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(POLR) Polar Capital Holdings Share Chat

Discussion in 'General Share Chat' started by Groucho, Jul 5, 2021.

  1. Groucho

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    01 July 2021



    POLAR CAPITAL HOLDINGS plc

    Group Audited Results for the year ended 31 March 2021


    "Achieved strong growth in an extraordinary year" Gavin Rochussen, CEO

    Highlights

    • Assets under Management ('AuM') at 31 March 2021 up 71% to £20.9bn (2020: £12.2bn).

    • Average AuM for the year up 18% to £16.7bn (2020: £14.1bn) and boosted by net inflows of £2.1bnand acquisitions of £1.7bn.

    • Net inflows (unaudited) in the quarter to 25 June 2021 of £517m and AuM (unaudited) at 25 June 2021 of £22.7bn.

    • Pre-tax profit up 49% to £75.9m (2020: £50.8m)

    • Core operating profit† up 24% to £51.5m (2020: £41.6m)

    • Basic earnings per share of 67.2p (2020: 43.5p) and adjusted diluted total earnings per share† up 53% to 62.2p (2020: 40.7p)

    • Second interim dividend increased by 24% to 31.0p per share (2020: 25.0p) bringing the total dividend for the year to 40p per share (2020: 33.0p), a 21% increase.

    • On 16 October 2020, the Group completed the acquisition of the International Value and World Value equity team from the Los Angeles based asset manager First Pacific Advisors, LP and a new joint venture, Phaeacian Partners LLC has been established.

    • On 26 February 2021, the Group completed the acquisition of 100% of the issued share capital of Dalton Capital (Holdings) Limited, the parent company of Dalton Strategic Partnership LLP, a UKbased boutique asset manager.

    • New sustainable thematic team joining in September 2021. This well-known and highly regarded team will be launching Polar Capital's first Article 9 ESG funds.


    † The non-GAAP alternative performance measures shown here are described and reconciled to IFRS measures on the Alternative Performance Measures (APM) page.



    Gavin Rochussen, Chief Executive Officer, commented:

    "The past year has been a challenging period for all, and I am exceptionally proud of what Polar Capital has achieved. Driven by the ongoing support of our clients and the hard work and resilience of my colleagues, AuM saw the highest single year of growth, rising by 71% to £20.9bn, boosted by inflows of £2.1bn and acquisitions of £1.7bn.

    "The products we launched as part of our growth strategy have seen strong demand, especially UK Value, now soft closed, and our sustainable Emerging Markets franchise, which has seen a very strong acceleration in demand. We have witnessed a rise in demand, internationally, for specialist thematic funds, which is a core area of strength for us. Our acquisitions, in the form of Dalton Strategic Partnership and the International Value team from First Pacific Advisors in the US have not only added capacity and broadened our product offering but strongly enhanced our international footprint through the addition of a SICAV and a US 40 Act investment vehicle. We have also increased our client base in Asia and added seven institutional mandates, including through some significant global distributors.

    "This has resulted in a strong year for our financial performance. It has also been pleasing to see that we have performed well in a Broadridge survey of UK fund buyers, where Polar Capital has been ranked 2nd for Brand Preference, 2nd for Product Quality and 4th for Account Management, outperforming many of our established and larger peers.

    "Looking ahead, we have recently announced the addition of a new sustainable thematic team who will be joining in September. This is a well-known, highly regarded team with a very strong performance record in an area with relatively few competitors. Demand for their products has been strong and we look forward to launching Polar Capital's first Article 9 funds as we enhance our ESG capabilities.

    "The outlook is positive with our diversified range of fund strategies, enhanced digital marketing footprint and broader distribution reach. We are confident that we can continue to deliver compelling returns for clients, growth in AuM and resultant increased total shareholder returns. "
     
  2. Groucho

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    The headline for the Polar Capital Holdings plc announcement released on 1 July 2021 at 10.26am under RNS No. 8417D should read Dividend Declaration.

    The announcement text is unchanged and is reproduced in full below:



    Polar Capital Holdings plc ("the Company")

    Legal Entity Identifier: 549300OXX7YE1947B825



    1 July 2021


    Second Interim Dividend


    Further to this morning's results announcement, the Board has declared an interim dividend of 31.0p per ordinary share payable to shareholders on the register as at 9 July 2021.

