11th Dec 2007 07:01
Polar Capital Holdings PLC11 December 2007 11 December 2007 POLAR CAPITAL HOLDINGS plc Interim results for the six months ended 30 September 2007 Polar Capital Holdings plc ("Polar Capital"), the specialist asset management group, announces core pre-tax profits up by over 170% Financial Highlights • Assets under management at 30 September 2007 up 46% to $3.8bn compared to prior year period (September 2006:$2.6bn and March 2007 $3.4bn) • Pre-tax profits up over 100% to £4.5m (September 2006:£1.1m) • Core operating profit, excluding performance fees, up 173% at £3.4m (September 2006:£1.2m) • Operating margin increased to 25% (September 2006:14%) • Basic undiluted earnings per share up to 4.8p (September 2006:1.3p) and diluted earnings per share up to 4.1p (September 2006:1.1p) • Interim dividend per ordinary share of 1.5p declared, to be paid in January 2008 • £22m of cash following investments of over £11m in our recently launched hedge funds Strengthening of Board and further fund manager appointments • Tom Bartlam appointed as Chairman • Technology team strengthened by appointment of senior fund manager • Healthcare team recruited to establish new business unit Outlook • In the short term investors may become somewhat more cautious • Market volatility makes forecasting of performance fees difficult Mark Kary, Chief Executive Officer, commented: "Our assets under management have grown strongly over the period. While investorconcerns over the direction of the global economy will lead to a morechallenging near term environment, we continue to be well positioned for theexecution of our longer term business plan." For further information please contact: Mark Kary, CEO or John Mansell, COOPolar Capital Holdings PLC Tel: 020 7227 2700 Ed Gascoigne-Pees/Felicity MurdochFinancial Dynamics Tel: 020 7269 7132/020 7269 7243 Nominated Adviser: LandsbankiSimon Bridges / Claes Spang Tel: 020 7426 9000 About Polar Capital Polar Capital Holdings plc is a research driven investment management companyproviding a highly entrepreneurial environment for outstanding portfoliomanagers within a structure that offers a level of marketing, administrative andoperational support normally found in much larger organisations. Our objective is to deliver strong, sustainable earnings and dividend growth bybuilding a highly diversified family of long-only, long-bias, equity long/shortand other fundamentally driven hedge fund strategies managed under the PolarCapital brand. Today Polar Capital has a staff of 62 of whom 35 are investment professionalsmanaging 16 funds, one managed account and two advisory relationships. Thesefunds, which are aimed at institutional and professional investors, havecombined assets under management as at 30 September 2007 of $3.8bn. Assets by strategy 30 September 31 March 30 September 2007 2007 2006 Japan $1,068m $1,082m $795mTechnology $1,035m $1,013m $871mGlobal Opportunities $590m $437m $277mEurope $499m $358m $317mGlobal Emerging Markets $446m $269m $175mUK $108m $129m $158mMacro $56m $53m $26mUtilities $47m $41m $13m Total* $3,849m $3,382m $2,632m *Excludes single $27m sub-advisory US equities account Analysis by generation of assetsfor the six months to 30 September 2007 Long Hedge Managed and Total Advisory Brought forward 31 March 2007 $1,563m $1,553m $291m $3,407mLong only transferred to hedge funds -$95m $95m - -Performance and currency movements $50m $75m -$7m $118mNet subscriptions and redemptions -$131m $482m - $351m Total assets at 30 September 2007 $1,387m $2,205m $284m $3,876m Chief Executive Statement Financial Review This is the first full six months of the company's life following its successfullisting as a public company in February 2007. It can look back at this firstperiod with a sense of achievement. Assets under management ("AUM") have risen to $3.8bn at 30 September 2007, anincrease of 46% compared to September 2006 ($2.6bn) and an 11% increase from the$3.4bn as at 31 March 2007 the year end of the company. This rise in AUM is theprime reason that the company has seen revenues increase in the period by 48% to£14.6m (2006:£9.8m) and its profit after tax rise to £3.1m (2006: £0.6m). Thisincreased profitability has led to the diluted EPS for the period to rise to4.1p (2006:1.1p). The profit before tax for the period which has increased to £4.5m (2006:£1.1m)is attributable as follows: Six months to Six months to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m Core operating profit 3.4 1.2 2.8Performance fee profit 0.3 .01 8.0Interest & similar income 0.8 0.3 0.9 4.5 1.6 11.7IPO costs - (0.5) (1.0) Profit before tax 4.5 1.1 10.7 It is particularly encouraging to note the increase in the operating profitmargin of the business. The core operating margin of the company rose to over24% in the period from 13% for equivalent period in 2006 and the marginincluding performance fee receipts was seen to rise to over 25% (2006:14%). Itshould be remembered that the vast majority of our