functions, whilst ensuring the
wellbeing and health of its staff.
The Group continues to maintain a robust financial resources
position with a strong gross cash position and access to cash flows
from ongoing investment management contracts. The Group's
forecasts, which are subject to rigorous sensitivity analysis, show
that the Group will be able to operate effectively even if there is
a severe reduction in AuM.
As a consequence, the Directors have reasonable expectation that
the Group has adequate resources to continue operating for at least
12 months from the date of approval of the interim financial
statements. Accordingly, the Directors continue to adopt the going
concern basis of accounting in preparing the condensed interim
consolidated financial statements.
2. Revenue
(Unaudited) (Unaudited)
Six months Six months
to 30 September to 30 September
2020 2019
GBP'000 GBP'000
---------------------------------------- ---------------- ----------------
Investment management and research fees 67,909 65,840
Investment performance fee 1,050 6,644
Loss on forward currency contracts (133) (1,162)
---------------------------------------- ---------------- ----------------
68,826 71,322
---------------------------------------- ---------------- ----------------
3. Operating costs
a) Operating costs include the following items:
(Unaudited) (Unaudited)
Six months Six months
to 30 September to 30 September
2020 2019
GBP'000 GBP'000
---------------------------- ---------------- ----------------
Staff costs 30,437 32,010
Depreciation 670 678
Short term lease payments 79 76
Interest on lease liability 65 78
---------------------------- ---------------- ----------------
b) Auditors' remuneration:
Audit of Group financial statements 43 26
Other fees
- local statutory audits of subsidiaries 51 20
- non-audit services 39 25
- tax advisory services - 1
133 72
---------------------------------------------- ---
4. Dividends
(Unaudited) (Unaudited)
Six months Six months
to 30 September to 30 September
2020 2019
GBP'000 GBP'000
-------------- ---------------- ----------------
Dividend paid 23,494 23,249
-------------- ---------------- ----------------
On 31 July 2020 the Group paid a second interim dividend for
2020 of 25p (2019: 25p) per ordinary share.
5. Share-based Payments
A summary of the charge to the consolidated statement of profit
or loss for each share-based payment arrangement is as follows:
(Unaudited) (Unaudited)
Six months Six months
to 30 September to 30 September
2020 2019
GBP'000 GBP'000
------------------------------ ---------------- ----------------
Preference shares 429 545
LTIP and initial share awards 810 1,253
Equity incentive plan 380 438
Deferred remuneration plan 663 893
------------------------------ ---------------- ----------------
2,282 3,129
------------------------------ ---------------- ----------------
Certain employees of the Group and partners of Polar Capital LLP
hold Manager Preference Shares or Manager Team Member Preference
Shares (together 'Preference Shares') in Polar Capital Partners
Limited, a group company.
The preference shares are designed to incentivise and retain the
Group's fund management teams. These shares provide each manager
with an economic interest in the funds that they run and ultimately
enable the manager, at their option and at a future date, to
convert their interest in the revenues generated from their funds
to a value that may (at the discretion of the parent undertaking,
Polar Capital Holdings plc) be satisfied by the issue of ordinary
shares in Polar Capital Holdings plc. Such conversion takes place
according to a pre-defined conversion formula intended to be
earnings enhancing for the Group and that considers the relative
contribution of the manager to the Group as a whole. The equity is
awarded in return for the forfeiture of a manager's current core
economic interest and is issued over three years from the date of
conversion.
During the period to 30 September 2020, there was no conversion
of preference shares into Polar Capital Holdings equity (2019:
one). At 30 September 2020 four sets of preference shares (2019:
three sets) have the right to call for conversion.
The following table illustrates the number of, and movements in,
the estimated number of ordinary shares to be issued.