    The dividend will be paid on 30 July 2021 and the shares will trade ex-dividend from 8 July 2021.
     
  3. Groucho

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  4. Groucho

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    Polar Capital surfs the fund flow waves
    Despite climbing more than 70 per cent in a year, the active manager's shares still look cheap
    • Net inflows and acquisitions power up AuM
    • Mandates still dominated by technology funds
    Free the numbers of any context, and the 12-month period to 31 March 2021 was pretty flattering for financial markets. It started with the MSCI All-World Index in a trough at $426 (£309) and finished with the global equity benchmark up 60 per cent at $680.47, an all-time high.

    Plot it on a chart and the profound economic uncertainty that marked much of that time is barely detectable.

    For asset managers, such rare periods of one-directional mania are usually a welcome boost to performance fees. The effect is doubly powerful when it is accompanied by fevered stock-buying. But for active funds with designs on outperformance, equity markets' post-crash rally has also set punishingly high expectations for the coming years.

    Full-year figures for Polar Capital (POLR), well-known among retail investors for its Technology and Global Healthcare trusts, bear this out. At the beginning of the year, the value of the company's assets under management (AuM) was £12.2bn; 52 weeks later, the pile was 71 per cent higher at £20.9bn.

    Average AuM for the year – up 18 per cent to £16.7bn – paints a more measured picture, but still reflects impressive net inflows of £2.1bn for the period. The acquisition of boutique UK asset manager Dalton and two value-focused fund teams from Los Angeles-based First Pacific Advisors, added another £1.7bn.

    Canny deal structuring – in the form of a revenue-share agreement with First Pacific and a cash-and-deferred consideration split for the Dalton team – meant Polar could massively expand its team footprint with barely a scratch to the balance sheet. Management has capitalised £25.4m-worth of goodwill following the deals, while net cash has risen by more than a quarter.

    This was despite a 31 per cent bump in total operating costs, which hit £118.5m in the period owing mainly to the increase in headcount, but also because of investments in operational support and distribution.

    Beyond soaring asset values and strong fund performance (more on this later), it is the latter front that investors should be most pleased with. In the past year, the group has added open-ended fund structures in both Western Europe and the US, vastly expanding the range of investors who can buy into Polar's funds.

    According to chief executive Gavin Rochussen, this has helped to tap into two big sources of international client flows: Asian investors looking to buy into global thematic funds and US investors looking for exposure to (often cheaper) non-US equity markets.


    Half the funds
    Indeed, for US stock buyers – still the largest pool of equity market liquidity in the world – the signature attraction of Polar's brand is never going to be the Polar Capital Technology trust. After all, the chief investor audience for the technology team – which now manages £10.2bn – has fewer options to match the performance of the Dow Jones Global Technology total return index.

    Polar's success in this endeavour – on a three, five and 10-year view – has been a major contributor to its brand cache. Breaking free of a heavy concentration toward technology and healthcare is nonetheless proving a challenge.

    Rocussen points to the success of the UK value, financials and emerging market teams since the vaccine-sparked rotation to value as evidence that Polar's broadening stable can benefit from several different asset allocation strategies. But technology still grew its share of the total asset pile in the year, from 43 to 49 per cent.

    "The harder we run the harder we have to run," concedes Rochussen. "All of these positive diversification flows are still battling to keep up with technology."

    Alongside investors' continued pivot to value and financial stocks, one potential route out of this conundrum arrives in September, in the shape of a sustainable investing team from Robeco Switzerland. The group, which manages over €5bn (£4.3bn), will launch strategies focused on two already very popular themes: clean energy and electric vehicles.

    Some may conclude this simply adds exposure to sectors where valuations are already sky high. Others will view these kinds of funds as must-haves and good opportunities to cross-sell. Polar's mantra, says Rochussen, is single-minded: provide a product that beats the benchmark.


    Cheap for a reason?
    FactSet-compiled consensus forecasts are for earnings of 64.4p and 73.7p per share for FY2022 and FY2023 , respectively, meaning the shares trade at a slight discount to the broader asset management sector.

    One effect of this has been to push Polar's forecast dividend yield up to 5 per cent, which seems a little harsh given the evident growth opportunities and the strong brand name. For comparison, near-term income prospects at other well-regarded UK active managers Liontrust (LIO) and Impax (IPX) look much weaker, despite their concentration in certain growth-focused sectors.

