TIDMCNKS
RNS Number : 9325A
Cenkos Securities PLC
02 October 2020
2 October 2020
Cenkos Securities plc
Interim Results for the six months ended 30 June 2020
Cenkos Securities plc (the "Company" or "Cenkos" or the "Firm")
today announces its results for the six months ended 30 June 2020.
Cenkos is an independent, specialist institutional securities
group, focused on small and mid-cap companies and investment funds.
The Group's principal activity is institutional stockbroking.
Cenkos' shares are admitted to trading on the AIM Market of the
London Stock Exchange ("LSE"). The Company is authorised and
regulated by the Financial Conduct Authority ("FCA") and is a
member of the LSE.
30 June 30 June
Highlights 20 19
---------------------------- --------- ----------
Revenue GBP12.9m GBP10.6m
Underlying profit/loss * GBP2.0m GBP(0.1)m
Profit before tax GBP0.8m GBP(0.2)m
Profit after tax GBP0.6m GBP(0.2)m
Cash GBP22.4m GBP14.7m
Net assets GBP24.6m GBP26.0m
Basic earnings per share 1.1p (0.6)p
Interim dividend per share 1.0p 2.0p
* Underlying profit is profit before restructuring costs and
charges related to the Cenkos Short-Term Incentive Plan and tax. A
reconciliation between Underlying profit before tax and Profit
before tax is shown in the table below.
Since being admitted to trading on AIM in 2006, the Company has
returned GBP114.6 million of cash to shareholders, equivalent to
177.3p per share, before the payment of the proposed 2020 interim
dividend of 1.0p per share.
Commenting the Company's Chief Executive Officer, Jim Durkin
said:
"Since the end of the period, we have completed several equity
fundraisings for our clients. Although our current pipeline is
encouraging and we continue to win new clients, we recognise that
the prevalence of both the virus and measures taken to contain it,
pose a continuing risk to the health of the economy and the
financial markets. The restructuring programme started in 2019, has
resulted in a significantly lower cost base going forward which,
combined with the strength of Cenkos balance sheet and a
rejuvenated strategic focus, means the Company is well placed to
face the challenges ahead. The second half of the current financial
year has begun with energy and purpose at Cenkos, despite the
ongoing macro challenges presented by the ongoing coronavirus."
For further information contact:
Cenkos Securities plc
Jim Durkin - Chief Executive +44 20 7397
Officer 8900
Nominated Adviser
Spark Advisory Partners Limited
Matthew Davis +44 20 3368 3550
Public Relations
Buchanan Communications
David Rydell +44 20 7466 5066
Chief Executive Officer's statement
The clear outcome of the 2019 general election made for an
encouraging start to 2020 with an increase in asset values and the
level of corporate activity. Since then the Coronavirus
("COVID-19") and the resulting lock down have had an unprecedented
impact on economies around the world. Our ongoing priority is the
health and well-being of our staff and I am grateful for the
efforts of our IT team, who ensured an immediate and seamless
switch to remote working and our HR and Facilities team for their
work to make our office COVID-secure, ready for our return. Swift
action and our flexible operating model meant we have been fully
operational throughout this time and therefore able to focus on our
clients' needs and assist them through this period. Indeed, the
second quarter of 2020 saw a further increase in corporate
activity, such that secondary funds raised on AIM were more than
double that raised in the first quarter.
Performance
Consequently, I am pleased to report that H1 2020 revenue
increased by 21% to GBP12.9 million (H1 2019: GBP10.6 million) and
underlying profit was GBP2.0 million (H1 2019: Loss GBP0.1
million).