performance fees crystallisein the second half of the year. The Board feels it is appropriate, given thispositive set of numbers to pay a first interim dividend of 1.5p. The dividendwill be paid on 19 January 2008 to shareholders on the register as at 21December 2007 and the shares will trade ex dividend from 19 December. The results have benefited from the crystallisation of a set of preferenceshares. In practical terms it is these preference shares that deliver to a fundmanager an entitlement to a percentage of the net management fees produced fromtheir products and an interest in their performance fees. These shares alsoprovide a mechanism whereby a fund manager is able to relinquish this interestin their management fees and reduce their interest in their performance fees inreturn for the receipt of shares in Polar Capital Holdings plc. These exchangesare expected to be earnings enhancing for shareholders and the consequence ofthis period's event is an 11% increase in the diluted EPS for the six monthsfrom 3.7p to 4.1p per share. Investment Markets The market backdrop to the period has been one of extreme volatility in globalequity, credit and currency markets especially in July and August as thecontinued deterioration in US housing market conditions gave rise to moreserious concerns on the sub prime credit exposure of global banks, hedge fundsand other financial institutions. By mid August equity volatility had risen tolevels not seen since the end of the 2000-2003 equity bear market, the MSCIWorld Equity Index had fallen 12% from peak to trough, and headlines weredominated by the very large performance drawdowns of a number of large and wellknown quantitative hedge fund houses. While general industry and marketperformance has improved from the August lows the issues of sub prime exposureswill take time to work their way through the system. Markets are left to reflecton the impact of much tightened credit conditions on the US and global economyon the one hand, and the inflationary impact of sharply high food and energyprices on the other. Investment Performance The investment performance over the six month period has been rather more mixedthan ideally we would have wished. The Global Opportunities, the EuropeanSmaller Companies, Global Utilities, FX Macro, Russian and Latin American Fundshave all performed well. More disappointing has been the performance of ourJapanese and Technology hedge funds and to a lesser extent our long onlyTechnology business. While the assets in our technology hedge fund are small($55m at the end of the period), the assets in our Japan hedge fund ($550m) aremore significant and it will be important for our performance to improve in whathas been a very difficult overall market. In the case of our long onlyTechnology business our underperformance has largely been a function of our "allcap" investment philosophy in a market where performance has been dominated bythe large/mega cap stocks. While we are comfortable that this philosophy is thecorrect one for longer term outperformance, we have not as a result capturedsome of the easier asset growth at a time when the technology cycle shows thefirst signs of reasserting itself for 7 years. Diversification and Asset Growth Opportunities While we remain very committed to both our long only and hedge fund businesses,the balance between an inevitably more directional long only business and whatshould be a more defensive equity long/short business at this possibly laterstage and less certain part of the equity cycle is important. At the macro level57% of our assets today are in hedge funds and 43% in long only; 12 months agothe split was 58% long only and 42% in hedge funds. Over the six month period there has been some encouraging progress on a numberof fronts. We have consistently articulated our desire to diversify the businessand how the relative emphasis on Technology and Japan would be diluted. Todaythese 2 units represent 54% of our assets under management (61% in 2006). In themeantime our Global Opportunities business (Polar Paragon Fund), our Europeanbusiness (Polar Forager and Polar Conviction Funds) and the Emerging Marketsunit now represent 15%, 13% and 12% respectively of overall assets. The year todate performance of the Paragon, Forager, Elbrus and Latam funds should lead tocontinued decent asset growth momentum in these 3 business units. Furthermore the prospects for the longer established Technology and Japan unitsremain in our opinion compelling. For just over a year we have articulated avery positive case for a recovery in the technology sector driven by bothabsolute and relative earnings growth, new product cycles, historicallyreasonable valuations and negative investor sentiment. In the 12 months to 30September 2007 the Dow Jones World Technology Index has appreciated 22% versusthe MSCI World Equity Index return of 19%. We are inclined to think that marketrotation into areas of growth like Technology and Healthcare is likely