    We reckon this caution is a function of two investor concerns: that Polar's huge weighting to red-hot growth stocks could suffer in a higher interest rate environment, and that diversification efforts to balance the portfolio will lead to a mean-reversion in performance.

    While the latter dynamic should never be discounted, it risks a misunderstanding of Polar's business model, which is predicated on offering a range of specialist thematic funds. Neither its scale nor its focus put it in competition with the passive giants, which broker Numis rightly describes as a "race to the bottom for an active manager".

    With a good brand and strengthening distribution channels, the shares still look undervalued on a cash-adjusted forward earnings multiple of 11. Since the year began, another £517m of client money has flowed in.

    The people-centred nature of asset management means this is one highly cash-generative UK company that is unlikely to succumb to private equity interest.
    Were a bid to come from within the sector, we expect it would need to be at a massive premium. Buy.

    Last IC View: Buy, 606p, 19 Nov 2020

    https://www.investorschronicle.co.uk/news/2021/07/02/polar-capital-surfs-the-fund-flow-waves/
     
  5. Groucho

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    Screenshot_20210913_162828.jpg

    Share price 853p - ED fair value target 1305p +53% - 4.7% yield

    13 SEP 2021
    An introduction to Polar Capital by Gavin Rochussen

    Gavin Rochussen, CEO of Polar Capital Holdings plc (AIM POLR), discusses the opportunity for Polar Capital.

    The full list of questions is below
    00:10 What has driven your significant increase in AUM?
    01:24 How do you increase funds' capacity while maintaining investment performance?
    02:18 How important is Polar Capital's unique culture?
    03:41 How does your focus on active management support growth?
    04:16 Is Polar Capital more than just a technology strategy?
    06:12 How important is ESG to your growth?
    07:59 What are your biggest competitive threats?
     
    Last edited: Sep 13, 2021
  7. Groucho

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  9. Groucho

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    08 November 2021

    Polar Capital Holdings plc


    Investor Presentation covering Interim Results

    Polar Capital Holdings plc ("Polar Capital" or the "Company"), the specialist active asset management group, is pleased to announce that Gavin Rochussen, CEO, and Samir Ayub, Finance Director, will be conducting a live online presentation covering the Group's half year results for the six months ended 30 September 2021.

    The presentation will take place on Thursday 25th November 2021 at 1pm

    This event is open to all existing and potential shareholders and registration is free. A Q&A session will follow the end of the presentation.

    To register for the event, please click here

    A recording of the event will be available afterwards here
     
  10. Groucho

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    Polar Capital Holdings plc

    11 November 2021

    Crystallisation of Business Units and Issue of Shares


    Polar Capital Holdings plc ("Polar Capital" or the "Company") announces the crystallisation of two sets of Preference Shares. One set is held by Dr Daniel Mahony, David Pinniger and Gareth Powell, portfolio managers of the Polar Capital Healthcare Team, in respect of the Polar Capital Biotechnology Fund. The second set is held by David Keetley, the lead manager of the Global Convertible Bond Fund.

    These crystallisations are expected to be immediately earnings enhancing for shareholders. Based on the results for the financial year ended 31 March 2021, the combined impact of the crystallisation would have been an earnings enhancement of around 2.2p per share1.


    Background

    As set out at the time of the Company's admission to AIM, Polar Capital has structured its fund management operations in such a way that the fund management teams are placed in separate business units. Each business unit is a separate profit centre and the fund managers responsible receive each year a payment which comprises a share of their unit's core operating profit (operating profit before performance fees and related distributions) and performance fees.

    In addition to the remuneration structure described above, certain fund managers and their teams are offered the prospect of an interest in the capital of the Company through the purchase of an individual class of preference shares in Polar Capital Partners Limited, a wholly owned subsidiary of the Company. These preference shares have been structured in such a way as to become convertible upon the occurrence of certain events, known as crystallisation events, into cash or, at the option of the Company, ordinary shares at a ratio that is intended to be earnings enhancing for the Group. At the election of the holders of the preference shares, they may crystallise all or part of their preference shares, or retain the balance, if any, for a further crystallising event at a subsequent date.

    From the effective date of crystallisation, the fund managers concerned cease to be eligible to receive their share (or the relevant proportion in the case of a partial crystallisation) of the business unit's core operating profit which has been crystallised and simultaneously going forward will receive a reduced interest in their performance fees.


