Record H2 2025 Earnings Call Transcript

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June 20, 2025

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.
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Earnings Conference Call
Record H2 2025
00:00 / 00:00

Transcript Sections

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Jan Vincent
Jan Vincent
CEO at Record

Good morning, everyone. I'm Jan Vincent, CEO of Record, and with me this morning is Richard Heading, our CFO. 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 13 years now, 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 Record's offering by building on our core strengths, and we are well positioned for the future. Let's start with a review of the financial highlights. FY25 was a year of major management transition and rebuilding, during which we nevertheless delivered solid financial performance.

Jan Vincent
Jan Vincent
CEO at Record

Assets under management passed the $100 billion 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. Management fees ended the year down 4%, which combined with low 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. 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 5.03 pence per share. Our balance sheet remains strong, and therefore we have increased the ordinary dividend to 4.65 pence per share.

Jan Vincent
Jan Vincent
CEO at Record

Richard will give some more detail on the financials shortly, but let's first review our strategic and operational progress. FY25 has been a busy year for Record. I took over the role of CEO in April last year, and in June, Richard joined as our new CFO. We also added Kevin Aylesh, our Chief of Staff, to the board in July. Otman Bukhami joined us in July in a non-executive role, bringing a wealth of valuable FX experience. In March, we announced the appointment of Andreas Genzer as our new Chief Investment Officer. 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.

Jan Vincent
Jan Vincent
CEO at Record

We began the year having taken the difficult decision to write off a significant technology project and having recently onboarded a 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. Of course, this year we opened our new head office in Paddington, from where we are talking to you today. The new office brings all of our U.K. staff together in a single modern workspace, and we are already seeing the benefits of renewed engagement and collaboration. Record's proposition remains unchanged. We deliver best-in-class solutions for large institutional investors.

Jan Vincent
Jan Vincent
CEO at Record

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. In November, we announced the launch of our Infrastructure Equity Fund with EUR 1.1 billion 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. Just last week, we announced that we have entered into non-binding terms to provide $2.2 billion of funding to the Kohler Potash plant.

Jan Vincent
Jan Vincent
CEO at Record

This deal is at an early stage, but another great example of how our unique ability to structure large-scale bespoke solutions is generating a strong pipeline of new opportunities for the business. 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 tenor 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 enhanced passive hedging that we are able to consistently earn performance fees by outperforming agreed benchmarks.

Jan Vincent
Jan Vincent
CEO at Record

This year, we earned GBP 3.2 million of performance fees compared to GBP 2.9 million 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 hedging 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 US dollar weakness, but in general, AUM and revenue in dynamic hedging were very stable.

Jan Vincent
Jan Vincent
CEO at Record

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. 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.

Jan Vincent
Jan Vincent
CEO at Record

This is our smallest pillar by revenue and can be more volatile than others, being more discretionary from a client perspective and where 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. Custom opportunities comprise 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 competency. In FY 2022, we launched the Emerging Markets Sustainable Finance Fund, offering investors higher yield, carry, and return opportunities relative to traditional EM debt.

Jan Vincent
Jan Vincent
CEO 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 EUR 1.1 billion 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. In private credit and private equity, we have two very exciting developments. 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 billion of initial funding.

Jan Vincent
Jan Vincent
CEO at Record

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. Just last week, we announced that through a joint venture owned by our German subsidiary, we have signed non-binding term sheets on a $2.2 billion financing transaction supporting Kohler Potash. We expect that deal to close in six to nine months' time frame. 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.

Jan Vincent
Jan Vincent
CEO at Record

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 performance fees. Private markets will deliver locked-in long-term revenue. As an example, the Infrastructure Equity Fund will lock in revenues for 15 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.

Jan Vincent
Jan Vincent
CEO at Record

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 Genzer as Chief Investment Officer will bring valuable new experience. With that, I'll hand over to Richard for a more detailed review of the financials.

Richard Heading
Richard Heading
Executive Director and CFO at Record

Thank you, Jan. Good morning, everyone. I'll now take you through the financial results for the year ended 31st of March 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
Richard Heading
Executive Director and CFO 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 GBP 1.9 million 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've continued to invest in our private markets businesses through our German subsidiary. We earn 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.

Richard Heading
Richard Heading
Executive Director and CFO at Record

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 of the inception stage losses in our German subsidiary. This reflects our confidence that that entity will generate taxable profits to offset those startup losses. Profit after tax, of GBP 9.1 million, was therefore only slightly down on the prior year. After adding back the share of losses attributable to the non-controlling shareholders, profit after tax attributable to Record shareholders is up 5% to GBP 9.7 million. Earnings per share is GBP 5.03, up 4% against a prior year figure of GBP 4.84.

Richard Heading
Richard Heading
Executive Director and CFO at Record

At the end of last year, assets under management passed the $100 billion 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, the discontinuation of a tactical interest rate swap portfolio reduced AUM by $2.3 billion. 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
Richard Heading
Executive Director and CFO 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 custom opportunities, where as previously described, we experienced some one-off outflows last year and in the first half of this year. Management fees in risk management increased across all products by 9% overall.

Richard Heading
Richard Heading
Executive Director and CFO at Record

The 18% increase in management fees from passive hedging reflected primarily the switch of a large client mandate from an active custom opportunity 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 GBP 3.5 million 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. The EMSF fund delivered management fees of GBP 5 million, slightly up from the prior year. 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 15-year investment horizon.

Richard Heading
Richard Heading
Executive Director and CFO at Record

We earned 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 GBP 3.2 million from GBP 2.9 million last year. 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 GBP 30.8 million. Average headcount during the year was up very slightly from 96 to 99. However, overall staff costs were down 5% to GBP 15.9 million. We have eliminated some expensive resources, particularly in technology, and have also reduced one-off staff settlement costs.

Richard Heading
Richard Heading
Executive Director and CFO at Record

Although we're capitalizing some internally developed software produced by the new IT team, we're doing so prudently, and capitalization is not a significant driver of lower costs. Technology cost represents the cost of third-party systems, consultants, and market data, and included in the prior year figure is the GBP 1.9 million IT write-off. Our new tech leadership team has made a good start on rationalizing 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
Richard Heading
Executive Director and CFO at Record

Bonus costs, the cost of the group bonus scheme, increased slightly from the prior year. Turning to the balance sheet, Record 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. 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.

Richard Heading
Richard Heading
Executive Director and CFO at Record

Our healthy surplus over our regulatory capital requirement and strong cash position allows us to continue to pay an attractive ordinary dividend, which this year has increased from GBP 4.6 to GBP 4.65, which equates to 92% of EPS. As Jan described in his remarks, we've started FY2026 with a well-positioned pipeline, 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 we're anticipating low single-digit revenue growth and, with the effective tax rate reverting to a more normal rate, flat EPS year on year.

Richard Heading
Richard Heading
Executive Director and CFO at Record

Recognizing the importance of the dividend to investors, but also the uncertainty in 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.I will now hand back to Jan to wrap up.

Jan Vincent
Jan Vincent
CEO 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. We are growing and expanding absolute return and private market offering. We are 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.

Jan Vincent
Jan Vincent
CEO at Record

We are well-positioned and remain optimistic about the future, both.

Executives
    • Richard Heading
      Richard Heading
      Executive Director and CFO
    • Jan Vincent
      Jan Vincent
      CEO
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