Record H2 2025 Earnings Report

Record EPS Results

• Actual EPS: GBX 5.03
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Record Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Record Announcement Details

• Quarter: H2 2025
• Date: 6/20/2025
• Time: Before Market Opens
• Conference Call Date: Friday, June 20, 2025
• Conference Call Time: 4:00AM ET

Record Financial Group is a leading specialist currency and asset manager with $102.7 billion in Assets Under Management Equivalents (as of 28th June 2024) for institutional clients, with global offices across London, Frankfurt, Zürich and Düsseldorf. We have over 40 years' experience in passive and active currency hedging, as well as return-seeking strategies. We can simplify currency for you and provide cost-effective solutions to almost all currency-related challenges. Our clients are asset managers, pension funds, foundations, and other institutional investors. Our asset management team offers best in class, yield-seeking strategies across various private market asset classes including EM Debt, Digital Lending, Private Credit and Infrastructure strategies. Delivery infrastructure includes funds, notes and SMA’s. We trade a wide range of instruments for our clients; including derivatives (such as options, futures, cross-currency and total-return swaps) and fixed income instruments (such as bonds and loans). We offer cost-efficient execution as well as for-return and arbitrage strategies. Record Currency Management Limited (RCML) is authorised and regulated by the Financial Conduct Authority in the UK, registered as an Investment Adviser with the Securities and Exchange Commission in the US, registered as a Commodity Trading Adviser with the US Commodity Futures Trading Commission, an Exempt International Adviser with the Ontario, Alberta and Quebec Securities Commissions in Canada, registered as exempt with the Australian Securities and Investments Commission. RCML is a wholly owned UK Subsidiary of Record (LON:REC). Record Asset Management GmbH (RAM) is an EU subsidiary of Record plc and has been granted BaFIN approval. RAM Strategies GmbH (RAMS) is a EU subsidiary of RAM and is a Tied Agent of AHP Capital Management GmbH. Record plc is listed on the Main Market of the London Stock Exchange.

Record H2 2025 Earnings Call Transcript

Key Takeaways

• Despite major management transitions, EPS rose 4% to 5.03p and the ordinary dividend was increased to 4.65p, supported by a 6% reduction in operating costs.
• Total revenue fell 8% year-over-year due to a 4% decline in management fees and lower performance fees following two exceptional prior years.
• The firm is expanding its private markets pillar with a €1.1 bn infrastructure equity fund, a Sharia-compliant deep-tier supply chain finance strategy, and a $2.2 bn potash financing deal, aiming to lock in long-term revenues.
• A technology strategy reset—after writing off a significant IT project last year—has realigned development with client priorities, delivering more cost-effective operations and flat tech costs (excluding write-offs).
• Core risk management products remain the business backbone, with passive hedging performance fees up to £3.2 m and a 24% increase in hedging for asset managers management fees, enhancing revenue quality.

Presentation

[Jan Hendrik Witte, CEO & Director at Record]

Good morning, everyone. I'm Jan Wissert, CEO of Records, and with me this morning is Richard Hedden, our CFO. And thank you for joining the call this morning. This financial year was my first full year since taking over as CEO of the group in April 2024. I've been at Record for nearly thirteen years now.

[Jan Hendrik Witte, CEO & Director at Record]

And having previously had responsibility for the client and investment teams, this year has brought a new set of challenges. I'm very proud of the progress we have made this year. As we will cover in this presentation, we continue to expand Redwood's offering by building on our core strengths, and we are well positioned for the future. But let's start with a review of the financial highlights. FY 'twenty five was a year of major management transition and rebuilding during which we nevertheless delivered solid financial performance.

[Jan Hendrik Witte, CEO & Director at Record]

Assets under management passed the $100,000,000,000 milestone at the end of last year and have remained above that figure throughout the year. We have seen a couple of large clients terminate absolute return mandates, which has impacted revenue in the year and impacted AUM. And management fees ended the year down 4%, which combined with lower management with lower performance fees. After two exceptional years in 2022 and 2023 resulted in total revenue down 8%. I'm very pleased with the progress we have made to control costs.

[Jan Hendrik Witte, CEO & Director at Record]

Costs were down 6% year on year. And even excluding the large IT write off taken last year, costs were flat. The net result is that EPS increased by 4% to 5.03p per share. Our balance sheet remains strong, and therefore, we have increased the ordinary dividend to 4.65p per share. Richard will give some more detail on the financials shortly, but let's first review our strategic and operational progress.

[Jan Hendrik Witte, CEO & Director at Record]

FY 'twenty five has been a busy year for my colleagues. I took over the role of CEO in April, and in June, Richard joined as our new CFO. We also added Kevin Ailes, our Chief of Staff, to the Board in July. Otman Bukrami joined us in July in a nonexecutive role, bringing a wealth of valuable FX experience. And in March, we announced the appointment of Andreas Denze as our new Chief Investment Officer.

