Annual Results for the year ended 31 December 2018

RNS Number : 9521T

Cenkos Securities PLC

26 March 2019

 

26 March 2019

Cenkos Securities plc

Annual Results for the year ended 31 December 2018

Cenkos Securities plc (the "Company" or "Cenkos") and together with its subsidiaries (the "Group" or the "Firm"), today announces its results for the year ended 31 December 2018. 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.

Highlights	31-Dec-18	31-Dec-17
Revenue	£45.0 m	£59.5 m
Profit before tax on continuing operations	£3.2 m	£10.0 m
Profit after tax on continuing and discontinued operations	£2.3m	£7.2m
Cash	£33.6 m	£36.8 m
Net assets	£27.6m	£29.7m
Basic and diluted earnings per share on continuing and discontinued operations	4.2 p	13.2 p
Full year dividend per share paid and proposed (1)	4.5 p	9.0 p

 ⁽¹⁾ Includes a proposed final dividend of 2.5p (2017: 4.5p)

Since being admitted to trading on AIM in 2006, the Company has returned £111.6 million of cash to shareholders, equivalent to 171.8p per share, before the payment of the proposed 2018 final dividend of 2.5p per share.

Commenting the Company's Chief Executive Officer, Anthony Hotson said:

"We have had a better start to 2019 than the same time last year. The pipeline of significant transactions in our business remains strong. Consequently, we look forward to the current year with optimism."

For further information contact:
Cenkos Securities plc
Anthony Hotson - Chief Executive Officer		[phone]
Nominated Adviser Spark Advisory Partners Limited
Matthew Davis		[phone]
Broker
Whitman Howard
Nick Lovering		[phone]
Public Relations Buchanan Communications
David Rydell		[phone]

 

Chief Executive's Statement

"Our corporate client base remains solid, reflecting our ethos of building and developing long-term relationships. Delivering good client outcomes lies at the heart of the Firm."

Anthony Hotson Chief Executive Officer

This year's Annual Report is my second, as your Chief Executive following my appointment in August 2017 after serving as a Non-executive Director since 2012. Having carried out and delivered business reviews in the front and back office, the company is now in a stronger position to address the commercial challenges ahead. It has a simpler management structure and a more robust three lines of defence compliance model which will help with the forthcoming implementation of the Senior Managers & Certification Regime ("SM&CR"). We completed the acquisition of the nominated adviser business of Smith & Williamson LLP during the year. I look forward to handing over the leadership of Cenkos to a new Chief Executive in the near future who I expect will build upon Cenkos' strengths and deliver growth for all our stakeholders.

Dividend

We propose a final dividend of 2.5p per share (2017: 4.5p per share) which brings the total dividend for the year to 4.5p per share (2017: 9.0p per share). Since we have been admitted to trading on AIM in 2006 we have returned £111.6 million of cash to shareholders, equivalent to 171.8p per share, before the payment of the proposed 2018 final dividend of 2.5p per share.

Performance

Cenkos has had a challenging year, delivering revenues, profit and dividends well behind 2017, albeit in line with the results achieved in 2016. After generating £18.1m of revenue in H1 2018, we are pleased to report that performance in the second half improved leading to full year revenues of £45.0m. Revenues, dominated by placing and corporate finance fees, have been generated across the Firm in reasonable numbers but with an absence of the larger deals that took place in 2017. Profits have been impacted by the implementation costs and consequences of the Markets in Financial Instruments Directive II (MiFID II) together with restructuring costs following the implementation of business reviews of the front and back office.

We have helped our clients raise £1.2bn (2017: £2.5bn) of equity finance. Our corporate client base remains solid, reflecting our ethos of building and developing long-term relationships. Delivering good client outcomes lies at the heart of the Firm.

The key performance indicators we use to assess our performance include both financial and non-financial indicators and signpost the Board's strategy which is set out in the Annual Report.

Brexit, the economy and regulatory environment

Political uncertainty and macro-economic factors have disrupted confidence in 2018 and continue to do so in 2019. The Board is mindful of these risks and they have been reflected in the Firm's assessment of principal risks.

Regulatory obligations in the financial sector increased in 2018 with the implementation of MiFID II. Whilst this implementation has gone well, there has been a fall-off in research revenues as "buy-side" demand for paid research has been eroded. The decline in research revenues is set to continue in 2019 as the market adjusts.

This pace of regulatory change will be sustained in 2019 with the implementation of the SM&CR. Whilst it is early days, I am pleased to note that actions taken from our front and back-office reviews over the last eighteen months have put the Firm in a solid position to deliver against the requirements of SM&CR.

Along with other firms, we continue to invest in people, systems and technology to meet the requirements of new regulation and legislation. Last year we reported the Firm had initiated the introduction of a new operating model for the compliance team. This new model has been completed and, following Philip Anderson's departure later in the year, this provides the opportunity for a new Head of Compliance to refine the model further upon arrival.

We believe that all regulation must be accompanied by a strong internal culture underpinned by the highest ethical and professional standards. Whilst an overarching governance framework is critical, with the highest standards being set by the Board as a role model, ultimately individuals must take responsibility for the way in which they conduct business and work with colleagues. This ethos lies at the heart of SM&CR. Details of our governance framework are set out in the Annual Report.

The Board

Several changes to the Board were announced in 2018. On 5 November 2018, Gerry Aherne retired as Chairman after six years in the position. Jeff Hewitt, Non-executive Chairman of the Audit, Risk and Compliance Committee, was appointed acting Chairman. Subject to regulatory approval being received Jeremy Miller will be appointed as a Non-executive Director and also to the position of Chairman of the Audit, Risk and Compliance Committee.