toaccelerate further as the activist and private equity themes of replacingmanagement and increasing financial leverage loses its impetus as borrowingcosts rise. Japan has clearly been a more difficult market (up 4% in the 12months to 30 September 2007) and the industry has seen significant redemptions..While our long only business has suffered redemptions alongside the industry, wehave continued to move forward and invest in a more significant researchresource for the unit in Tokyo that should permit the business to getsignificant traction when the cycle turns. We are encouraged by the progress in a number of our smaller and newer businessunits. Inevitably when we recruit a new team and build a new unit, it will taketime for that group to establish its fund, build a performance record andinitiate the marketing process. The Global Utilities Fund (started at the endof 2005 but restructured at the beginning of calendar 2007) has enjoyed anencouraging calendar year of performance; a combination of this performance, thestrong thematic undercurrent of growth in the sector and its relative recessionresistant characteristics should present a significant marketing opportunity forthe fund early in the new calendar year. Equally the Polar Discovery Fund (ourforeign currency/macro fund launched in 2006) has had strong performance year todate coupled with a stream of less correlated returns that should permitaccelerated marketing early in the New Year in what has the potential to be oneof Polar Capital's largest capacity strategies. Other Developments Our strategy for growth combines investment performance, taking our existingfunds to their capacity potential (we calculate that conservatively we haveabout $5bn of spare capacity in existing funds), increasing the scope of eachbusiness unit, and the recruitment of new teams. We are pleased to haverecruited Gareth Powell from Framlington and Dan Mahony from Morgan Stanley toestablish Polar Capital's Healthcare business. We have seeded a GlobalHealthcare long only fund and hope that over time this unit will spawn a numberof different healthcare related strategies. We have a number of other fund manager recruitment initiatives in place, andcontinue to target the addition of 1 to 2 new teams per year. Outlook We cannot ignore current market concerns on the US housing market and economy,the sub prime crisis in the financial sector and potential overspill to thegreater global economy, with the concomitant impact on asset allocationdecisions and investor behaviour. Our business and brand are focused exclusivelyin fundamental and research driven investment strategies and the company has nodirect exposure to any credit related or quantitative investment strategies. Itis nevertheless possible that investors become somewhat more cautious short termon equity directionality and allocation, particularly in more volatile markets.We have however long been of the view that allocations to the hedge industry insuch a more challenging environment for traditional equity management willaccelerate, especially to those strategies and funds whose risk adjusted returnsand/or ability to protect capital are differentiated. At the same time PolarCapital's long only exposure to markets like Technology, Healthcare and Japanthat have arguably been out of favour for some time would suggest a moredefensive nature to such businesses. It is worth highlighting two shorter term concerns. Firstly market uncertaintyand volatility will lead to a more challenging environment for increasing fundsunder management. Secondly, it clear that the increased volatility in marketshas made the accurate forecasting of performance fees less easy. With most ofour fund year ends falling around the calendar year end it is our intention asstated at the time of the Initial Public Offering to give guidance of thequantum of these fees in the middle of January. Importantly however Polar Capital continues to focus on the execution of itslonger term business plan, and we would appear to be well positioned to grow ourassets under management and broaden out the diversification of the business. Wewish to thank our staff, investors in our funds and shareholders for all theirsupport and loyalty. Mark KaryChief Executive10 December 2007 Consolidated income statementfor the six months to 30 September 2007 Six months to Six months to Year to 30 Sept 30 Sept 31March 2007 2006 2007 £000 £000 £000 Restated Restated Revenue 14,612 9,811 41,269Interest receivable and similar income 811 297 1,108 Gross income 15,423 10,108 42,377Cost of sales (1,069) (955) (2,165) Net fees 14,354 9,153 40,212Operating costs (9,834) (7,983) (29,525) Profit on ordinary activities before taxation 4,520 1,170 10,687Taxation (1,365) (513) (2,552) Profit on ordinary activities after taxation 3,155 657 8,135 Basic earnings per ordinary share 4.8p 1.3p 14.7p Diluted earnings per ordinary share 4.1p 1.1p 12.8p All of the items in the above statements are derived from continuing