[Jan Hendrik Witte, CEO & Director at Record]

Andreas was most recently the Chief Investment Officer for the Credit Suisse pension fund. We already know each other well, and he will be a tremendous addition when he joins next week. We began the year having taken the difficult decision to write off a significant technology project and having recently onboarded new technology leadership team. The team has made great progress in resetting our tech strategy and in aligning our tech development portfolio with client and operational priorities. Not only is this delivering good results, as you saw from the financial highlights, it is also a far more cost effective approach.

[Jan Hendrik Witte, CEO & Director at Record]

And, of course, this year, we opened our new head office in Pennington from where we are talking to you today. The new office brings all of our UK staff together in a single modern workspace, and we are already seeing the benefits of renewed engagement and collaboration. Records proposition remains unchanged. We deliver best in class solutions for large institutional investors. During the year, we have restructured our client facing activities to operate the business through three main pillars: risk management, absolute return and private markets, each of which I'll discuss in more detail shortly.

[Jan Hendrik Witte, CEO & Director at Record]

In November, we announced the launch of our infrastructure equity funds with €1,100,000,000 of commitments. We are well progressed with the due diligence on the first series of investments and expect the first capital call in the coming weeks. In December, we also announced our plans to launch the world's first Sharia compliant deep tier supply chain finance strategy, on which we hope to be able to provide more details soon. And just last week, we announced that we have entered into nonbinding terms to provide $2,200,000,000 of funding to the Kola potash plant. This deal is at an early stage, but another great example of our unique ability to structure large scale bespoke solutions is generating a strong pipeline of new opportunities for the business.

[Jan Hendrik Witte, CEO & Director at Record]

Turning to look in more depth at our products, starting with the risk management product pillar, which includes our long established traditional hedging products and where we still generate the majority of our revenue today. Passive hedging includes two offerings. Pure passive hedging is a highly cost effective way to eliminate currency exposure from clients' portfolios. Enhanced passive hedging, which is sometimes also known as tenant management, adds value by taking advantage of structural inefficiencies and behavioral changes in FX markets in a structured and risk managed way. It is in an enhanced passive hedging that we are able to consistently earn performance fees by outperforming agreed benchmarks.

[Jan Hendrik Witte, CEO & Director at Record]

This year, we earned GBP 3,200,000.0 of performance fees compared to GBP 2,900,000.0 last year. Those performance fees and the switch of a large client last year from an active to a passive strategy resulted in strong revenue growth for this product. Dynamic Engine is an attractive alternative to passive, which seeks to reduce currency risk while generating value by benefiting from foreign currency strength and protecting against currency weakness. Towards the end of the year, we saw some clients reduce their hedge ratios in response to U. S.

[Jan Hendrik Witte, CEO & Director at Record]

Dollar weakness. But in general, AUM and revenue in dynamic hedging were very stable. While our passive and dynamic clients are typically institutional investment funds, such as public pension funds or endowments, hedging for asset managers has been developed to meet the specific needs of asset managers in private equity and private credit, which typically have lower liquidity and require a more bespoke hedging solution. We've seen strong growth this year from both new clients and existing clients who are growing their asset base. These risk management products remain the core of our business and all have performed well this year.

[Jan Hendrik Witte, CEO & Director at Record]

We expect continued growth in these products with the majority of the growth coming from hedging to asset managers. Moving on to look at absolute return. Absolute return products aim to provide clients with attractive returns while maintaining low correlation with traditional asset classes. This is our smallest pillar by revenue and can be more volatile than others, being more discretionary from a client perspective and by clients change asset allocations more frequently. FX alpha grew revenue during the year, but a reduction in AUM at the end of the period will weigh on revenue next year.

[Jan Hendrik Witte, CEO & Director at Record]

Customer opportunities comprises a range of bespoke strategies. We saw a large reduction in AUM and revenue during the year as two of these mandates were terminated. Private markets are our newest offering and where we see most potential for rapid growth. These most clearly demonstrate our ability to develop bespoke solutions at large scale, including beyond our core currency competence. In FY 'twenty two, we launched emerging market sustainable finance funds, offering investors higher yield, carry and return opportunities relative to traditional EM debt.

[Jan Hendrik Witte, CEO & Director at Record]

In addition to financial returns, the fund also seeks to have a positive impact by mobilizing capital for the development of emerging market economies. As previously mentioned, earlier this year, we announced the launch of our infrastructure equity fund with €1,100,000,000 in commitments. This particular fund has been tailored specifically to the needs of our Swiss pension fund clients, again, demonstrating our ability to develop complex solutions to meet a broad range of client needs. We are very far advanced with the first capital deployment, which we expect to announce very soon. And in private credit and private equity, we have two very exciting developments.

