Record (LSE:REC) — Full Year Results

0:01 Good afternoon, and welcome to the RECORD PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you

0:33 over to CEO, Leslie Hill. Good afternoon. Thank you. Good afternoon, everybody. Yes. My name is Leslie Hill. I'm the CEO of RECORD Financial Group, and I have with me Steve Cullum, who's our finance director. Some of you may have met us before. We're going to work through, the results presentation, methodically, but we will, encourage you to submit your questions as and when they occur to you. And as we have done in the past, we will attempt to ask them on the spot if we can.

1:08 So I think that's good. Should we kick off now? Yes. Yeah. If we start, excuse me, with the sort of financial headlines, I'll just run through these briefly. It's a it's been a very a good year, a good couple of years for us. We're very pleased with the results and with how how things are going against the change in strategy that we sort of mentioned following Leslie's appointment. In terms of AUME, we continue continue to see growth in our AUME currently mainly from the main mainly mainly from the hedging side of the business. We are hoping for we expect some traction from some of the new products that we've talked about previously to start coming on board in the current financial year FY '24.

1:58 But we start the year at a probably at at at not probably, at our highest ever AUM of 87,700,000,000, which we're very pleased with. Revenue growth over the last couple of years, we've seen revenue growth of 76% over the last year of 27%. We have seen some exceptional, I think, performance fees for FY '23, which we're, again, very pleased with, albeit these tend to be more sort of episodic and sporadic and and a market dependent.

2:32 Notwithstanding that, the management fees have continued to grow year on year. So I think since '21, we've seen a 50 over a 54 around a 54% increase in our management fees. And for the the last financial year to FY '23, they grew by 12%. In terms of what that means feeding through to our profit before tax figure, again, over the last two years, a 135% growth. And over the last year, 34% growth. So we are we're very pleased, as I said, with how how the strategy is is is is on track and and and how we are growing not just in the new side of the business or or the new diversified side of the business, but in the more traditional side of the business as well. I think finally, in terms of sort of EPS and dividend, we've seen EPS growth for the last financial year of 32% and over the last two years of 116%.

3:33 And in terms of dividend, what does that mean in terms of dividends? FY '22, we announced 4.52p per share total dividend, and this year, it's 5.18p per share. So the dividends are in line with our policy, which is to sort of grow the dividend in line progressive dividend in line with the growth in profit. So I think that's very high level top line financial headlines. We can we should probably down drill down, I think, a little bit more into some of the strategy progress against strategy, Leslie. Yeah.

4:15 So an update on strategy. Yes. They're quite small printers, actually. Thank you very much. That's great. So as you will all see from that this picture that you're looking at, we set out our plans a couple of years ago, and they included three main areas of evolution. We wanted to modernize the tech stack so we could continue to offer the business we've always we've always offered, but more efficiently and and more able to scale the business to respect and respond to new clients. We've had some asset management plans come on board this year, which is a relatively interesting development for us. So we needed to modernize for lots of reasons, and we're doing that. Have done some of it, doing more.

5:07 We diversified because we recognize that currency as a standalone was a rather niche activity. So we have got a German subsidiary. We have a Baffin license, and we're rolling out a suite of investment products and funds across across a raft of different possible opportunities.

5:27 We're building some partnerships have built and are building partnerships with either specialist asset management providers, which fit in with our open architecture idea of an asset manager who offers their clients their own ideas, but ideas from others as well. And we've launched a string of new funds and have more to launch. So that's so far what we've achieved in diversification, although there's a great deal more to go. The third piece was we needed to build a really robust succession plan, which we've been doing, both by creating a share incentive plans for those people we wish to promote through the ranks into more senior positions and, also by giving the younger people in the business, who had shown aptitude, more, responsibility, which they're responding to very well.

6:19 Neil has retired now. He's in the process of retiring, I think it's this month, and we have a new chairman elect who I've known for a while and has known RECORD for a while, but who comes from a very, innovative and interesting area of the venture capital world, which is proving extremely useful to us. I noticed that there is a question from Steve. And the question is performance fees were described by the other Steve as episodic, and analysts seem to forecast these at zero. Is this appropriate, or does it understate likely company performance? In terms of the analyst forecast,

6:56 they they did use to forecast at zero, but we've now delivered performance fees on a fairly regular basis for the last sort of three or four years, albeit at different levels, hence, this sort of episodic ness of the performance fee. So the analysts are actually now baking in roughly between 1.5 and 2,000,000 of performance fees to their numbers on a on a certainly for FY '24 and and and going forward. So not a huge amount, but they are they are there is a change in terms of they do now baking small amount of performance fees versus, you know, not previously doing so. Hopefully, that answers the question. Is is sorry. I just explained that we we can get performance fees from Yes. Slightly different resources. So we've got tenant managed passive hedging product where we can earn performance fees, and that's the product that performed particularly well for FY '23.