    Biotechnology Fund unit

    Dr Daniel Mahony, Gareth Powell and David Pinniger have elected to crystallise in full their preference shares in relation to this Fund.


    Global Convertible Bond Fund unit

    Mr David Keetley has elected to crystallise two-third of his preference shares in relation to this Fund.


    Under the terms of the preference shares the crystallisation value is calculated as at 31 March 2021 and either satisfied in cash, or at the option of the Company, by issue of new ordinary shares. The Company has elected to satisfy the consideration for both crystallisations by the issue of new ordinary shares.

    Both crystallisations are in relation to the crystallisation period ended 31 March 2021. The initial crystallisation value in respect of the Biotechnology Fund unit is to be satisfied by the issue of up to 1,037,152 new ordinary shares, and the initial crystallisation value in respect of the partial crystallisation of the Global Convertible Fund unit is to be satisfied by the issue of up to 313,362 new ordinary shares. The new ordinary shares will be issued in tranches as described below.

    The crystallisation value is re-calculated at each of the first, second, and third anniversaries of 31 March 2021, based on the profits of the business unit in the 12 months ended on the respective anniversary. If the result of the re-calculation provides for a smaller cash or share consideration, then the amounts paid or shares issued to the owners of the preference shares are adjusted accordingly. The effect of such re-calculation is to adjust downwards any consideration and there can never be an increase in the crystallisation value. In return for this delivery of new ordinary shares, the Healthcare and convertible bond team will be forfeiting their interests (or the relevant proportion in the case of a partial crystallisation) in their core operating profit in relation to the Polar Capital Biotechnology Fund and the Global Convertible Bond Fund respectively for the financial year ended 31 March 2021.

    Under the terms of the preference shares 10 percent of the new ordinary shares are issued immediately with the balance of 30 percent of the new ordinary shares due (subject to the re-calculation described above) on or as soon as practicable after each crystallisation anniversary.

    As a result, the Company will issue a total of 135,052 (the initial 10%) new ordinary shares in respect of these crystallisations. The new ordinary shares will rank pari passu with the Company's existing ordinary shares at the time of issue.

    The Company's current issued share capital is 100,113,855 ordinary shares and following admission of the new ordinary shares the total ordinary shares in issue will be 100,248,907.

    Note 1 Presented for illustrative purposes based on the year end results for 31 March 2021 and assuming the crystallisation occurred as at 31 March 2021.
     
  11. Groucho

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    Screenshot_20211122_140459.jpg
    We increase our fundamental value from 1305p to 1400p, 70% above the current share price. We had previously forecast AUM of £23.4bn on 31 Mar 22, but it is already £25.0bn. If we assume no growth from market movements or investment performance for the remainder of the FY, with net inflows continuing at the average of H1 (just over £100m per month), our revised estimate is £25.5bn.
    We also note the continuing discount in valuation compared to peers. Polar’s PE ratio of 12.2 is less than half of the peer group median of 30.0 (page 12), which seems strange given its growth and profitability profile. We maintain that there are sound reasons for a significant change in rating.
     
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    12 April 2022

    Polar Capital Holdings plc

    Fund Terminations


    Polar Capital Holdings plc ("Polar Capital" or the "Group"), the specialist active asset management group, confirms that the Directors of the two 1940 Act mutual funds, Phaeacian Accent International Value Fund and the Phaeacian Global Value Fund (the "Funds"), managed by Phaeacian Partners LLC (the Adviser), have decided to terminate the Funds with effect from 26 May 2022. The termination of the Funds is immaterial to the core profitability of the Group.
     
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    21 June 2022


    Polar Capital Holdings plc


    Investor Presentation covering Preliminary Results


    Polar Capital Holdings plc ("Polar Capital" or the "Company"), the specialist active asset management group, is pleased to announce that Gavin Rochussen, CEO, and Samir Ayub, Finance Director, will be conducting a live online presentation covering the Group's Preliminary Results for the 12 months ended 31 March 2022.

    The presentation will take place on Thursday 30 June at 11.00am.

    This event is open to all existing and potential shareholders and registration is free. A 'Question & Answer' session will follow the end of the presentation.

    To register for the event, please click here.

    A recording of the event will be available afterwards here.
     
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