Estimated number of ordinary shares to be issued against
preference shares with a right to call for conversion:
(Unaudited) (Unaudited)
30 September 30 September
2020 2019
Number of Number of
shares shares
--------------------------- ------------- -------------
At 1 April 4,676,882 6,628,293
Conversion/crystallisation - (1,442,064)
Movement during the period 147,276 (51,192)
At 30 September 4,824,158 5,135,037
--------------------------- ------------- -------------
Number of ordinary shares to be issued against converted
preference shares:
(Unaudited) (Unaudited)
30 September 30 September
2020 2019
Number of Number of
shares shares
----------------------------- ------------- -------------
Outstanding at 1 April 3,733,904 3,654,068
Conversion/crystallisation - 1,442,064
Adjustment on re-calculation (28,261) -
Issued during the period (1,622,380) (1,218,022)
Outstanding at 30 September 2,083,263 3,878,110
----------------------------- ------------- -------------
6. Earnings Per Share
A reconciliation of the figures used in calculating the basic,
diluted and adjusted earnings per share (EPS) figures is as
follows:
(Unaudited) (Unaudited)
Six months Six months
to 30 September to 30 September
2020 2019
GBP'000 GBP'000
Earnings
Profit after tax for purpose of basic
and diluted EPS 21,825 19,932
Adjustments (post tax):
Add back cost of share-based payments
on preference shares 429 545
Less net amount of deferred staff remuneration (832) (748)
----------------------------------------------- ---------------- ----------------
Profit after tax for purpose of adjusted
basic and adjusted diluted EPS 21,422 19,729
----------------------------------------------- ---------------- ----------------
(Unaudited) (Unaudited)
Six months Six months
to 30 September to 30 September
2020 2019
Number of Number of
shares shares
--------------------------------------------- ---------------- ----------------
Weighted average number of shares
Weighted average number of ordinary shares,
excluding own shares, for purposes of
basic and adjusted basic EPS 93,307,573 92,261,884
Effect of dilutive potential shares -
share options 1,699,471 3,744,900
Effect of preference shares crystallised
but not yet issued 2,083,263 3,878,110
Weighted average number of ordinary shares,
for purpose of diluted and adjusted diluted
EPS 97,090,307 99,884,894
--------------------------------------------- ---------------- ----------------
(Unaudited) (Unaudited)
Six months Six months
to 30 September to 30 September
2020 2019
Pence Pence
------------------- ---------------- -----------------
Earnings per share
Basic 23.4 21.6
Diluted 22.5 20.0
Adjusted basic 23.0 21.4
Adjusted diluted 22.1 19.8
------------------- ---------------- -----------------
7. Issued Share Capital
(Audited)
(Unaudited) 31 March
30 September
2020 2020
Allotted, called up and fully paid: GBP'000 GBP'000
-------------------------------------------- ------------- ---------
98,492,358 ordinary shares of 2.5p each
(31 March 2020: 96,691,656 ordinary shares
of 2.5p each) 2,462 2,417
-------------------------------------------- ------------- ---------
During the period, Polar Capital Holdings plc has issued 178,322
shares on exercise of employee share options and 1,622,380 shares
in connection with the crystallisation of manager preference
shares.
8. Financial Instruments
The fair value of financial instruments that are traded in
active markets at each reporting date is determined by reference to
quoted market prices or dealer price quotation (bid price for long
positions and ask price for short positions), without any deduction
for transaction costs. For financial instruments not traded in an
active market, such as forward exchange contracts, the fair value
is determined using appropriate valuation techniques that take into
account the terms and conditions and use observable market data,
such as spot and forward rates, as inputs.
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities.
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
(Unaudited) 30 September 2020
------------------------------------------
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
Financial assets
Assets at FVTPL 49,729 - - 49,729
Other financial
assets - 68 - 68
49,729 68 - 49,797
--------- --------- --------- ---------
Financial Liabilities
Liabilities at
FVTPL 6,360 - - 6,360
Other financial
liabilities 2,342 6 - 2,348
------ ------
8,702 6 - 8,708
------ ------
(Audited) 31 March 2020
------------------------------------------
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
Financial assets
Assets at FVTPL 38,654 - - 38,654
Other financial
assets 2,322 - - 2,322
40,976 - - 40,976
--------- --------- --------- ---------
Financial Liabilities
Liabilities at
FVTPL 3,457 - - 3,457
Other financial
liabilities - 2,444 - 2,444
--------- --------- --------- ---------
3,457 2,444 - 5,901
--------- --------- --------- ---------
During the period there were no transfers between levels in fair
value measurements.