7:56 We also have currency for return mandates, sort of some of those are linked to performance fees as well. So

8:02 I think the likelihood of performance fees on a forward looking basis are greater than they have been on a backward looking basis, and therefore, that's recognized by the analysts in in the fact that they now assume a low level of performance fees in their in their numbers. But certainly, the performance fees for this year were very were very were higher than we would have anticipated. Should we well, hopefully, not our traders, but certainly, we had not baked it in, so it was it was good to get. But we wouldn't necessarily always expect that level every year, obviously, as as Steve has alluded to. Should we unless anyone has any questions on the quick progress run through, I would now remind you all, if you have seen it before and tell you about it if you haven't, But a year ago, we were encouraged by everyone, our market analysts and investors and the board, to put forward a three

8:59 year plan, which we did, which was everyone felt was quite a bold plan, but which was very carefully couched in real opportunities we were working on that we can see have real chances to either match or succeed and exceed our expectations. So the revenue we are targeting in two years' time is 60,000,000, and we are aiming for as high an operating margin as close to 40% as we can achieve. We are somewhat

9:32 hampered to an extent by inflation like everyone else, but many of the new products that I've alluded to are at higher margin, higher fees than we're used to seeing in currency markets or in the currency world. So if we do more of that, that should and we keep our costs under control, that should inexorably improve the operating margin in the future. We have a dividend payout target range, which we propose to keep. And, again, we've kept it for this year. And as I've mentioned, and Steve has two performance fees, are giving us opportunities to to do even better than we had hoped. On the left hand side is something which I think we've sort of hit on already, but I'll quickly run down. Anyone has a question, let me know.

10:19 So we are moving from being a niche FX manager to a more widely based asset manager. We're growing our revenue but across a much broader product range. We are looking for, and I think achieving, innovative higher revenue margin products to improve our margins and to improve the stability and robustness, I think that's the word, robustness of the business. We have recruited people who wish to be more entrepreneurial, and that means they come with good experience, broader expertise, and that's serving us very well. Our Baffin license and our RAIF LUX fund structure are now up and running, and we are rolling out a range of funds as we speak.

11:08 Not always as quickly as we would like. The wheels of bureaucracy can be excruciatingly slow, but we are on track to do what we want to do. The at the that comes with the growth in the pipeline of opportunities both at record asset management and at record currency, but also in record digital assets.

11:30 And we have been able to increase performance fees as we've already mentioned. Now hold on. Here's Alastair. Right. What's Alastair saying? You're targeting revenue of 60,000,000 for FY '25, but the forecast of revenue 50.7 in FY '25 and 50 two 0.2 in FY '26. Are the analysts being too conservative? Okay. They do have a particular way of attacking our forecast. When I say attack, I don't mean being negative about it, but the way they approach it is that they tend not to put anything in until it's pretty much in the bag. Whereas by the nature of a three year plan, we are obliged to look somewhere further out. That doesn't mean that it isn't something we can see, that we have clients for, that we're actually working on or or launching or negotiating, But it does mean that they I don't know if it's too conservative, but they typically, I think, do take a conservative line. I I think it's fair to say, just going back to the slide, that the the the pipeline of opportunities that we refer to are tangible pipeline of opportunities. They're not, you know, finger in the air type estimates.

12:43 The the issue maybe that we've had, and I think Leslie's already alluded to, is that, you know, some of the some of the timing of these things are are outside of our control. So we we had a we had a slide in our Capital Markets Day presentation that alluded to some of the close the opportunities that were a bit closer in terms of timing. They're all still very tangible opportunities, but most of them have had a degree of slippage in terms of timing. So from an analyst perspective, I think the view is, you know, we appreciate that there's a tangible pipeline of opportunities there. But until we can hang some numbers on a definite revenue stream, then, you know, we will build those in as we go. So the plan is on a quarterly basis, we do trading updates, and we will keep the market up to date on on where we are on on certain certainly in terms of our AUME, but on certain fund launches on the asset management side as well. And we will start to report those sections, currency management, asset management, and then potentially digital set on a separate basis going forward. And as we do that, the analysts obviously will will bake that into their numbers.

13:56 So I I think are the analysts being too conservative? That's that's a question,

14:02 I suppose, for them to answer. They're being cautious, and they're not you know, they will report the revenue as of when they see some tangible progress, which kind of, I suppose, is is is fair. Enough. It's fine. Yes. There's there's a question that I can't oh, here we go. Graham, this is from Tom. It's great to see the progress you are making. How confident are you in hitting your twenty twenty five

14:27 targets? What do you see as the greatest risk? Question. They wouldn't be there if we didn't have a high degree of confidence we can achieve them. We believe that a year ago and the evidence so far to suggest would suggest we can. What I would say, though, I think is that timing is always an issue. Getting things off and running our UBS fund, which has been a great success, was, I think, four months or five months delayed. We're supposed to start at 400,000,000 and surprised everyone by starting at 750, which is the right way around, of course. But you you do get surprises. We're working on an infrastructure deal with a group of Swiss clients and Dutch fund, which is a fabulous deal if we can do it, and I think we will. But two of the partners in that deal were separate investors, five separate investors on one side and the Dutch fund on the other, and we were in the middle. And of the five, two were UBS and Credit Suisse.

15:24 So for a while, you know, everybody sort of rushed around frantically saying, well, maybe they can't maybe they can't invest. Maybe if they can only do half, maybe what entity is going to invest. Should they still carry on separately since they are separately organized at the moment? And they ended up going ahead. But in the meantime, we had collected a couple of other subscribers from Swiss clients who had asked to join, but we had said they couldn't straight away. So but it delayed us by a month whilst they had meetings and, you know, UBS and Credit Suisse ran around quite distressed about what they should do. So these things happen, but I I feel we're okay. I feel we're okay. And you guys will hear if we think we're not okay because it is our intent to be as clear and transparent and never overpromise and undeliver. I think it's I think it's fair to say that this time last year

16:18 I I I think I think these can be seen as as ambitious targets. We do feel that we can hit them. It's probably a little bit harder now than it was twelve months ago due to the slippage and and inflationary pressures that we're seeing. Thinking about the margin. I'm thinking about the margin. Yeah.

