Record Share Discussion Threads

[bingobanjo] 13/7/2023 12:50

Investor Meet Company today 2pm re full year results

[mpage] 03/7/2023 14:55

@adamB1978. About employee share ownership. It's a bit lower than 3-5 years ago.

Personally, I wouldn't put too much weight on this aspect - apart from senior staff where it's meant to lock them in for reason of succession planning. When the only office was in Windsor, employees might have been reluctant to commute to London. But now REC has opened a London office (good!) - this will widen the talent pool available but turnover may also be higher.

Enjoying one's job, being paid well for it and not have to suffer from sociopathic line managers make for happy employees. Staff leave because of unpleasant managers, as much as anything. A growing company company will be telling its staff that there will be opportunities for advancement.

There is a bog standard (govt subsidised) Share Incentive Plan which probably accounts for the majority of that 63%. At Record, staff have to buy 2 shares to be given 1 free. These SIPs have a 5 year lock up if one wants to avoid clawbacks on NICs and Income Tax. Maximum subscription is £3,600 per year. In many financial companies, those in the know, consider SIPs to be a form of redundancy insurance. If one is made redundant and classified as a 'good leaver' then a company might potentially hand over the entire SIP contents tax free.

"The Group operates the Record plc Share Incentive Plan ("SIP"), to encourage more widespread ownership of Record plc shares by employees. The SIP is a tax‑approved scheme offering attractive tax savings for employees retaining their shares in the scheme over the medium to long term."

So how much do employees contribute annually to their Record SIP? Well, not that much (so far) as the latest AR tells us:

"As an incentive to employees, the Group matches every two shares bought by employees with a free matching share. During the year, the Group awarded 31,039 matching shares (2022: 23,309 matching shares) to employees. The expense charged in respect of the SIP was £24,950 in the year ended 31 March 2023 (2022: £18,310."

The max that a staff member could buy in their SIP is £3600x 0.66 = £2376 per year.

The AR tells us that staff(63% of 88 = 55 staff) bought 62,078 shares in the SIP or approx 1128 shares costing say 1128 x 85p or around £1000pa out of a maximum of £2376pa. That difference tells you that most employees are simply saving a regular monthly amount, rather than the max possible. That's why I say I wouldn't put too much weight on the rank and file share ownership.

Set against these purchases, Neil Record (70) has said that while he intends to be a significant shareholder for many years to come, he will also be periodically selling traches to fund scholarships (well done that man!)

Mr Record has built up a great little niche business and I'm happy to hold and see how the growth strategy pans out over the next 2-3years.

[shallwe] 03/7/2023 11:48

-4.9% and it's not even ex-div date :(

[adamb1978] 30/6/2023 22:58

Thanks mpage. 13x-15x is exactly where I am.

With companies where people are the asset there's always the risk that they walk out the door and kill value however here >60% of people are shareholders. Therefore if they stay then there's a greater chance that the value creation/growth story could have more legs to it, opening the door for a re-rating to a multiple more consistent with a very high ROCE company.

[mpage] 30/6/2023 21:27

@AdamB1978 I suppose you could compare it with a fund management company that enjoys the potential for perf related fees, eg Polar Capital. But you'd have to reduce the P/E because tke market cap is much smaller (illiquid)/the free float is limited. If REC can continue to deliver strong earnings growth then x13-x15 is not unreasonable. There is still a big succession risk in two years' time.

REC is a nice niche business but it also looks like a bid target- if a buyer could persuade Neil Record his legacy would endure.

[adamb1978] 30/6/2023 20:49

What multiple do we think REC would trade on if they hit their medium term goals? Views on what the best comps are?

At the moment its trading on a PE of around 10x Mar-25 if they hit their goals. That's very cheap givne the cash balance, cash generation, ROCE etc

Finding it more difficult to quantify the upside here, but comforting that there should be minimal/no downside if they deliver.

Welcome any views

[topvest] 30/6/2023 20:03

A very good set of results. I would like to see growth on Currency for Return, but that was the only negative. More than happy with my position here. Lets hope Neil Record has a great retirement. He has done very well in his 40 years here. I agree that Leslie has done a super job.

[konradpuss] 30/6/2023 11:03

Trident, agreed. If there were no performance fees the results would look different.

My view is that you have to average out the performance fees. Some years there is just no currency market volatility other years there is lots.

[mpage] 30/6/2023 10:45

A year ago REC announced its 3 yr plan for FY25: Revenues > £60m with an operating margin ("inflation willing") of c.40%.