A summary of H1 2020 performance compared to H1 2019 is set out
in the table below:
Six months Six months
ended ended
30 June 30 June
2020 2019
Revenue streams GBP 000's GBP 000's % change
---------------------------------------------- ----------- ----------- ---------
Corporate finance 9,216 6,245 48%
---------------------------------------------- ----------- ----------- ---------
Nomad, broking and research 3,244 3,459 -6%
---------------------------------------------- ----------- ----------- ---------
Execution - net trading gains 445 921 -52%
Revenue 12,905 10,625 21%
---------------------------------------------- ----------- ----------- ---------
Staff costs (7,392) (6,368) 16%
---------------------------------------------- ----------- ----------- ---------
Administrative expenses before restructuring
costs and STIP (3,539) (4,336) -18%
----------- ----------- ---------
Underlying profit/(loss) 1,974 (79) n/a
---------------------------------------------- ----------- ----------- ---------
Restructuring costs and STIP (1,158) (172) 574%
---------------------------------------------- ----------- ----------- ---------
Operating profit/(loss) 816 (251) n/a
---------------------------------------------- ----------- ----------- ---------
Investment income - interest income 23 65 -65%
---------------------------------------------- ----------- ----------- ---------
Finance costs (86) (10) 763%
---------------------------------------------- ----------- ----------- ---------
Profit/(loss) before tax 753 (196) n/a
---------------------------------------------- ----------- ----------- ---------
Tax (163) (5) 3160%
---------------------------------------------- ----------- ----------- ---------
Profit/(loss) after tax 590 (201) n/a
---------------------------------------------- ----------- ----------- ---------
Corporate finance
Corporate finance fees increased by 48% to GBP9.2 million (H1
2019: GBP6.2 million). The level of corporate activity during this
period has partly been due to companies raising funds to shore up
their balance sheets to help them through the COVID-related
economic down-turn. However, Cenkos' strategic focus on Growth
Companies has seen our clients overwhelmingly raise funds for
acquisitions and expansion to take advantage of new opportunities.
Consequently, in raising funds for our clients, the average
discount over H1 2020, between the placing price achieved by Cenkos
and the clients' share price the previous day was 5.4%.
During H1 2020 we assisted our clients in raising GBP340 million
(H1 2019: GBP343 million) of equity finance from 11 (H1 2019: 11)
transactions.
Nomad, broking and research
Nomad, broking and research fees decreased by 6% to GBP3.2
million (H1 2019: GBP3.5 million) due to the net fall in the number
of our clients from 100 at 31 December 2019 to 97 at 30 June 2020.
Of the 11 clients no longer represented by Cenkos, 5 either
delisted or were subject to a takeover. 8 new clients joined Cenkos
in 2020 and we have so far completed transactions for 4 of
them.
Execution
Net trading gains decreased by 52% to GBP0.4 million (H1 2019:
GBP0.9 million). The Coronavirus and impact of the measures to
contain it, led to a sizeable fall in markets worldwide. The FTSE
AIM all share index declined by nearly 40% from 975.18 on 20
February 2020 to 589.90 by 19 March 2020 (Source: Google). Since
then there has been a significant recovery in asset prices with the
index climbing back to 883.75 by 30 June 2020. Despite the market
conditions and the capital limits we apply to our trading books, we
have traded profitably over the period, while making markets in 185
stocks and maintaining a top 3 market share in 80% of our client
stocks.
Administrative expenses
Administrative expenses - staff costs
Staff costs increased by 16% to GBP7.4 million (H1 2019: GBP6.4
million) primarily due to an increase in the variable remuneration
accrued in line with the increase in net revenue. This was
partially offset by a reduction in salary costs resulting from the
restructuring and reduction in staff numbers (see below).
Administrative expenses - other
Other administrative expenses decreased by 18% to GBP3.5 million
(H1 2019: GBP4.3 million) due mainly to a fall in transaction costs
and professional fees.
Administrative expenses - restructuring costs and Short-Term
Incentive Plan ('STIP')
The restructuring programme started in 2019 was completed in H1
2020, resulting in a further reduction in staff numbers to a total
headcount of 89 at 30 June 2020, from 95 at 31 December 2019. This
restructuring has led to a charge in H1 2020 income statement of
GBP0.7 million (H1 2019: GBP0.2 million) but an ongoing annualised
saving in base staff costs of GBP0.8m. The measures we have taken
to shape the business for the future meant Cenkos did not need to
cut salaries, furlough staff or utilise any government allowances
beyond the automatic deferral of one quarters payment of VAT,
during the lockdown period.
The STIP was launched in April 2020 as a one-off plan to retain
and incentivise key members of staff. The plan was funded using
shares already held by the EBT, which will vest in equal tranches
on the first and second anniversaries of its launch. The charge of
GBP0.5 million (H1 2019: GBPnil) represents the portion of the fair
value of the scheme allocated to this period.
Underlying profit before tax is disclosed before restructuring
costs and costs associated with the STIP as the Directors' believe
this provides a clearer view of the performance of the
business.