16:35 You know, there are certain things that are beyond their control, but we we do still think that they're achievable. But they are dependent on certain timings and, you know, fund launches and clients and due diligence processes, etcetera. So but I think the answer I think the answer is Yes. Yes. We are we still remain confident. And and there are two elements to add to that. One is that the new business, when it comes onboard, is at higher fees than we're used to seeing from currency, so that's good, which should help us with the margins to reach better margins than we're at now and and approach the 14 that we're aiming for. And I think oh, hang on. Sorry. This is another question about slippage. Is with the projects that have slipped, Is it slippage like to be more like weeks, months, quarters, or longer?

17:23 When there is slippage well, the one I described with UBS and Credit Suisse, it was a month. I think months is probably fair. That's you know, weeks, you probably don't worry too much. But once it's two or three months, then, obviously, it has got it does have an effect. But I I don't want to be pessimistic. We're just being kind of realistic, really, about what we're doing. I said there were two factors that were relevant. One was the fact that the new products were of higher margin. And, of course, I I can't remember what the second was, but it'll come to me, so we'll come back to it. Now so that's that page. Oh, wait. Wait. There's one. There's one. Here we are. VEVAC. Reading the annual report, I felt the diversification strategy seemed to lack focus.

18:09 Oh, VEVAC. You're so cruel. Also, I see what's two exact approach.

18:15 Can you please provide color on how you approach which opportunities to investigate and go on to pursue? Actually, Vivek, that was what I was going to talk about that I kind of briefly forgot. And what I was going to say was there is a balance to be struck between focus. We know all about that because we did currency for thirty seven years or however long it's yeah. Thirty seven years. Only currency. And as you say, I sort of rush around and sort of see what happens, see what sticks. I would say the opportunities that we can investigate, we our our aspirations are bounded only really by one thing, but but it's a big thing. And that is the available pool of talent that I can recruit, exceptional talent, to drive a project forward to completion. So our head of sales, now CEO of RECORD PLC, our CTO, and some of the guys at RAM that we've hired and others.

19:10 When I can find someone who says to me, I would like to build a digital strategy. This is what I want to do. These are the partners I want to bring in. Here are the guys who want to deal with this. I don't think, oh, that's one too many things. I do think, is it possible? Is it feasible? Is it commercial? And

19:27 can we can we cope with it?

19:30 I think we're about where we need to be right now in terms of diversification because we have several brand strategies. We have emerging markets sustainable finance. We also have Becky, our CTO, and her digital strategies, and we have the mainstream business. So we we aren't utterly unfocused, but we are focused not on, oh, I really like an equity strategy, so I think I'll have one. But more on, very important, what do the clients want? What do clients ask us for? And secondly, have I got someone who I can turn to and say, can you bring this in? And they go away and do it. And that means I need to motivate them with good salaries and bonuses and equity shares. But that is a limit of our aspirations, not some sort of mythical sort of asset allocation where we should be in every asset class. I hope that I don't know if that I hope that answers.

20:23 I I think maybe two probably the two best examples of listening to clients and developing products based on what they need or want are the EMSF fund, which we launched two years ago Yeah. And has been very successful. Performance, very good, and we will be looking to roll that out and and develop that going forward. And, also, the the infrastructure fund, which we've touched on, which we which again was an approach by existing clients asking us to put together an infrastructure fund on their behalf. So it's not a it's not a haphazard sort of approach. It's a listen to clients type approach. What do they need? What do they want? And, you know, we if if we can partner with some experts that infrastructure experts as an example and help them help us do that together, then that's that's that's what we do. Exactly.

21:14 So, hopefully, that does answer the question. I know you'll come back if it doesn't. Should we move on to the next slide, which sort of tries to show the the evolution, if you like, of the group structure, Leslie? I mean, I do know what's up there, so I probably don't need this. I suppose it's good to have a look. So three years ago, if you looked at RECORD, you would have only seen the dark blue boxes and not all of those. That was all our traditional passive and active hedging and currency for return. And, obviously, we wanted to diversify away from just that. We did add the emerging market sustainable finance fund that Steve has alluded to, which is also a dark blue box because it is principally a currency fund even though it includes some fixed income, some impact bonds as well.

22:07 So in the quest for diversification and perhaps partly to address the question about how we choose opportunities, we found a team who had been at Citi who were twenty year veterans and wanted to start their own asset management firm to distribute and also do investment management on funds because they were experts at funds and structuring for existing clients that they had or knew of with existing managers and partners, some of whom they knew of or had approached. And we have we're getting a Baffin license, so that means we were able to take them on. Initially, I think they plan to do it all themselves, which I totally understand, but they did find that the weight of regulatory effort, time, money, all the stuff that goes with being an asset manager, it's expensive to set up an asset management firm from scratch today and very challenging. I think even if you have good clients to build the track record and and stay alive through, you know, the early stages. And what we provide, I think one of the things we provide, is a house where people can bring their ideas and their entrepreneurial enthusiasm and energy and experience, and we can help them build it. And on that right hand area, either the funds we distribute, the trade finance fund, digital lending, and bank loans, or the funds which we've launched where we are the investment manager, and one of them is the infrastructure deal that I alluded to in the bottom