operations. Consolidated statement of recognised income and expensefor the six months to 30 September 2007 Six months Six months to Year to to 30 Sept 30 Sept 31 March 2007 2006 2007 £000 £000 £000 Restated Restated Profit for the financial period 3,155 657 8,135(Losses)/gains on the revaluation of (204) (3) 220available-for-sale financial assetsDeferred tax in respect of employee share options (253) 20 679Deferred tax in respect of available-for-sale financial assets 61 2 (65) Total recognised gains and losses 2,759 676 8,969 Consolidated balance sheetas at 30 September 2007 30 Sept 30 Sept 31 March 2007 2006 2007 £000 £000 £000 Restated Restated Fixed assets 437 519 537Available-for-sale financial assets 11,810 3,207 3,929Deferred tax assets 601 188 856 Total non-current assets 12,848 3,914 5,322 Current assetsReceivables 3,307 3,107 4,228Cash at bank and in hand 22,546 14,556 31,403Total current assets 25,853 17,669 35,631 Total assets 38,701 21,577 40,953 Non-current liabilitiesDeferred tax liabilities 5 - 66 Current liabilitiesTrade and other payables 6,522 8,600 7,360Current tax liabilities 461 1,757 995Total current liabilities 6,983 10,357 8,355 Total liabilities 6,988 10,357 8,421 Net assets 31,713 11,220 32,532 Capital and reservesCalled up share capital 1,688 1,299 1,673Share premium account 15,059 1,558 15,050Investment in own shares (558) (734) (558)Other reserves 1,153 794 1,563Retained earnings 14,371 8,303 14,804 Total shareholders' funds - equity interests 31,713 11,210 32,532 Consolidated cash flow statementfor the six months to 30 September 2007 Six months Six months to Year to to 30 Sept 30 Sept 31 March 2007 2006 2007 £000 £000 £000 Restated Restated Cash flows generated from operating activitiesCash generated from operations 3,935 3,558 8,785Tax paid (1,900) (2,187) (3,563) Net cash inflow generated from operating activities 2,035 1,371 5,222 Returns on investment and servicing of financeInterest received and similar income 811 297 1,108Interest paid and similar charges - - (9)Equity dividends paid (3,619) (4,825) (5,880)Issue of share capital 24 551 14,436Issue of preference shares by subsidiary - - 7undertakingPayments in relation to investment in own shares - (550) (550)Receipts in relation to disposal of own shares - 580 756Net cash (outflow)/ inflow from financing activities (2,784) (3,977) 9,662 Cash flows generated from investing activitiesPurchase of property, plant and equipment (24) (32) (176)Purchase of available-for-sale financial assets (8,084) (2,209) (2,708)Net cash outflow generated from/(used in) investing activities (8,108) (2,241) (2,884) Net (decrease)/ increase in cash and cash equivalents (8,857) (4,847) 12,000Cash and cash equivalents at start of period 31,403 19,403 19,403 Cash and cash equivalents at end of period 22,546 14,556 31,403 Notes to the financial statements for the six months to 30 September 2007 1. Principal Accounting Policies Polar Capital Holdings plc is a public limited company registered in England andWales. The principal accounting policies applied in the preparation of theseconsolidated financial statements are set out below. Adoption of International Financial Reporting Standards ('IFRS') in thefinancial year ending 31 March 2008 In the current year Polar Capital Holdings plc and its subsidiaries (togetherreferred to as 'the Group') have adopted all the standards and interpretationsissued by the International Accounting Standards Board and the InternationalFinancial Reporting Interpretations Committee that are relevant to itsoperations and effective for the Group's financial year beginning on 1 April2007. The adoption of these standards and interpretations has resulted inchanges to the Group's accounting policies and the principal impact of theadoption of IFRS on the results for the year ended 31 March 2007 are set out inNote 10 to these financial statements. Basis of preparation The financial statements have been prepared in accordance with IFRS as adoptedby the European Union and the Companies Act 1985 applicable to companiesreporting under IFRS. The consolidated financial statements have been preparedunder the historical cost convention, as modified by the revaluation ofavailable-for-sale financial assets. At the date of authorisation of these financial statements IFRS 8 'OperatingSegments' was in issue but not yet effective. The Group has not adopted thisStandard and does not anticipate it will have any material impact on thesefinancial statements when it comes into effect. The financial statements have been prepared in accordance with IAS 34 'InterimFinancial Reporting'. The publication of non-statutory accounts The financial information contained in this interim report does not constitutestatutory accounts as defined in s240 of the Companies Act 1985. The financialinformation for the six months ended 30 September 2007 and 2006 has not beenaudited. The information for the year ended 31 March 2007 has been extractedfrom the latest published audited accounts, which have been filed with theRegistrar of Companies, subject to amendments reflecting the changes inaccounting standards from UK GAAP to IFRS. The report of the independent auditoron those financial statements contained no qualification or statement under s237(2) or (3) of the Companies Act 1985. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaryundertakings). All intra-group transactions, balances, income and expenses areeliminated on consolidation. Fixed assets Fixed assets are stated at cost, less depreciation and accumulated impairmentprovisions. Depreciation is provided at rates calculated to write off the costof each asset over its expected useful economic life. The carrying value ofproperty, plant and equipment is assessed annually and any impairment is chargedto the income statement. Depreciation is charged on a straight line basis as follows: Leasehold improvements 25%Computer equipment 33%Office furniture 33% Financial assets and liabilities Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Available-for-sale financial assets Available-for-sale financial assets are initially recognised at fair value,being the consideration given together with any acquisition costs associatedwith the asset. The Group's investments in the funds that it manages aredesignated as "available-for-sale" financial assets and are included innon-current assets. Such assets are subsequently carried at fair value, with anygains or losses arising from changes in fair value being recognised in equity.Available-for-sale financial assets are derecognised when the rights to receivecash flows from the financial assets have expired or have been transferred andthe Group has transferred substantially all risks and rewards of ownership. Whenderecognition occurs a realised gain or loss is recognised in the incomestatement, calculated as the difference between the net sales proceeds and theoriginal cost of the financial asset. Any fair value gains or losses previouslyrecognised directly in equity are recycled into the income statement as part ofthis calculation of the gain or loss arising on derecognition. The Group assesses at each reporting date whether there is objective evidencethat an investment is impaired. In the case of a financial asset classified asavailable-for-sale, a significant or prolonged decline in the fair value of thefinancial asset below its cost is considered as objective evidence that theasset is impaired. If any such evidence exists for available-for-sale financialassets, the cumulative loss - measured as the difference between the acquisitioncost and the current fair value, less any impairment loss on that assetpreviously recognised in the income statement - is removed from equity andrecognised in the income statement. Impairment losses recognised in the incomestatement, if subsequently reversed, are taken through equity and not the incomestatement. Pensions The Group operates a defined contribution money purchase pension scheme coveringthe majority of its employees. The costs of the pension scheme are charged tothe profit and loss account in the period in which they are incurred. Trade receivables Trade receivables are initially recognised at fair value, and are subsequentlycarried at the lower of original fair value and their recoverable amount. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand, deposits and othershort-term highly liquid investments that are readily convertible to a knownamount of cash and are subject to an insignificant risk of changes in value. Forthe purpose of the consolidated cash flow statement, cash and cash equivalentsconsist of cash and cash equivalents as defined above. Trade payables Trade payables initially recognised at fair value and subsequently at amortisedcost. Income recognition Revenue Revenue represents fees receivable (excluding value added tax) during the periodfor discretionary investment management and advisory services. Management feesand performance fees are recognised when receivable. Performance fees, which arebased on the investment performance achieved for certain client portfoliosrelative to predefined benchmarks, are recognized as revenue at the end of theperiod over which the performance is measured. Interest receivable and similar income Interest receivable is recognised on an accruals basis using effective interestmethods. Dividend income from investments is recognised on the date that theright to receive payment has been established. Cost of sales Cost of sales includes fees and commissions payable to third parties in respectof the management of investment management contracts. Commissions anddistribution fees payable to third parties are recognised over the period forwhich the service is provided. Operating leases Amounts payable under operating leases are charged to the income statement on astraight-line basis over the lease term. Taxation The income tax expense represents the sum of the tax currently payable anddeferred tax. The tax currently payable is