Profit and earnings per share
Statutory profit before tax for the period was GBP0.8 million
(H1 2019: loss GBP0.2 million). The tax charge for the period of
GBP0.2 million equates to an effective tax rate of 22% (H1 2019:
3%). Profit after tax for the period was GBP0.6 million (H1 2019:
Loss GBP0.2 million)
Basic earnings per share for the period was 1.1p (H1 2019:
-0.6p)
Financial position
The statement of financial position discloses net assets of
GBP24.6 million as at 30 June 2020 down from GBP26.0 million as at
30 June 2019, which largely reflects the cost of shares acquired by
the EBT and dividends paid since then being partially offset by the
H1 2020 profit generated.
The increase in Non-current assets relates to the recognition of
a right-to-use asset on signing of new leases on our London offices
during H2 2019. This has a corresponding impact on trade and other
payables.
The reduction in net trading investments resulted mainly from
the sale of shares received in lieu of fees ('SILOF').
The movements in trade and other receivables, trade and other
payables and cash and cash equivalents relates to the sale of
shares, the settlement of shares trades and profitable trading
during the period.
30 June 30 June
2020 2019 Change
Net assets summary GBP 000's GBP 000's GBP 000's
---------------------------------------- ---------- ---------- ----------
Non-current assets 5,171 1,539 3,632
---------------------------------------- ---------- ---------- ----------
FVOCI financial assets - 534 (534)
---------------------------------------- ---------- ---------- ----------
Other current financial assets 4,163 10,168 (6,005)
---------------------------------------- ---------- ---------- ----------
Other current financial liabilities (681) (4,157) 3,476
---------------------------------------- ---------- ---------- ----------
Net trading investments 3,482 6,545 (3,063)
---------------------------------------- ---------- ---------- ----------
Trade and other receivables 11,737 28,591 (16,854)
---------------------------------------- ---------- ---------- ----------
Trade and other payables - current (12,818) (25,210) 12,392
---------------------------------------- ---------- ---------- ----------
Trade and other payables - non current (5,337) (171) (5,116)
---------------------------------------- ---------- ---------- ----------
Cash and cash equivalents 22,352 14,660 7,692
24,587 25,954 (1,368)
---------------------------------------- ---------- ---------- ----------
Capital and Liquidity
The Board continuously assesses the Company's cash and capital
requirements with the intention of maintaining a strong balance
sheet, including a significant surplus over and above its Pillar 1,
Individual Capital Guidance ('ICG') and Combined Capital Buffer
('CCB') requirements and sufficient liquid resources to cover at
least 12 months of fixed overheads.
At 30 June 2020, Cenkos had a capital resources surplus of
GBP15.8 million (H1 2019: GBP15.9 million) above its Pillar 1
regulatory capital requirement.
The Board
There have been several changes to the Board in 2020. Following
Jeff Hewitt's retirement from the Board and his role as acting
Chairman and Non-Executive Director on 28 February 2020, Jeremy
Miller assumed the role as the acting Non-Executive Chairman on an
interim basis. I am pleased to report that following our
announcement in February of Lisa Gordon's appointment, her
application was approved by the FCA on 10 June 2020 and she was
formerly appointed as Chairman of the Board on 26 June 2020. In
addition, following our announcement in November 2019 that Julian
Morse, the head of our Growth Companies team, would join the Board
as an Executive Director, his application was approved by the FCA
on 27 April 2020 and he was formerly appointed a Director on 13 May
2020.
Assessment of Coronavirus impact
Since the start of lockdown, Cenkos has been fully operational
and able to focus on our clients' needs. Consequently, we have been
working with them to assess the impact of COVID-19 on their
businesses and where appropriate assist them with their funding
strategies, whether this be to strengthen balance sheets, invest in
growth opportunities and/or complete acquisitions.
Our offices are COVID-secure, and we began a phased return, in
line with Government guidance, earlier this month. Many of the new
ways of working adopted over this period; however, will be carried
forward to maximise our future operational efficiency.
Outlook
Since the end of the period, we have completed several equity
fundraisings for our clients. Although our current pipeline is
encouraging and we continue to win new clients, we recognise that
the prevalence of both the virus and measures taken to contain it,
pose a continuing risk to the health of the economy and the
financial markets. The restructuring programme started in 2019, has
resulted in a significantly lower cost base going forward which,
combined with the strength of Cenkos balance sheet and a
rejuvenated strategic focus, means the Company is well placed to
face the challenges ahead. The second half of the current financial
year has begun with energy and purpose at Cenkos, despite the
ongoing macro challenges presented by the ongoing coronavirus.
Dividend
The Board proposes an interim dividend of 1.0p per share. The
dividend will be paid on 20 November 2020 to all shareholders on
the register at 23 October 2020.