23:38 right box. And another one we're just launching is a protected equity fund. And perhaps if it makes sense, I might just touch on that briefly to give you a taster for how we go about things. So we had a Dutch family office who one of our RAM guys knew very well. In fact, I think he'd had them as a client in the past. They had a protected equity fund that they ran for themselves, and they're a sizable family office, which had an equity manager and a protection factor. Let's call it a risk off manager, equity manager, so options based. Their agent run, agent worked well, and they wanted to offer it to other clients and other families, people that they knew, but they didn't want to build a fund, and they didn't want to asset manage it themselves. They would do find the clients. They would do the strategy, the oversight. But in terms of the day to day, they wanted someone like us. So we've launched that fund for them with our Luxembourg structure, and they are a client, but their clients will also be or the new clients they want to bring in will also be clients of ours. So that's an example of where a

24:44 someone brought us an idea, which we were able to help them realize. We can bring other clients into it. We are not limited. It's not closed it's not a closed ended fund, and it's not one where it's by subscription only. People can join, and it's done well. So that's a good example. There are two other boxes on this page, and I don't I don't want to spend too long on it. One is the light green, the order meal box, which says record digital assets. And there, for example, we have a number of strategies in early stages. We've invested directly with one or two businesses or and we've also invested small amounts of money in a couple of funds to get our toe in the water. Any of you who came or no. Not came, but listened to the Capital Markets Day, which I think you were able to do.

25:32 We had our CTO, Rebecca Venice, who described what we were doing. We're now at the stage of launching a fund. We've signed a agreement with a cryptocurrency manager who has been trading for ten years very successfully for himself and his clients and wants to become more of an institutional manager and or should we say, he wants to bring it into the world of regulation institution. He sees that as the future, which I think is good, And we're helping him build that fund in Luxembourg. He pays for it, but he generously quite very generously shares his fees and performance fees with us for doing that. And if we bring five clients to him as opposed to him bringing the clients to the fund, which is the way we envisage it at the moment, we would get a greater share of the revenue. So that's a very nice diversifier.

26:23 He comes with a very good pedigree. He's an excellent person and very clever and talented. He's been mining coins since he well, since he was really quite young. He started very young, and he's sort of 30, I think, now.

26:39 So he's an interesting guy. And he came to us because he liked us, because we allow him to run his own business the way he wants to because we're supportive. He gets on very well and works very closely with our CTO, I don't think we would have him coming to us were it not for her. And it's an interesting avenue. It's a diversifier. It will never take over. It will never be other than a share of relatively

27:06 contained share of the business, but it is an opportunity for us to own performance fees from another source and to learn more about the world of cryptocurrency tokens and stablecoins and all that stuff, which Darren is teaching us and which we hope to be able to show to some clients. Although we don't need our clients for this to be successful because he brings his own clients, but I think there's an opportunity there. And in coming years, I think this whole world will become more acceptable and more institutionalized, so we see the merit there in doing that. So that's the pale green box, but it's it's there's a couple of things we're doing. She she's doing some other stuff too, but we will talk about that. And and I would just add to that. I think I mean, the crypto is one project underneath that that particular sort of subsidiary, but I think you described it on another presentation as the whole world of digital assets.

28:03 So as a business, what we must do and can't ignore is the speed of innovation on the digital assets sort of sector and how that impacts the, you know, the financial services sector that we're business in. So it it gives us the opportunity to sit down next to experts in these different fields to learn and to understand and to build relationships and and hopefully build products in the future to to service that that sort of client set. Exactly. Exactly. And that sort of segues quite nearly into the last box, the the light blue box, the sky blue box, which which was just buried inside all the

28:41 dark blue boxes a couple of years ago because we only had record currency. So, therefore, everything we did to support our business was living there. But we've now split that into RECORD group services. There is a a number of ways. First of all, we're modernizing the technology which lives in that box because the technology is available to all the people who are part of the group, and then we transfer price so that they everyone pays fairly for what they need.

29:09 But it also includes finance and legal HR compliance, very important. Risk management, also very important. Operational services, trading, and that sort of thing. And at the moment, it's a cost center in the sense that it provides shared services to the group. But we are starting to see, particularly with RECORD PLC, things like our expertise in compliance and risk monitoring can be sold to those guys who are busy with their own activity. But once they get involved with the institution, well, they want someone else to take care of managing the compliance necessary that their presentations should all be appropriate. All the things we do as a matter of course, KYC, you know, all that sort of stuff.

29:57 So that black box is not a profit center and may never be very profitable, but it can perhaps help to support itself over time by providing shared services to clients as well as to everyone in our group. It's not essential for us to meet our targets, but it is potentially an interesting avenue we can explore. So that's what we look like now. So what's next? So there's a product performance section next. We can talk briefly about the performance on the EMSF. Why do we do that? Oh, hang on. That's a summary, isn't it? Summary and outlook. Yeah. What's that? It's too small up there, isn't it? It's a little bit tiny. Is it on the right side? Okay.

30:43 Uh-huh. Okay. So here is just a recap, which I know might be useful for some of you. I won't dwell on it too much. So as I think you've heard, we've made some good progress with diversification, modernization, and succession and plan to continue to hold on. Michael has appeared with a question. In terms of modernization, is there further work to be done, and is further investment required for your digital offering? Good question. So I'd like to split the modernization business away from the digital side of the business. For modernization, yes, there is further work to be done. We're sort of two thirds of the way through, I think, roughly, where where we want to get to as a stage one. But I'm I'm of the belief if you are an asset management firm in the twenty first century who offers a service offering, if you like, as well as products, you will need to be a fintech.