[Jan Hendrik Witte, CEO & Director at Record]

Last December, we announced that we are working to launch the world's first Sharia compliant deep tier supply chain finance fund with a target of 1,000,000,000 of initial funding. Deep tier supply chain finance specifically targets the needs of SMEs within the lower tiers of the supply chain. We are well advanced with the structuring of the fund and sourcing the portfolios of receivables, and we expect to announce the launch of this fund in the second half of this year. And just last week, we announced that through a joint venture of our German subsidiary, we have signed nonbinding term sheets on a $2,200,000,000 financing transaction supporting Core Potash. We expect that deal to close in six to nine months' time.

[Jan Hendrik Witte, CEO & Director at Record]

Overall, I'm very excited about the progress we are making in the private market space, where we have the opportunity to deliver impressive growth and profitability. At the start of the year, we laid out three strategic objectives, and we have continued to make good progress on each of those. As I've discussed on the previous slides, we're building a strong platform for organic growth in our traditional currency products, but in particular through a broad offering, which leverages our unique core strength. Our growth plans will simultaneously improve quality of earnings, which we define as earnings that are consistent and recurring over time and less sensitive to market conditions or to individual client or market dynamics. Our core risk management products create a high quality, profitable revenue base, including a reliable component of performances.

[Jan Hendrik Witte, CEO & Director at Record]

Private markets will deliver locked in long term revenue. As an example, the infrastructure equity fund will lock in revenues for fifteen years. Our success and reputation is built on exceptional client delivery, which requires excellence in everything we do, including the operational platform on which we build our business. During the year, we have reinvigorated the concept of operational excellence through our new technology team aligned to our operations teams, and our new office will facilitate better engagement and collaboration. The appointment of Andreas Denzeff, Chief Investment Officer, will bring valuable new experience.

[Jan Hendrik Witte, CEO & Director at Record]

With that, I'll hand over to Richard for a more detailed review of the financials.

[Richard Heading, CFO & Director at Record]

Thank you, Ian. Good morning, everyone. I'll now take you through the financial results for the year ended 03/31/2025. Total revenue decreased 8% during the year, a combination of lower management fees and lower performance fees, the detail of which I'll cover shortly. We also recorded higher costs of sales in the year, which represents some fund administration expenses incurred ahead of revenue that will be recognized in the current financial year.

[Richard Heading, CFO & Director at Record]

We made good progress controlling operating costs even as we continue to make important investments for the future. Overall, operating costs were down 6% during the year. As a reminder, last year, we recognized a £1,900,000 write off of capitalized IT development costs and brought in a new IT leadership team and a new IT strategy. Excluding the impact of that write off, costs were flat. Within that flat cost envelope, we continued to invest in our private markets businesses through our German subsidiary.

[Richard Heading, CFO & Director at Record]

We earned a small amount of income on the small portfolio of investments that we hold on our balance sheet. The operating profit margin was down from 27.8% to 25.6%, driven by lower performance fees, resulting in operating profit for the year down 15%. Net finance income was once again positive as we earned interest on our surplus cash balances. Surplus cash, which we hold to meet regulatory capital and liquidity requirements and to cover bonus and dividend payments, is managed by our investment team and held primarily in money market funds. Our tax rate this year was low because we recognized a tax credit in respect to the inception to date losses in our German subsidiary.

[Richard Heading, CFO & Director at Record]

This reflects our confidence that, that entity will generate taxable profits to offset those start up losses. Profit after tax of £9,100,000 was therefore only slightly down on the prior year. After adding back the share of losses attributable to the noncontrolling shareholders, profit after tax attributable to record shareholders is up 5% to 9,700,000 Earnings per share is 5.03p, up 4% against a prior year figure of 4.84p. At the end of last year, assets under management passed the $100,000,000,000 mark for the first time and remained above that milestone throughout the year. We did see some net outflows during the year as we reported at the half year.

[Richard Heading, CFO & Director at Record]

The discontinuation of tactical interest rate swap portfolio reduced AUM by $2,300,000,000 We also saw the wind down of an FX alpha mandate towards the end of the period. Nevertheless, inflows in hedging for asset manager products in particular have partially offset those outflows. Underlying movements in existing exposures were very small, while the impact of foreign exchange was positive. We present our assets under management in US dollars. However, assets are denominated in multiple underlying currencies, and we earn management fees in the underlying currency.