Since being admitted to AIM we have returned GBP114.6m of cash
to shareholders, equivalent to 177.3p per share, before the payment
of the proposed 2020 interim dividend of 1.0p per share.
Responsibility statement
We confirm that to the best of our knowledge:
a) The condensed set of financial statements, prepared in
accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position
and profit of Cenkos Securities plc and the undertakings included
in the consolidation taken as a whole as at 30 June 2020; and
b) The interim management report includes a fair review of the
development and performance of the business and the position of
Cenkos Securities plc with a description of the principal risks and
uncertainties that the Company faces.
Forward-looking statements
These financial statements contain forward-looking statements
with respect to the financial condition, results, operations and
businesses of Cenkos Securities plc. Although the Company believes
that the expectations reflected in these forward- looking
statements are reasonable, we can give no assurance that these
expectations will prove to have been correct. Such statements and
forecasts involve risk and uncertainty because they relate to
events and depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied
by forward-looking statements and forecasts. Forward-looking
statements and forecasts are based on the Directors' current view
and information known to them at the date of this statement. The
Directors do not make any undertaking to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Jim Durkin
Chief Executive Officer
1 October 2020
Condensed income statement
For the six months ended 30 June 2020
Unaudited Unaudited Audited
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2020 2019 2019
GBP 000's GBP 000's GBP 000's
------------------------------------------ ----------- ----------- ------------
Continuing operations
------------------------------------------ ----------- ----------- ------------
Revenue 12,905 10,625 25,916
--------------------------------------------- ----------- ----------- ------------
Administrative expenses (12,089) (10,876) (25,801)
--------------------------------------------- ----------- ----------- ------------
Operating profit/(loss) 816 (251) 115
--------------------------------------------- ----------- ----------- ------------
Investment income - interest
income 23 65 106
--------------------------------------------- ----------- ----------- ------------
Finance costs (86) (10) (76)
--------------------------------------------- ----------- ----------- ------------
Profit/(loss) before tax from continuing
operations 753 (196) 145
-------------------------------------------- ----------- ----------- ------------
Tax (163) (5) (101)
--------------------------------------------- ----------- ----------- ------------
Profit/(loss) after tax 590 (201) 44
--------------------------------------------- ----------- ----------- ------------
Attributable to:
------------------------------------------ ----------- ----------- ------------
Equity holders of Cenkos Securities plc 590 (201) 44
Basic earnings per share 1.1p (0.6)p (0.2)p
--------------------------------------------- ----------- ----------- ------------
Diluted earnings per share n/a n/a n/a
--------------------------------------------- ----------- ----------- ------------
Condensed statement of comprehensive income
For the six months ended 30 June 2020
Unaudited Unaudited Audited
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2020 2019 2019
GBP 000's GBP 000's GBP 000's
------------------------------------------------------- ----------- ----------- ------------
Profit/(loss) 590 (201) 44
---------------------------------------------------------- ----------- ----------- ------------
Amounts that will not be recycled to income statement
in future periods
---------------------------------------------------------- ----------- ----------- ------------
Gain / (loss) on FVOCI
financial asset (36) 14 (46)
---------------------------------------------------------- ----------- ----------- ------------
Tax on FVOCI financial
asset 6 (3) 9
---------------------------------------------------------- ----------- ----------- ------------
Other comprehensive gains
/ (losses) (30) 11 (37)
---------------------------------------------------------- ----------- ----------- ------------
Total comprehensive income/(expense) 560 (190) 7
---------------------------------------------------------- ----------- ----------- ------------
Attributable to:
------------------------------------------------------- ----------- ----------- ------------
Equity holders of Cenkos
Securities plc 560 (190) 7
---------------------------------------------------------- ----------- ----------- ------------
Condensed statement of financial position
As at 30 June 2020
Unaudited Unaudited Audited
30 June 30 June 31 December
2020 2019 2019
GBP 000's GBP 000's GBP 000's
------------------------------- ---------- ---------- ------------
Non-current assets
------------------------------- ---------- ---------- ------------
Property, plant and equipment 434 441 517
---------------------------------- ---------- ---------- ------------
Right-of-use assets 4,299 502 4,540
Intangible asset 50 83 67
Deferred tax asset 387 512 486
Investments in subsidiary
undertakings 1 1 1
---------------------------------- ---------- ---------- ------------
5,171 1,539 5,611
------------------------------- ---------- ---------- ------------
Current assets
------------------------------- ---------- ---------- ------------
Trade and other receivables 11,737 28,591 13,455
---------------------------------- ---------- ---------- ------------
FVOCI financial assets - 534 60