9. Notes to the Cash Flow Statement
(Unaudited) (Unaudited)
Six months Six months
to 30 September to 30 September
2020 2019
GBP'000 GBP'000
---------------------------------------------- ---------------- -----------------
Cash flows from operating activities
Profit on ordinary activities before tax 27,041 24,949
Adjustments for:
Interest receivable and similar income (41) (139)
Investment income (155) (132)
Interest on lease 1 65 78
Depreciation of non-current property and
equipment 670 678
Increase in fair value of assets at fair
value through profit or loss (9,656) (899)
Increase/ (decrease) in other financial
liabilities 3,311 (1,326)
Increase in receivables (15,302) (766)
Decrease in trade and other payables (2,059) (13,984)
Share-based payments 2,282 3,129
Increase in liabilities at fair value through
profit or loss 175 1,219
Release of fund units held against deferred
remuneration (613) 1,012
---------------------------------------------- ---------------- -----------------
Cash generated from operations 5,718 13,819
---------------------------------------------- ---------------- -----------------
Reconciliation of profit before tax to cash generated from
operations
1 In order to be consistent with the presentation of the current
interim period consolidated cash flow statement, interest on lease
of GBP78,000 has been reclassified as a separate line item in the
comparatives.
10. Related Party Transactions
Transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on
consolidation and are not included in this note. All related party
transactions during the period are consistent with those disclosed
in the Group's annual financial statements for the year ended 31
March 2020 and have taken place on an arm's length basis.
11. Post Balance Sheet Date Events
On 16 October 2020, the Group completed the acquisition of the
International Value and World Value equity team from the Los
Angeles-based asset manager First Pacific Advisors LP. The
acquisition is part of the Group's strategy of diversifying its
product offering into top-performing international and global
strategies and its institutional presence in North America. The AuM
managed by the team at date of acquisition was GBP431m.
Due to the short period of time between the acquisition date and
the date of this interim report, the accounting for the acquisition
has not been finalised. The acquisition will be accounted for in
accordance with IFRS 3 Business Combinations and full statutory
disclosure will be provided in the Group's Annual Report and
Accounts for 2021.
12. The Publication of Non-Statutory Accounts
The financial information contained in this unaudited interim
report for the period to 30 September 2020 does not constitute
statutory accounts as defined in s434 of the Companies Act 2006.
The financial information for the six months ended 30 September
2020 and 2019 has not been audited. The information for the year
ended 31 March 2020 has been extracted from the latest published
audited accounts, which have been filed with the Registrar of
Companies. The audited accounts filed with the Registrar of
Companies contain a report of the independent auditor dated 19 June
2020. The report of the independent auditor on those financial
statements contained no qualification or statement under s498 of
the Companies Act 2006.
Directors
David Lamb Non-executive Chairman (from 28 July 2020)
Non-executive Director (appointed 9 April 2020)
Tom Bartlam Non-executive Chairman (retired 28 July 2020)
Gavin Rochussen Chief Executive Officer
John Mansell Executive Director
Brian Ashford-Russell Non-executive Director
Jamie Cayzer-Colvin Non-executive Director
Alexa Coates Non-executive Director, Chair of Audit and Risk
Committee
Win Robbins Non-executive Director, Chair of Remuneration
Committee
Andrew Ross Non-executive Director (appointed 9 April 2020)
Company No.
4235369
Registered Office
16 Palace Street
London, SW1E 5JD
Tel: 020 7227 2700
Group Company Secretary
Neil Taylor
Dividend
A first interim dividend of 9.0p per share has been declared for
the year to 31 March 2021. This will be paid on 8 January 2021 to
shareholders on the register as at 18 December 2020. The shares
will trade ex-dividend from 17 December 2020.
Remuneration Code
Disclosure of the Group's Remuneration Code will be made
alongside its Pillar 3 disclosure which is available on the
Company's website.
Half Year Report
Copies of this announcement and of the Half Year report will be
available from the Secretary at the Registered Office, 16 Palace
Street, London SW1E 5JD and from the Company's website at
www.polarcapital.co.uk
Neither the contents of the Company's website nor the contents
of any website accessible from the hyperlinks on the Company's
website (or any other website) is incorporated into or forms part
of this announcement .
ENDS
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END
IR FLFIDLTLTLII
(END) Dow Jones Newswires
November 19, 2020 02:00 ET (07:00 GMT)
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