31:41 You will have to be a tech firm because that's how the economies of scale are achieved. That's how you produce the kind of reporting the clients want, the kind of attribution, the kind of data, how you store it and manipulate the data cost effectively. So I don't think we'll ever Michael, I don't think we'll ever get sort of there and then it stops. In fact, we did do that in RECORD once before, and it was a bit of a mistake. We did a big project probably fifteen, twelve years ago. Ago. Yeah. We're also exhausted when it was over. It was like, oh, that's enough of technology. We won't do any more of that. And, of course, it just doesn't work that way, and it doesn't work that way anymore. So we were behind the curve, and we're catching up, but we're not there yet. As far as the as far as the digital offering is concerned, at the moment, we'll build a fund for Darren, and we will invest either indirectly or directly with certain people. And we are working on an infrastructure, very interesting green energy infrastructure offering, which I will park for the moment because it's a bit of a way out there.

32:40 For the digital offering, we don't need to change our technology. We are not planning to do cryptocurrency trading in house. Darren will bring his business into the fund acting pretty much the way way he he does does now now and and always always has has and successfully. So in a way, we provide the framework, but the plumbing or the engineering, we don't need to spend money on to achieve what we want. Now what what that means in the future, I suspect that will change too. I suspect things like the dreaded AI that everyone always talks about is something we will use more and more of, and we'll probably find ways to be much more cost effective than what we offer. Everything, you know, from compliance to trading to analysis and everything else. But we we will be investing in our mainstream business to scale the currency side of the business more than investing in speculative digital technology, I would say.

33:40 Yeah. And and I think what we are seeing on the on the RECORD digital side with some of the projects and and contacts relationships that we're building is that the speed of innovation in that in general is is just very, very quick. And it what it does is it's, you know, being involved and being in the mix allows us to understand what's happening apologies. What's happening with with the invasion, and we are much more open now to external kind of development in terms of our IT side. I think mentioned it earlier, we were much more inward focusing a few years ago.

34:27 We are now completely almost a 180 degree turn, and we're we're now outward focusing and able to sort of plug into relevant systems and software as as as needed Yeah. Where we can see that they improve our efficiency and our speed of delivery. So I don't think there's as Leslie said, there's no end destination, but some of the larger projects, the heavy lifting, we we are making our way through. And I I can see decline in that sort of Yeah. Expenditure over the next couple of years. Yeah. That seems to be the direction of travel. So just to continue on the summary and outlook briefly, and, again, I think I've alluded to SGD. So we're looking for higher margin products and finding them and diversifying our assets.

35:12 We're improving skill sets, and that's what I mean when I talk about the RAM, the RECORD asset management team, the man who we've described who is cryptocurrency expert, but also in house here at RECORD, more technological expertise in house as well as outsourced. And all of this really helps us build a much more robust business. We've got our license. It's been with us for a while now. We've got the new Luxembourg Reef structure up and running. We've got the RDAV, the Lux Fund, which we're hoping to launch as soon as we possibly can with Darren and his cryptocurrency clients. We're building new partnerships, as I think we've mentioned, including The US based syndicated loan manager that we've alluded to before who knows nothing of the European market.

36:06 We have a very interesting project with a Texan based big family office called CAS Investments, which is coming along nicely. And we continue to work with eTeam, which is a twenty year old supply chain finance platform, which has done well. Our capital position continues to be strong. As I think you all know, we have a dividend policy, which we are continuing. And the board's confidence oh, I've repeated myself. The board's confidence in future growth is underpinned by the dividend using our current dividend policy. So none of that is excitingly well, it's exciting, but none of it's entirely new to any of you if you've listened to this before. We can look at the financials, or we could look at performance. Should we look at the performance of a couple of the products? Yes. If we look at the MSF because we can talk a little bit about balance plans for that this year. Yeah.

37:01 That's good. That's good. So this is the emerging market sustainable finance fund we launched with UBS two exactly two years ago. On the right hand side are the assets, and on the left hand side is the performance versus an emerging market debt group of benchmark. So the performance has been good. The asset base started higher than we thought, went up a lot higher than we expected, and then they did some rebalancing. They haven't sold out their assets. They reliably inform us because we aren't doing well, because, obviously, we are doing well. And we're ready to market it more widely. And to that end, we have now retained someone who will make this part, this business, this fund and all the other funds that come from it, their remit and will be the CEO of the sustainable finance effort for RECORD.

37:53 And he will join us later this year, but has already started helping us out as an adviser. Oh, Vivek's back. Hang on. So it's a good fund. I think it's doing well. I think there's lots of opportunity to use it as either a sustainable finance fund or just as an EM debt fund, which is what this gentleman in question feels would be another option to replace existing EM debt managers or add to the roster of in a in a group of EM debt managers. Can we talk a little ask, can you talk a little bit more about the partnerships and what the relationship is? Yes. Is RECORD providing a feeder fund acting as a distribution partner? Managers acting as a European regulated entity that appoints partners as investment advisers to RECORD as manager.