---------------------------------- ---------- ---------- ------------
Other current financial
assets 4,163 10,168 8,973
---------------------------------- ---------- ---------- ------------
Cash and cash equivalents 22,352 14,660 18,333
---------------------------------- ---------- ---------- ------------
38,252 53,953 40,821
------------------------------- ---------- ---------- ------------
Total assets 43,423 55,492 46,432
---------------------------------- ---------- ---------- ------------
Current liabilities
------------------------------- ---------- ---------- ------------
Trade and other payables (12,818) (25,210) (14,715)
---------------------------------- ---------- ---------- ------------
Other current financial
liabilities (681) (4,157) (1,840)
---------------------------------- ---------- ---------- ------------
(13,499) (29,367) (16,555)
------------------------------- ---------- ---------- ------------
Net current assets 24,753 24,587 24,266
---------------------------------- ---------- ---------- ------------
Non-current liabilities
------------------------------- ---------- ---------- ------------
Trade and other payables (5,337) (171) (5,219)
---------------------------------- ---------- ---------- ------------
Total liabilities (18,836) (29,538) (21,774)
---------------------------------- ---------- ---------- ------------
Net assets 24,587 25,954 24,658
---------------------------------- ---------- ---------- ------------
Equity
------------------------------- ---------- ---------- ------------
Share capital 567 567 567
---------------------------------- ---------- ---------- ------------
Share premium 3,331 3,331 3,331
---------------------------------- ---------- ---------- ------------
Capital redemption reserve 195 195 195
---------------------------------- ---------- ---------- ------------
Own shares (5,579) (5,004) (5,436)
---------------------------------- ---------- ---------- ------------
FVOCI reserve (171) (82) (141)
---------------------------------- ---------- ---------- ------------
Retained earnings 26,244 26,947 26,142
---------------------------------- ---------- ---------- ------------
Total equity 24,587 25,954 24,658
---------------------------------- ---------- ---------- ------------
Condensed cash flow statement
For the six months ended 30 June 2020
Unaudited Unaudited Audited
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2020 2019 2019
GBP 000's GBP 000's GBP 000's
-------------------------------------------------------- ----------- ----------- ------------
Profit/(loss) 590 (201) 44
----------------------------------------------------------- ----------- ----------- ------------
Adjustments for:
-------------------------------------------------------- ----------- ----------- ------------
Net finance income 64 (55) (30)
----------------------------------------------------------- ----------- ----------- ------------
Tax expense 163 5 101
----------------------------------------------------------- ----------- ----------- ------------
Depreciation of property, plant and equipment,
ROU assets and intangible asset 348 498 899
----------------------------------------------------------- ----------- ----------- ------------
Fair value adjustment to deferred
consideration - - 40
--------------------------------------------------------- ----------- ----------- ------------
Shares and options received
in lieu of fees (120) (374) (3,987)
----------------------------------------------------------- ----------- ----------- ------------
Share-based payment expense 945 736 1,115
----------------------------------------------------------- ----------- ----------- ------------
Operating cash flows before movements in working
capital 1,990 609 (1,818)
----------------------------------------------------------- ----------- ----------- ------------
Decrease in net trading investments and
FVOCI financial assets 3,795 692 3,598
---------------------------------------------------------- ----------- ----------- ------------
(Increase) / decrease in trade and
other receivables 1,756 (9,925) 5,212
--------------------------------------------------------- ----------- ----------- ------------
(Decrease) in trade and other payables (2,596) (7,783) (17,861)
--------------------------------------------------------- ----------- ----------- ------------
Net cash flow from operating activities before
interest and tax paid 4,945 (16,407) (10,869)
----------------------------------------------------------- ----------- ----------- ------------
Tax paid - (200) (351)
----------------------------------------------------------- ----------- ----------- ------------
Net cash flow from operating activities 4,945 (16,607) (11,220)
----------------------------------------------------------- ----------- ----------- ------------
Investing activities
-------------------------------------------------------- ----------- ----------- ------------
Interest received 26 49 90
----------------------------------------------------------- ----------- ----------- ------------
Purchase of property, plant
and equipment (7) (7) (197)
----------------------------------------------------------- ----------- ----------- ------------
Acquisition of Nomad business - - (140)
----------------------------------------------------------- ----------- ----------- ------------
Net cash flow from investing activities 19 42 (247)
----------------------------------------------------------- ----------- ----------- ------------
Financing activities
-------------------------------------------------------- ----------- ----------- ------------
Lease incentive received 500 - 500
--------------------------------------------------------- ----------- ----------- ------------
Lease payments made (22) (357) (613)