[Richard Heading, CFO & Director at Record]

As shown in the breakdown on this slide of assets under management by underlying currency, the majority of assets are denominated in Swiss francs and US dollars. The foreign exchange movements were driven by a strengthening of the Swiss franc against the US dollar, and the impact on our GBP revenues is limited. Looking at revenue by product. I've presented our product revenues by the three pillars that Jan described earlier, and a reconciliation between the new and the old presentation has been provided in the appendix to this pack. Revenue increased in all products except customer opportunities, where, as previously described, we experienced some one off outflows last year and in the first half of this year.

[Richard Heading, CFO & Director at Record]

Management fees and risk management increased across all products and by 9% overall. The 18% increase in management fees from passive hedging reflected primarily the switch of a large client mandate from an active customer opportunities strategy, while dynamic hedging management fees were flat year on year. Hedging for asset managers made good new business wins during the year, growing the management fees by 24% as a result. Revenue of £3,500,000 from absolute return products was down just over 50% due to the impact of lost and restructured mandates in custom opportunities. FX Alpha, however, continued to grow.

[Richard Heading, CFO & Director at Record]

The EMSF fund delivered management fees of £5,000,000 slightly up from the prior year. And as Jan described, we expect the first deployment of capital into the Infrastructure Equity Fund very soon. We will earn a closing fee on each capital deployment and an ongoing management fee on deployed capital providing recurring revenue over a fifteen year investment horizon. We had exceptional performance fees last year, but that was not repeated this year due to more challenging trading conditions. However, performance fees on enhanced passive hedging products increased to £3,200,000 from £2,900,000 last year.

[Richard Heading, CFO & Director at Record]

This is important to note because while some performance fees are impacted by market conditions, on passive hedging mandates, as Jan explained, we're able to systematically and consistently outperform benchmarks, creating a more stable revenue stream. Moving on to operating costs. Overall operating costs were down 6% to £30,800,000 Average headcount during the year was up very slightly from 96 to 99. However, overall staff costs were down 5% to £15,900,000 also reduced our of also of also our

[Richard Heading, CFO & Director at Record]

allocation. Costs.

[Richard Heading, CFO & Director at Record]

Technology cost represents the cost of third party systems, consultants and market data, and included in the prior year figure is the 1,900,000 IT write off. Our new tech leadership team has made a good start on rationalising and reducing these costs, And excluding the impact of the IT write off in the prior year, these costs are down 9%. We've increased spending on professional fees, which includes legal fees, primarily in relation to the setup and launch of new private market products that we expect to launch soon. Occupancy costs are higher due to the temporary double running of office space during the transition to our new office. Going forward, overall occupancy costs will be lower.

[Richard Heading, CFO & Director at Record]

And bonus costs, cost of the group the cost of the group bonus scheme, increased slightly from the prior year. Turning to the balance sheet. Redbold is a highly cash generative and capital light business. And maintaining a strong balance sheet is an important priority for us, one which our clients value and which we believe should also be valued by investors. Our first priority is to ensure that our regulatory capital and liquidity requirements are met.

[Richard Heading, CFO & Director at Record]

During the year, our surplus of net assets over our minimum regulatory capital requirement was largely unchanged. Cash and cash equivalents remain high and together make up just under half of our net assets. During the year, cash decreased due to lower profits, an increase in fixed asset purchases, primarily the fit out of the new office and the timing of tax payments. Our healthy surplus, overall regulatory capital requirement and strong cash position allows us to continue to pay an attractive ordinary dividend, which this year has increased from 4.6p to 4.65p, which equates to 92% of EPS. As Jan described in his remarks, we started FY 'twenty six with a well positioned pipeline.

[Richard Heading, CFO & Director at Record]

And over the medium term, we expect the deployment of new funds in the private market space in particular to drive revenue and EPS growth. The outlook for the current year is highly dependent on the timing of closing the large and complex deals in the pipeline, but also the uncertainty and timing of new revenue growth, we remain committed to paying a healthy ordinary dividend while always balancing that with the aim of maintaining a strong balance sheet, which is valued by investors and clients alike. And now I'll hand back to Jan to wrap up.

[Jan Hendrik Witte, CEO & Director at Record]

Thank you, Richard. As I said in my opening remarks, our unique selling point remains the same. We deliver best in class solutions for large institutional investors. We have been doing that for many years in our risk management products, which continues to be the core of our business. And we are growing and expanding absolute return and private market offering.

[Jan Hendrik Witte, CEO & Director at Record]

And we're starting to see meaningful synergies across our product lines as more of our risk management clients turn to us for complementary offerings such as infrastructure and credit. We are well positioned and remain optimistic about the future, both near

Participants

Executives

• Jan Hendrik Witte, CEO & Director
• Richard Heading, CFO & Director