38:41 It seems quite an eclectic mix from private credit to trade finance to tail risk hedge fund if it's the same universe. Who would be responsible for investment for its compliance for fund offers? Okay. Yeah. It's a good question. So it is a little bit of an eclectic mix. You're absolutely right. If we go back up to what you first the first sentence. Okay. So a feeder fund group, which is the Luxembourg structures that we're building, we can be a number of things. So in certain cases, we can be the distributor of the fund acting as the salesperson as we might perhaps do for someone like V Team, the supply chain finance guys. We can also act as a a as the manager, investment manager, which might mean that we calibrate between two or three protect the protected equity. There's a balance to be struck between the long equity and the protection, And the two managers operate independently underneath the umbrella, and we're on top calibrating and make sure that the client gets the balance that they want.

39:44 And that's driven by their recipe that they've chosen, but they want us to do it independently for them. And we are a regulated entity in Europe with the Baffin license, so we can appoint partners as subadvisors to a RECORD fund. So the EMSF fund is a RECORD fund. The cryptocurrency fund will be in DAIR, d a I r, record fund. The RAM funds are some of them are record funds, some of them are not. So it is a mix. It is client led and opportunity led. The reason it's eclectic is the one thing that holds all those things together from private credit to trade finance to to other things is the available pool of talent to to manage these projects forward, as I think I've said. And therefore, if the RAM team come to me and say, we've got a good trade fine supply chain finance guy. We've got a good syndicated loan guy, and we've got some clients who quite like to put those two together.

40:51 We can accommodate that. So it's eclectic, and it's also fair to say that not all clients will ever be in all things. So there's a sort of a spread of clients across there too. But if you want to diversify, then a mix, as long as you're not unfocused, a mix and as little correlated as possible mix is the secret to success. And, I mean, it was pioneered by GAM many years ago, the open architecture type of an asset management approach where you provide clients with the opportunity to dip into third party providers and third party funds so long as the commercials work for the client and and, obviously, for us. Okay. Oh, responsible for investment performance compliance, etcetera.

41:38 Right. Fund operations is generally us. Compliance is generally us. Investment performance, it will depend. On EMSF, it is us. On the DARE Capital fund, it will be Darren. On the RAM funds, depending on who it is, it could be partly us and partly the sub adviser manager. So it's a mix. Okay. What else have we got? We've there's still a few slides in the performance section, but they're they're based roughly on the on the hedging. Yeah. I don't think well, I'm we didn't do that last time. We No. I can go through I I'd I'd probably go start to go through the financials. Yes. Oh, that's a good idea. Now I can have a rest. Yes. Indeed. Okay.

42:25 So I think the first slide is just really a bit of a repeat of what we've already seen at the introduction. Again, all the graphs going in the all the bars going in the right direction, and we're very we're very pleased, and things feel to be on track. I think the operating margin, as we might have already said previously, you know, we saw a 1% increase year on year. I was gonna say slightly disappointing. Not not disappointing as such, but we've we've seen, obviously, quite a strong headwind from inflation over over the year, which is continuing, but it hopefully somewhat abated in the current financial year. So and I think the expectation, again, I think we've just to repeat what we said earlier, the expectation now that some of the new products with higher revenue margins are starting to be in fruition in terms of some fund launches, we will start to see some some of those new revenue streams coming through.

43:24 And the expectation is that will have an impact on the operating margin as well. Slightly flattered, I think, this year by performance fees. They are they were exceptional this year, 5,800,000 versus 500,000 last year. But, again, as we said earlier, I think there is there is an element of performance fees that we bake into the the analyst numbers now going forward. That is part of the business model more part of the business model now than it was previously a few a few years ago. So we're very happy with how things are going at the moment. This is a bit of a repetition. Think this we show this just to just to sort of reiterate, I think, the reasons behind the change in strategy back in February 2020.

44:15 And just very briefly, although we were seeing a slight increase year on year in revenue, I think mainly due to the lack of investment in technology, we were just we were adding costs and adding headcount, which was having an impact on our on our profitability. So, you know, at the point that we decided to make the change, we saw we saw a bit of a hit in FY twenty one, and then we've seen since then over the last two years the subsequent bounce, obviously, in revenue and likewise in profitability, which hopefully, you know, gives some reassurance that the strategy is doing what we hoped it would do, device diversifying the business and and giving us higher margin revenue revenue streams. Assets under management.

45:03 We actually reported our highest ever assets under management at the March 31 of 87,700,000,000 from 83.1 at the beginning of the year. Inflows of just over net inflows of just over 9,000,000,000. And and again, reassuringly sort of dispersed across both passive hedging and and dynamic hedging and and some and multiproduct as well, which is a slightly higher revenue margin for us. I think it's worthy of note actually that over the last four years, year on year, we've seen net positive inflows. So it's it's good that the traditional the more traditional side of business as we kind of view it is still is still seeing, you know, very positive growth. And actually, over the last four years, we've added almost 26,000,000,000 in assets net inflows, assets under management on that side of the business, which is is provides a very strong and sort of fundamental foundation, if you like, on which to to to further build the business on on the asset management side.

46:08 I think this slide really just is there to to show a bit of diversification within the currency management products. So we have we've gone we've we've had quite a high jump, but we can see that the proportionally the share of assets under management that are going to the higher dynamic hedging revenue side of the business are growing, which is a more profitable business line for us. And the impact that that has on the revenue mix can be seen if we go back, I don't know, six, seven years, we can see that over 50% of our revenues were down to passive hedging, which has now decreased to about 34%. Dynamic hedging has gone up to about 31%, which, again, underlines the the growth, I think, in the higher revenue margin dynamic hedging side of the business within the currency management side.