----------------------------------------------------------- ----------- ----------- ------------
Dividends paid (515) (1,398) (2,485)
----------------------------------------------------------- ----------- ----------- ------------
Proceeds from sale of own shares to employees on
dividend reinvestment - 23 40
----------------------------------------------------------- ----------- ----------- ------------
Acquisition of own shares (908) (678) (1,277)
----------------------------------------------------------- ----------- ----------- ------------
Net cash used in financing activities (945) (2,410) (3,835)
----------------------------------------------------------- ----------- ----------- ------------
Net increase / (decrease) in cash and cash equivalents 4,019 (18,975) (15,302)
----------------------------------------------------------- ----------- ----------- ------------
Cash and cash equivalents at beginning
of period 18,333 33,635 33,635
--------------------------------------------------------- ----------- ----------- ------------
Cash and cash equivalents
at end of period 22,352 14,660 18,333
----------------------------------------------------------- ----------- ----------- ------------
Condensed statement of changes in equity
For the six months ended 30 June 2020
Equity attributable to equity holders
Capital
Share Share redemption Own FVOCI Retained
capital premium reserve shares reserve earnings Total
GBP GBP GBP
000's GBP 000's GBP 000's 000's 000's GBP 000's GBP 000's
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Balance at 1 January 2019 567 3,331 195 (5,663) (93) 29,254 27,591
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Loss - - - - - (201) (201)
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Loss on FVOCI financial
assets net of tax - - - - - - -
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Gain on derecognition of
FVOCI financial asset net
of tax - - - - 11 - 11
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Total comprehensive income - - - - 11 (201) (190)
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Issue of shares to employees
on dividend reinvestment - - - 36 - (13) 23
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Transfer of shares from
share plans to employees - - - 1,301 - (1,301) -
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Acquisition of own shares - - - (678) - - (678)
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Credit to equity for equity-settled
share-based payments - - - - - 606 606
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Current tax on share-based
payments - - - - - - -
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Dividends paid - - - - - (1,398) (1,398)
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Balance at 30 June 2019 567 3,331 195 (5,004) (82) 26,947 25,954
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Profit - - - - - 245 245
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Loss on FVOCI financial
assets net of tax - - - - (37) - (37)
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Gain on derecognition of
FVOCI financial asset net
of tax - - - - (22) 11 (11)
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Total comprehensive income - - - - (59) 256 197
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Issue of shares to employees
on dividend reinvestment - - - 29 - (12) 17
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Transfer of shares from
share plans to employees - - - 138 - (138) -
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Acquisition of own shares - - - (599) - - (599)
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Credit to equity for equity-settled
share-based payments - - - - - 169 169
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Current tax on share-based
payments - - - - 7 7
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Dividends paid - - - - - (1,087) (1,087)
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Balance at 31 December
2019 567 3,331 195 (5,436) (141) 26,142 24,658
------------------------------------ --------- ---------- ------------ -------- --------- ---------- ----------
Balance at 01 January 2020 567 3,331 195 (5,436) (141) 26,142 24,658
------------------------------------- ---- ------ ---- -------- ------ ------- -------
Profit - - - - - 590 590
------------------------------------- ---- ------ ---- -------- ------ ------- -------
Loss on FVOCI financial
assets net of tax - - - - (30) - (30)
------------------------------------- ---- ------ ---- -------- ------ ------- -------
Total comprehensive income - - - - (30) 590 560
------------------------------------- ---- ------ ---- -------- ------ ------- -------
Transfer of shares from
share plans to employees - - - 765 - (765) -
------------------------------------- ---- ------ ---- -------- ------ ------- -------
Acquisition of own shares - - - (908) - - (908)
------------------------------------- ---- ------ ---- -------- ------ ------- -------
Credit to equity for equity-settled
share-based payments - - - - - 792 792
------------------------------------- ---- ------ ---- -------- ------ ------- -------
Dividends paid - - - - - (515) (515)
------------------------------------- ---- ------ ---- -------- ------ ------- -------
Balance at 30 June 2020 567 3,331 195 (5,579) (171) 26,244 24,587
------------------------------------- ---- ------ ---- -------- ------ ------- -------
Notes to the financial statements
1. Accounting policies
General information
The interim condensed financial statements of Cenkos Securities
plc (the "Company" or "Cenkos") for the six months ended 30 June
2020 are unaudited and were approved by the Board of Directors for
issue on 1 October 2020.
