Record – Is This Currency Manager Worth A Spin?

You have to admit that the last year has been somewhat tumultuous – wars, inflation, strikes and the like have caused some real turbulence in markets everywhere.

A beneficiary of such resultant chaos that has been showing through intermittently during the year could well be this group.

The current year to the end of March, for this global currency and asset manager, might well be reporting a big improvement in its profits.

With $80.8bn of AUME

Established forty years ago, the Windsor-based Record (LON:REC) group companies provide currency and derivative management services in the UK, North America, Continental Europe, Australia, and internationally.

From its offices in London, Zurich and Dusseldorf, its 85 employees offer asset management services; derivatives, such as options, futures, cross-currency, and total-return swaps; fixed income instruments, including bonds and loans; ancillary services including cash and liquidity management, collateral management, and derivatives overlays.

Its clients include asset managers, pension funds, foundations, and other institutional investors. It distributes its products through direct sales, as well as through investment consultants.

Assets Under Management Equivalents (AUME) at the end of September stood at $80.8bn.

Good Equity Participation

Neil Record, Chairman, controls 28.3% of the group’s 199m shares equity, while Chief Executive Leslie Hill holds 8.23%. Bob Noyen owns 4.01% of the company’s shares.

Large professional holders include Schroder Investments (5.07%), Interactive Investor (4.34%), Apex Financial Services Trust (3.16%), Hargreaves Lansdown Asset Management (1.67%), Premier Fund Managers (2.80%), Northern Trust Global Investments (2.72%), and Hargreaves Lansdown Stockbrokers (2.62%).

Recent Interims

For the half-year to end September the group reported material profit growth and a diversification of its products and revenues, helping to support its strong financial position and dividend increase.

Revenue was up 35% to £22.1m, profits were 46% better at £7.5m, while its earnings were 57% up at 3.27p per share, easily covering the 14% improved interim dividend of 2.05p.

CEO Leslie Hill stated that:

“Our growth trajectory continues as planned supported by solid product performance over the period and with good progress made in our plans for diversification.

We have close engagement with our clients, listening to their concerns and understanding their needs – further reinforcing already strong relationships and leading to new ideas for future collaboration and opportunities for diversification.

The Group remains well positioned financially, with increased cash generation and a strong Balance Sheet to support its future growth plans. The Board remains confident in the strategy to deliver future growth, an outlook which is reflected by an increase in the interim dividend.”

Analyst Opinion – Showing Good Growth And On Track Strategically

Analysts Andrew Mitchell and Martyn King, at Edison Investment Research, consider that the group is progressing well in implementing its strategy to accelerate growth in a sustainable way.

They are going for £42.0m (£35.2m) revenues for the year to end March 2023, taking pre-tax profits up to £13.2m (£10.9m), lifting earnings to 5.45p (4.37m) per share covering a 4.10p (3.60p) dividend.

Conclusion – A Chart Breakout Due Shortly

The £191m capitalised group has declared an ambition to be targeting growth to annual revenues of £60m by March 2025 – which is quite an impressive target.

The group’s third quarter Trading Update is due on 26 January, prior to a Capital Markets Day event during the afternoon of 9 February. Both events are more than likely to gain media coverage and create investor interest.

In July last year the group’s shares hit 97p, while the recent price recovery from the 61p in June last year saw them hit 95p just before Christmas, following which they dropped back to 88p.

Currently trading at around 96.5p they have the looks of an early breakout to well above the 100p level within days, with perhaps 120p being an easy objective.

(Profile 20.08.20 @ 35p set a Target Price of 44p*)

(Asterisks * denote that Target Prices have been achieved since Profile publication)