47:08 I think Leslie alluded to the dividend policy earlier on. We I think we changed the policy slightly this time last year to include a range an ordinary payout range of between 7090% of EPS. We paid out 80% last year, and we've paid out 76% this year of EPS, but we also paid out a special dividend as well. I think going back to what I said about performance fees, we had an exceptional year in terms of performance fees. So what we what we wanted to do was to make sure that we could still deliver year on year a decent growth in the ordinary dividend. So hence, the reason for dialing back slightly from the 80% payout last year to the 76% this year.

47:57 Now as we said earlier, we're confident in in the targets that we've set ourselves, but we also want to make sure that we allow for certain factors such as timing, etcetera, that are beyond our control and therefore may sort of push slightly some of the revenue streams backwards. But we feel confident and happy with the way that the dividend policy is working at the moment. We don't allow ourselves to pay more than the earnings, so it retains the robustness, if that's the right word, of the balance sheet as well, which is important for us and I think for clients and investors. Income statement. I've got the last sort of two years in there rather than just the last one just to sort of emphasize again in terms of revenue sort of roughly '25 to 35 to almost 45. So we, you know, we're very pleased with the trajectory of the business at the moment.

48:53 And bearing in mind that the vast majority of this growth in terms of the management fee side of the business is is still on the traditional side of the business. We've yet to see the the impact from those higher revenue margin products coming on board, which we expect to see in the current financial year. So the trajectory, I think, is is kind of underlying there in both the management fees, but also the total revenue side of the business. Consequently, we've seen the the growth in the operating margin year on year. I just I just talked about the operating margin. We expect that to increase. The target is to reach get as close to the 40% operating margin as we can. We set that this time last year. Obviously, it's been quite a a quite a headwind from from inflation this year. So without that, we would have hoped to have been slightly ahead at this stage, but we, you know, we hope that that will change and increase going forward with the with the new products coming on board.

49:54 How are we doing on time? We've got ten minutes. So I was just gonna talk about costs quickly. Yeah. Good idea. So in terms of costs, again, it comes back to the sort of inflation and growth aspects of the business. Personnel, we've seen just under 20% increase in personnel costs year on year. Obviously, we want to support our employees in terms of the cost of living. So we've we've we've agreed to sort of sort of some one off payments as opposed to increasing sort of the base salary levels. We continue to keep an eye on that. We want to make sure that our employees or we'll help our employees as much as much as we can without impacting, I think, the overall profit margin by too by too much.

50:44 We've grown in size in London. We took a London office this time or, actually, no, it was it was earlier than this time last year. We are investing in our resources. We're we're attracting new talent to the business. So we've already outgrown the first office, and we've had to move in London to a to a bigger office. So we're we're spending about £1,000,000.5 a year at the moment on office costs. We're looking at that fairly closely in terms of how that works alongside people working from home and more remote working situations. But I think I think a lot of the increases in costs are down to the new products. So we're paying new for we're paying more for new data licenses. As I just said, we've got increased office space. We're helping employees with cost of living increases, etcetera. So the impact has been quite big in terms of the non personnel costs as well. So just over a 30% increase.

51:45 The current financial year, we will continue to see, think, the full year impact of those inflationary increases in FY '23, but not at the same level that we've seen that we've just seen for FY '23. And that is definite focus, you know, of ours in terms of are we, you know, are are we are we using our our money as efficiently as possible in in in terms of the the the cost base. So that's a continuing sort of focus. And very briefly, just moving on to the balance sheet, which we we spoke about earlier, we do keep a fairly sort of sizable, robust balance sheet in terms of net assets of around 28,000,000. A large portion of that is is is effectively cash, so about 14,500,000 of that is cash.

52:39 Keeping or maintaining that amount of cash on the balance sheet is is really for two reasons. A, as well as the capital requirement, we now have a liquidity requirement under IFPR, which which means that we have to keep a fair amount of cash in in fairly short term and liquid investments or or accounts. But also it allows us it allows us to invest in opportunities as they arise. And because we are a very cash or a very cash generative business, we can we can continue that ongoing cycle of investment and maintaining the level of the balance sheet ongoing. And there's just another question, obviously. Vivek has a question. Notwithstanding the execution of the diversification strategy, would I be correct in thinking that the company benefited from market conditions, volatility and, in particular, interest rate differentials?

53:34 Do you expect such conditions to sustain or act as a relative headwind going forward? I would say we did benefit from market conditions, particularly, as you say, rate differentials between the dollar and European currencies. It's a good question, isn't it, what we would expect to see whether interest rates would come down again quickly. It it would appear that in some countries, there'll certainly be differentials because in some countries like The UK, the inflation seems to be more embedded than it appears to be in other countries. So we don't we don't need benign conditions. What we need is differentials, as you say, and we tend to benefit from volatility as long as it's not chaotic. So I would say it's probably going to help us going forward. The big question for us with active mandates, we have a lot of active mandates, which have a dollar base as the base currency.

54:29 So a strong dollar for us is a good thing from the perspective of the clients. Strong foreign currencies against the pound is obviously a good thing for us vis a vis our income or our revenue that comes in because we will hedge it, but we will also see some benefits from from a weak pound. So I expect that probably they the conditions will continue and will help us. Maybe not quite as much as they have, but probably to some extent. And I think the fact that we we are diversifying in terms of the products that rely on different market conditions helps the sort of robustness of the the the income streams as well. Sustain one product becoming unpopular or changing.