based on taxable profit for the period. Taxableprofit differs from profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Income tax relatingto items charged or credited directly to equity is also dealt with in equity. Deferred tax is recognised on differences between the carrying amounts of assetsand liabilities in the financial statements and the corresponding tax bases usedin the computation of taxable profit, and is accounted for using the balancesheet liability method. Deferred tax liabilities are generally recognised for all taxable temporarydifferences and deferred tax assets are recognised to the extent that it isprobable that taxable profits will be available against which deductibletemporary differences can be utilised. The carrying amount of deferred taxassets is reviewed at each balance sheet date and reduced to the extent that itis no longer probable that sufficient taxable profits will be available to allowall or part of the asset to be recovered. Deferred tax is calculated using tax rates that have been enacted orsubstantively enacted by the balance sheet date. Deferred tax is charged orcredited to the income statement, except when it relates to items charged orcredited directly to equity, in which case the deferred tax is also dealt within equity. Deferred tax assets and liabilities are offset when there is alegally enforceable right to set off current tax assets against current taxliabilities and when they relate to income taxes levied by the same taxationauthority and the Group intends to settle its current tax assets and liabilitieson a net basis. Share-based payments Equity-settled share-based payments are measured at fair value (excluding theeffect of non market-based vesting conditions) at the date of grant. The fairvalue determined at the grant date of the equity-settled share-based instrumentis expensed on a straight-line basis over the vesting period, based on theGroup's estimate of the shares that will eventually vest and adjusted for theeffect of non market-based vesting conditions. Segmental reporting and functional currency The directors are of the opinion that the Group is engaged in a single, unified,business of managing investments. No segmental reporting is therefore provided.The Group functional currency is pounds sterling, as its operating activitiesare based in the UK and all or substantially of its income and expenses arebased in pound sterling. 2. Revenue Six months to Six months to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £000 £000 £000 Investment management fees 13,422 9,133 20,184Investment advisory fees 193 228 490Investment performance fees 997 450 20,595Revenue 14,612 9,811 41,269 3. Profit on ordinary activities before taxation Six months to Six months to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £000 £000 £000Profit on ordinary activities before taxation isstated after charging:Staff costs 3,535 3,398 7,675Depreciation of tangible fixed assets 124 108 228Operating lease rentals land & buildings 653 653 653 other 53 53 53Auditors' remuneration Audit services Current year 30 21 40 Underprovision in prior year 42 - - Other services relating to taxation 22 17 48 All other services 88 114 257 4. Dividends Six months to Six months to 30 Sept 30 Sep 2007 2006 £000 £000 Dividend paid 3,619 4,825 The directors have declared a dividend of 1.5p per ordinary share in respect ofthe period to 30 September 2007. 5. Earnings per ordinary share The calculation of earnings per Ordinary share is based on the profit for theperiod of £3,155,032 (September 2006: £657,552; March 2007: £8,134,609) and on66,929,478 (September 2006: 51,214,347; March 2007: 55,584,556) Ordinary shares,being the weighted average number of Ordinary shares in issue during the period. The calculation of diluted earnings per Ordinary share is based on the profitfor the period of £3,155,032 (September 2006: £657,552; March 2007: £8,134,609)and on 77,866,861 (September 2006: 58,874,511; March 2007: 63,634,996) Ordinaryshares, being the weighted average number of ordinary shares allowing for alldilutive options of 3,074,945 (September 2006: 3,082,760; March 2007: 3,300,080)and shares not issued under a crystallized event of 7,225,825 (September 2006:4,356,080; March 2007: 2,178,040). 6. Available-for-sale financial assets Six months to Six months to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £000 £000 £000 At beginning of period 3,929 1,001 1,001Additions 8,085 2,209 2,708(Loss)/gain on movement in fair value (204) (3) 220At end of period 11,810 3,207 3,929 The Group's available-for-sale financial assets are principally in the funds itmanages, all of which are listed. 