The Company is incorporated in England under the Companies Act
2006 (company registration No. 05210733) and its shares are
publicly traded. The Company's principal activity is as an
institutional stockbroker to UK small and mid- cap companies and
investment funds. These financial statements are presented in
pounds sterling because that is the currency of the primary
economic environment in which the Company operates.
The preparation of financial statements in conformity with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these
estimates are based on management's best knowledge of the amount,
event or actions, actual results ultimately may differ from those
of estimates.
Critical accounting policies and key sources of estimation
uncertainty
The judgements and assumptions that are considered to be the
most important to the portrayal of the Company's financial
condition are those relating to equity-settled share-based
payments, valuation of derivative financial assets, provisions and
revenue recognition. These critical accounting policies and
judgements are described on page 59 of the Cenkos Securities plc's
2019 Annual Report and Accounts.
These financial statements have been prepared on the historical
cost basis, except for the revaluation of certain financial
instruments.
Where appropriate prior year figures have been restated to
conform to the current year presentation.
Basis of accounting
The interim condensed financial statements for the six months
ended 30 June 2020 have been prepared in accordance with
International Accounting Standard ("IAS") 34 Interim Financial
Reporting. The interim condensed financial statements do not
include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's annual financial statements for the year ended 31 December
2019.
The accounting policies adopted in the preparation of the
interim condensed financial statements are consistent with those
followed in the preparation of the Group's annual financial
statements for the year ended 31 December 2019.
The financial information contained in these interim condensed
financial statements does not constitute the Company's statutory
accounts within the meaning of section 434 of the Companies Act
2006. The comparative information contained in this report for the
year ended 31 December 2019 does not constitute the statutory
accounts for that financial period. Those accounts have been
reported on by the Company's auditors, at the time, Ernst &
Young LLP and delivered to the Registrar of Companies. The report
of the auditors was unqualified and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
Going Concern
The Group's business activities, together with the factors
likely to affect its future development and performance, its
principal risks and uncertainties, the financial position of the
Group, its cash flows and liquidity position are set out in the
Strategic Report in the Group's Annual Report for the year ended 31
December 2019.
In light of internal forecasts and the current pipeline of
transactions, the Directors are satisfied that the Group has
sufficient resources to continue in operation for the foreseeable
future, a period of not less than 12 months from the date of this
report. Accordingly, the Directors continue to adopt a going
concern basis in preparing the interim financial statements.
Coronavirus ('COVID-19') was recognised as a pandemic by the
World Health Organization (WHO) on 11 March 2020. In response, the
governments of many countries, states, cities and other geographic
regions have taken preventative or protective actions, such as
imposing restrictions on travel and business operations and
advising or requiring individuals to limit or forego their time
outside of their homes. These actions have severely restricted the
level of economic activity around the world and impacted the health
of the financial markets. Cenkos responded to COVID-19 promptly by
enacting its business continuity plan and successfully implementing
a comprehensive remote working capability. These procedures are
working well and have enabled us to ensure both the wellbeing of
our staff and the ability to continue servicing our clients.
Throughout this period and since the period end, Cenkos has
completed a number of equity fundraisings for our clients, which
could suggest a period of increased economic activity as our
clients look to strengthen their balance sheets, invest in growth
opportunities and/or complete acquisitions. Alternatively, although
our current pipeline is encouraging and we continue to win new
clients, we recognise that both the virus and the measures used to
contain it pose a continuing risk to the health of the economy and
the financial markets. This may dissuade companies from approaching
the markets to raise further capital, leading to a period of
inactivity. Whilst it is not possible to quantify the overall
impact of COVID-19, as described above, if it were to lead to a
period of inactivity this would most likely lead to a reduction in
fees generated from placing and corporate finance and a decline in
fair values of listed equities, options and warrants as observed in
March 2020. Management continues to monitor the impact of the
COVID-19 pandemic on the Company and the financial markets.