55:17 Hold on. Joseph, if you do achieve your targets, when? Thank you for that. And the smiling face. I like that, Joseph. The shares of record are going to look very cheap indeed. Are you not tempted to buy back shares using some of the cash on the balance sheet or cancel the specials to buy back shares? To be perfectly honest with you, if I was going to buy back shares, however we did it, I would use those shares to incentivize the staff who were building this new business with us. Because some of us, like me, had the advantage of starting a record in 1993 when I did and built up a shareholding before we went public, which was obviously beneficial when we did go public. But some of the people like our CTO and our new CEO of RECORD PLC and the round guys, they've got some shares. Certainly, Becky and Yan have got quite good shares because we've done an AltiC scheme for them, but they they could do with more.

56:18 So although I recognize that from a shareholder perspective, it's an advantageous, really, to reduce the number of shares out there, I I I'm balancing that. I want the shareholders to understand that a a quick fix from getting, you know, an advantage to a buck share buyback is not nearly as powerful or as valuable to their long term value, and I I like people who would like to hold the chairs for a long time if at all possible, that it'll be much more valuable for us if we can get people like Becky, Yan, Andres, maybe Darren as well, the Ram guys, and, you know, all these other guys involved as partners, which is hard to do when you've got a share price. Although we've been very cheap, and as you would suggest, we are perhaps a little cheap, then it's hard to do to get them to pay and to get them to forego some of their bonus to participate in the LTIP.

57:15 It's not easy work to get them a few million shares each, but I would very much like to try and achieve that if we can, and we're on the way to doing that. Yeah. So we won't buy them back. Steve will buy them back and keep them in his back pocket for the. I I I think one of the issues in terms of the share register is the number of historical shareholders that we've got, either ex employees or or, you know, ex directors or partners of ex employees. And that All relatives. All relatives. Sort of excellent. And and that is one focus that we do have, I think, in terms of what what what what what are the sort of levers that we might be able to use to maybe shake the tree a little bit and free up some of the free flow going forward and try and make a bit more of a market in the share. So I don't think we're alone in that. I think lots of businesses that have come from our size and are growing have got similar similar problems. And it's certainly something with the help, hopefully, of our new chairman coming on as well. We can get some ideas and and and try and sort of release some of those shares back into the market so they can float about. Indeed.

58:22 Good. Okay. Let's see. Do we have a summary page, or did we already do it? No. I think was that? No. I think that was I think that was the summary page was at the beginning. That was the strategic. It's always good to summarize at the beginning. We do. Hold on. Oh, Joseph's back again. Hang on a minute. Right. Joseph, now thank you. One more, if I may. Okay? Whilst I totally appreciate point about slippage, perhaps pushing back the f y twenty five target when you think about the f y twenty six thirty opportunities, has that become broader and more exciting since you've started on the journey? Yes. I'm seeing more and more things all the time. And and I think, weirdly, if you if you have, like, a village and you start with a cheese shop and a butcher or something like that I live near Barnes, so I know about villages.

59:18 And it then attracts maybe a guy who's a, you know, bakery or whatever. It doesn't really matter. And it attracts more people, so you get the kind of cluster effect. And one thing that I do see is that people are now starting to come to me and say, oh, I've got an idea. I think I'd like to do this. Maybe I could try that, or I'd like to start an asset management firm, but I don't think I can cope with all the stuff you have to do, and I don't have the cash. And so I think we will get more opportunities going forward, and then the focus will be between I think it was Vivek who said, you know, stay focused. Don't sort of run about like chickens, you know, with your heads cut off. You've got to be very focused about what you do. But in terms of slipping the targets back beyond f y twenty five, I don't think we need to do that. If if we do need to do that, we will do it, and I will explain to everyone why in a very clear and transparent way.

1:00:08 But and it was a and I know it's a challenging target, but I I still think we're on target to do it. And so I I I wouldn't want to change that now. Hopefully, that answers your question. But we do believe that for investors to trust us and stick with us, we need to share with them everything we can as soon as we know it, and we can talk about it, which we always would. So I think let's stay with it, Joseph, for the time being, and, you know, we'll see how we do, watch the space, and and maybe we won't have to do anything. Maybe we will achieve it easily or, who knows, do better. I don't know. Yeah. And just picking up on your point about FY twenty six to thirty, I think we spoke to someone earlier, and and he said success free success. And I think once we've shown that we can deliver, which hopefully we've done, you know, for the last couple of years, if that continues, I think the the available opportunities, you know, will will will still continue to be there and and and and grow.

1:01:09 So, yeah, I mean, hopefully, that and that gives us obviously a much a much broader opportunity set, if you like, going forward. Wouldn't it be great if we're all sitting here in a few years and record currency represents 30% of the revenue, and RAM represents, you know, another 30%. And or they're each 35, and RDEV is is another, you know, thirty, twenty five, 30. So that would be great because then you'd be able to look at us and say, yes. They are a truly diversified and strong business that come whether whatever the world tries to throw at them in the future. So that is our game plan, although, clearly, it cannot be achieved very, very quickly. I think we're done. I think oh, are they going to shut us down? Bless you, Steve. Yeah. Thank you very much indeed for your presentation and for addressing the questions as they came up. And, of course, the company will review all questions submitted today and publish those responses on the investor me company platform.

1:02:10 Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team of t of RECORD PLC, we'd like to thank you for attending today's presentation. Good afternoon to you all.