7. Reconciliation of equity Share Share Own Capital Other Retained Total capital premium shares reserve reserves earnings £000 £000 £000 £000 £000 £000 £000 At 31 March 2007 1,673 15,050 (558) 555 1,008 14,804 32,532Profit for the financial period 3,155 3,155Equity dividends paid (3,619) (3,619)Issue of share capital 15 9 (14) 10Employee share options charge 31 31Losses on the revaluation of available for salefinancial assets (204) (204)Movements in deferred tax (192) (192)At 30 September 2007 1,688 15,059 (558) 541 612 14,371 31,713 8. Notes to the cash flow statementReconciliation of profit before taxation to cash generated from operations Six months to Six months to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £000 £000 £000 Restated RestatedCash flows from operating activitiesProfit on ordinary activities before tax 3,709 873 9,579Depreciation of tangible fixed assets 124 108 228Decrease/(increase) in receivables 920 1,841 554(Decrease)/increase in trade and other payables (835) 736 (1,573)Share based payment 31 - 52Other non-cash reserve movements (14) - (55) Cash generated from operations 3,935 3,558 8,785 9. Related party transactions BJD Ashford-Russell is a member of Polar Capital LLP and a director of the PolarCapital Technology Trust plc (the Trust). Polar Capital LLP is appointedinvestment manager of the Trust. The total fees received by the Group asinvestment manager of the Trust for the 6 months to 30 September 2007 were£1,856,890 (September 2006: £1,894,891). At the end of the period, the Group had an outstanding loan due of £557,804(September 2006: £1,033,997) from the Polar Capital Employee Benefit Trust,which was set up in 2002 to hold ordinary shares in Polar Capital Holdings Plcfor the benefit of employees. 10.IFRS transition First time adoption of IFRS: The transition date to IFRS from UK GAAP was 1 April 2006. The accountingpolicies are based on IFRS applied retrospectively and have been applied by theGroup in arriving at its transition date balance sheet amounts. Reconciliation from UK GAAP to IFRS: The tables below reconcile total shareholders' funds at 1 April 2006, 30September 2006 and 31 March 2007 under UK GAAP to total equity under IFRS, andthe profit after taxation for the year ended 31 March 2007 and the period ended30 September from UK GAAP to IFRS. Reconciliation of shareholders' funds under UK GAAP to shareholders' equityunder IFRS Transitional Date 31 March 30 Sept 1 April 2007 2006 2006 £000 £000 £000 UK GAAP - Total shareholders' funds - equity interests 31,524 11,035 14,614IFRS transition adjustments:Fair value of available for sale financial assets (1) 220 (3) 3Deferred tax asset relating to share options (2) 854 187 160Deferred tax asset/ liability relating to available for sale financial assets (1) (66) 1 (1) IFRS - Total shareholders' funds - equity interests 32,532 11,220 14,776 Reconciliation of profit after taxation under UK GAAP to profit after taxationunder IFRS 31 March 30 Sept 2007 2006 £000 £000 UK GAAP - Profit on ordinary activities after taxation 8,150 665IFRS pre-tax transition adjustments:Deferred tax on share options (2) (15) (8) IFRS - Profit on ordinary activities after taxation 8,135 657 IFRS transition adjustments relating to profit after taxation and shareholders'equity (1) Tax on share options Under IAS 12 the Group has recognised a deferred tax asset in relation to thecorporation tax deduction which is expected to arise on the future exercise ofshare options which had not been exercised at the balance sheet date. Under UKGAAP the value of this asset was restricted by reference to both vested optionsand the cost associated with the share options which had been recognised in theprofit and loss account. IAS 12 also differs from UK GAAP in relation to thevalue of income tax deductions arising on the exercise of share options whichcan be recognised in the income statement. Under UK GAAP the full value ofcorporation tax deductions was recognised in the income statement whereas underIAS 12 the tax effect of a deduction exceeding the accounting cost previouslyrecognised is taken directly to equity. (2) Fair value of investments The Group has designated the investments held at the transition date as "available-for-sale", and they have therefore been valued at fair value, together with the recognition of the corresponding deferred tax liability. Shareholder Information Directors T Bartlam, Non executive Chairman M Kary, Chief Executive J Mansell, Chief Operating Officer B Ashford-Russell T Woolley H Aldous, Non executive director, Chairman of Audit Committee J Cayzer-Colvin, Non executive director, Chairman of Remuneration Committee P Buckley, Non executive director C Hale, Non executive director Ms. S Street, Non executive director Dividend An interim dividend of 1.5p per share has been declared for the period ended 30September 2007. This will be paid on 19 January 2008 to shareholders on theregister on 21 December 2007. The shares will trade ex dividend from 19December 2007. Interim Report The interim report will be posted to shareholders in January 2008. Copies willbe available from the Secretary at the Registered Office, 4 Matthew ParkerStreet, London SW1H 9NP and on the Company's website at www.polarcapital.co.uk. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Polar Capital