In order to mitigate the risk associated with fluctuations in
the financial markets, the Company operates a flexible business
model which links risk adjusted variable remuneration to corporate
performance. Fixed costs are kept low and controlled and, in
addition, the review of overheads conducted in 2019 has resulted in
a significantly reduced fixed cost base going forward, so providing
an even stronger foundation. Cenkos is not reliant on external
borrowings but is funded entirely by share capital and retained
earnings. The business is not capitally intensive. The trading book
is tightly controlled by book limits and, apart from shares
received in lieu of fees, is held for market making purposes or to
facilitate client business. Cenkos has a positive cash cycle and
does not run any liquidity mismatches. Cash is the largest asset on
the statement of financial position and consequently its exposure
to credit risk is largely due to its bank deposits before risk
weighting.
Management has also performed an impact analysis as part of its
going concern assessment using information available to the date of
issue of these financial statements. As part of this analysis, a
number of adverse scenarios have been modelled to assess the
potential impact on the Company's revenue streams, in particular
corporate finance fees, and on asset values, liquidity and capital
adequacy. In addition, a reverse stress test has been modelled to
assess the stresses the balance sheet has to endure before there is
a breach of the relevant regulatory capital requirement or
insufficient cash resources and including an assessment of any
relevant mitigations management has within their control to
implement. Having performed this analysis, management believes
regulatory capital requirements continue to be met and the Company
has sufficient liquidity to meet its liabilities for the next 12
months and that the preparation of the financial statements on a
going concern basis remains appropriate as the Company expects to
be able to meet its obligations as and when they fall due for the
foreseeable future.
Changes in accounting policy
During H2 2019, the Company elected to voluntarily change its
accounting policy for the Cenkos Securities Employee Benefit Trust
('EBT'), the Deferred Bonus Scheme EBT and the Share Incentive Plan
('SIP'); to treat it as an extension of the Company instead of as a
separate subsidiary company. Consequently, the Company no longer
has material subsidiaries as the remaining subsidiaries are all
dormant companies, and, as a result, the Company is able to take
advantage of the exemption under section 405 of the Companies Act
2006 and prepare separate financial statements for the Company
only, rather than prepare both consolidated and parent company
financial statements. This provides a clearer view of the financial
performance and position of the Company for the users of the
financial statements. This change has been adopted retrospectively
and the impact of this change on the Company statement of financial
position for the comparative period is to eliminate a balance
receivable from the EBT and recognise the shares held by the EBT as
own shares held, as shown in the table below:
Restated Restated
1 January
30 June 2019 2019
GBP 000's GBP 000's
Current Assets: Trade and other receivables -
Amounts owed by group undertakings (5,004) (4,181)
=============================================================== =========== ============
Equity: Own shares 5,004 4,181
=============================================================== =============== ==========
The impact of this change on the Company cash flow statement is
to include the own shares acquired by the EBT during the year under
the caption 'Acquisition of own shares' and eliminate the increase
in the balance receivable from the EBT from trade and other
receivables.
Other new and amended standards
Other new and amended standards and Interpretations issued by
the IASB that will apply for the first time in the next annual
financial statements are not expected to impact the Company as they
are either not relevant to the Company's activities or require
accounting which is consistent with the Company's current
accounting policies.
2. Dividends
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2020 2019 2019
GBP 000's GBP 000's GBP 000's
------------------------------------------------- ----------- ----------- ------------
Amounts recognised as distributions
to equity holders in the period:
--------------------------------------------------- ----------- ----------- ------------
Final dividend for the year ended 31 December
2019 of 1.0p (2018: 2.5p) per share 515 1,398 1,398
---------------------------------------------------- ----------- ----------- ------------
Interim dividend for the period to 30 June 2019
of 2.0p (2018: 2.0p) per share - - 1,087
515 1,398 2,485
------------------------------------------------- ----------- ----------- ------------
The proposed interim dividend for the period ended 30 June 2020 of 1.0p
(30 June 2019: 2.0p) per share was approved by the Board on 1 October 2020
and has not been included as a liability as at 30 June 2020. The dividend
will be payable on 20 November 2020 to all shareholders on the register
at 23 October 2020.
3. Events after the reporting period
There were no material events to report on that occurred between
30 June 2020 and the date at which the Directors signed the Interim
Report.
4. Market abuse regulation (MAR) disclosure
Certain information contained in this announcement would have
been deemed to be inside information for the purposes of article 7
of Regulation (EU) No 596/2014 until the release of this
announcement.
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END
IR KKBBPPBDKOKK
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October 02, 2020 02:00 ET (06:00 GMT)
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