If they can hit this target then profit before tax = c. £24m or EPS roughly 9.5p (corp tax will be higher)or 60% higher than FY23 5.95p. You can apply whatever P/E ratio you like to 9.5p e.g. 15x >>> target price of 142p. This is back of an envelope stuff.

You can also look at the hurdles for the exec options and pencil in your own estimates. E.g. HALF of the options awarded will vest if the co can deliver EPS growth of between RPI+7% and RPI+9.99%. RPI in May was 11.3%. Much, much higher than when the hurdle were originally set. IF RPI for FY24, FY25 is (guesses) 8% and 7% then this would require a minimum EPS for FY25 to be in range 7.8p-8.2p

ALL of the options vest if EPS growth is >RPI+13%. That would require a minimum EPS of c 8.6p for FY25

Much depends on the success of the new areas, the size of any performance fees and succession planning for new (internal) CE after FY25.

[trident5] 30/6/2023 10:23

FY25 forecasts are just a finger in the air. Results here massively helped by performance fees, which has been very volatile - none in Q4.

[adamb1978] 30/6/2023 09:44

Happy with the figures. Its a little odd that th special divi is burried in the narrative rather than mentioned upfront

I think they need to help analysts understand the FY25 (and FY24) forecasts given that the market forecasts at the moment are way too low and as a consequence, so is the share price

[mpage] 30/6/2023 09:01

CEO seems very capable. Full marks for honesty in the statement where she says "I am happy, indeed amazed, to say we managed to stay on budget.."

Next few years could be transformative. IF she can deliver on the 3yr plan then she can retire happy and well satisfied.

Div: the payout ratio was 87% (including the special.

[konradpuss] 30/6/2023 08:52

We know their vocalised medium term goal i.e. turnover £60 million in Y/E 2025.

It would be interesting to know what their long term ambissions/goals are. I might well ask.

[robsy2] 30/6/2023 08:23

Yep,it’s just been great here since lesley took over. Very happy to see what they can achieve over the next couple of years.

[konradpuss] 30/6/2023 07:55

Good results. A shame Neil Record is retiring although he is 70.

Looks set fair for £60 million turnover in 2025 (Y/E).

Profit margin slightly improved as well - it's not all about turnover.

Interesting also that their core business of currency management has a new stream of clients and is growing. The dividend and special dividend very welcome.

[mammyoko] 30/6/2023 07:48

Record is not immune from these challenges, but structurally we are positioned to be nimble and adaptable to client demand as it develops and changes. While cost pressures (particularly labour costs) will undoubtedly impact the business, the current pace of growth and change should allow the revenue to grow sufficiently to MORE THAN COMPENSATE FOR THE COST-BASE GROWTH

[retsius] 14/6/2023 21:14

Adam

Thanks for that. IC had it down for Friday, explains no share deals at the moment.
R.

[adamb1978] 14/6/2023 20:52

Results in two weeks per their website:

hxxps://recordfg.com/investors-centre/financial-calendar/

[konradpuss] 14/6/2023 20:24

I am sure the results will be just fine with the bundle of performance fees.

The market is ignoring Record currently.

I bet old Simon 'puffer' at the I.C. will raise his target price on the results.

[retsius] 14/6/2023 20:01

No comments or trades here.
Results on Friday.
R.

[topvest] 30/4/2023 16:45

They are delivering well at the moment in my view. There is major upside if they can continue to grow the higher margin income streams. Still a bit disappointing that Currency for Return hasn't really taken off as that would be a game changer! I'm more than happy to hold. I purchased 3 stakes in the last couple of years.

[adamb1978] 28/4/2023 22:33

Konradpass

"Cerrito, I would say they are inexpensive if you are 'signed up' to the forecast of the management team for the next couple of years."

Completely agree. I put it at c.150p in 2 years, plus substantial divis banked in the meantime

[konradpuss] 28/4/2023 21:30

Melton, so we all are aware quite a chunk of the income goes to the employees.

It's the bottom line that counts.

[melton john] 28/4/2023 18:49

I used to be in REC and have been getting up to date. A comment on the sale of option shares seems appropriate if a little late. A purchase of option shares is seen as income and so income tax is immediately due on the difference between the price on the day and the price paid. Covering this with a sale is common. Been there.

[konradpuss] 28/4/2023 18:11

Cerrito, I would say they are inexpensive if you are 'signed up' to the forecast of the management team for the next couple of years.