Two further changes took place in the year. I announced my intention to step down from the Board as soon a suitable successor has received regulatory approval. On 12 December 2018, Philip Anderson (Finance Director and Head of Compliance) announced his intention to step down from the Board on 31 March 2019. He will continue as Head of Compliance until a suitable successor is appointed and has received regulatory approval. Philip has supported me in the front and back office reviews and redesigned the Firm's three lines of defence compliance model. I would echo the Board's thanks to Philip Anderson for the work he carried out on the Cenkos business model and in preparing the foundations for the Firm's compliance with SM&CR.   

People

The reputation of our business is reliant on the quality, expertise, professionalism and conduct of every person in the Firm. Our teams always set out to deliver outstanding client outcomes. The Board and management is focused on retaining and developing a pool of diversified talent with a shared set of values and strategic goals. On behalf of the Board, I would like to thank our employees for their contribution in 2018.

Outlook

We continue to live in uncertain times where the geopolitical environment makes it very difficult to predict either the direction of the markets or health of investor sentiment. This situation is being further exacerbated by the uncertainties around Brexit.

In 2018, market volatility appears to have had a negative impact on investor sentiment. This climate is likely to persist through 2019 and the Board have factored this into the Firm's plans in 2019. Notwithstanding this, we remain ranked as one of the leading brokers in London for growth companies and the Cenkos business model is resilient and well capitalised.

We have had a better start to 2019 than the same time last year. The pipeline of significant transactions in our business remains strong. Consequently, we look forward to the current year with optimism.

 

Consolidated income statement

For the year ended 31 December 2018

		2018 £ 000's	2017 £ 000's
Continuing operations
Revenue		44,953	59,504
Administrative expenses		(41,902)	(49,528)
Operating profit		3,051	9,976
Investment income - interest receivable		103	23
Profit before tax from continuing operations for the year		3,154	9,999
Tax		(805)	(1,815)
Profit after tax from continuing operations for the year		2,349	8,184
Discontinued operations
Loss after tax from discontinued operations for the year		-	(973)
Profit for the year		2,349	7,211
Attributable to:
Equity holders of Cenkos Securities plc		2,349	7,211
From continuing operations
Basic and diluted earnings per share		4.2p	15.0p
From continuing and discontinued operations
Basic and diluted earnings per share		4.2p	13.2p

Consolidated statement of comprehensive income

For the year ended 31 December 2018

	2018 £ 000's	2017 £ 000's
Profit for the year	2,349	7,211
Amounts that will not be recycled to income statement in future periods
Loss on FVOCI financial assets	(180)	(133)
Tax on FVOCI financial assets	29	26
Exchange differences on translation of foreign operations	-	(105)
Other comprehensive loss for the year	(151)	(212)
Total comprehensive income for the year	2,198	6,999
Attributable to:
Equity holders of Cenkos Securities plc	2,198	6,999

Consolidated statement of financial position

As at 31 December 2018

		2018 £ 000's	2017 £ 000's
Non-current assets
Property, plant and equipment		558	525
Intangible asset		100	-
Deferred tax asset		520	738
		1,178	1,263
Current assets
Trade and other receivables		18,831	20,798
FVOCI financial assets		220	250
Other current financial assets		12,648	10,615
Cash at bank		33,635	36,829
		65,334	68,492
Total assets		66,512	69,755
Current liabilities
Trade and other payables		(32,640)	(36,300)
Other current financial liabilities		(6,018)	(3,341)
		(38,658)	(39,641)
Net current assets		26,676	28,851
Non-current liabilities
Trade and other payables		(263)	(366)
Total liabilities		(38,921)	(40,007)
Net assets		27,591	29,748
Equity
Share capital		567	567
Share premium		3,331	3,331
Capital redemption reserve		195	195
Own shares		(5,663)	(3,845)
FVOCI reserve		(93)	58
Retained earnings		29,254	29,442
Total equity		27,591	29,748

 

Consolidated cash flow statement

For the year ended 31 December 2018

		2018 £ 000's	2017 £ 000's
Profit for the year		2,349	7,211
Adjustments for:
Net finance income		(103)	(23)
Tax expense		805	1,815
Depreciation of property, plant and equipment		247	242
Shares and options received in lieu of fees		(1,970)	(3,888)
Share-based payment expense		1,852	1,560
Operating cash flows before movements in working capital		3,180	6,917
Decrease in net trading investments and FVOCI financial assets		2,492	7,908
Decrease in trade and other receivables		1,983	3,623
(Decrease)/increase in trade and other payables		(3,029)	1,959
Net cash flow from operating activities before interest and tax paid		4,624	20,407
Tax paid		(1,664)	(1,334)
Net cash flow from operating activities		2,960	19,073
Investing activities
Interest received		90	23
Purchase of property, plant and equipment		(280)	(378)
Acquisition of Nomad business		(100)	-
Net cash outflow from investing activities		(290)	(355)
Financing activities
Dividends paid		(3,573)	(5,201)
Proceeds from sale of own shares to employee share plans		62	66
Acquisition of own shares		(2,353)	(549)
Net cash used in financing activities		(5,864)	(5,684)
Net (decrease)/increase in cash at bank		(3,194)	13,034
Cash at bank at beginning of year		36,829	23,795
Cash at bank at end of year		33,635	36,829

 

Consolidated statement of changes in equity

For the year ended 31 December 2018

	Equity attributable to equity holders of the Parent
	Share capital £ 000's	Share premium £ 000's	Capital redemption reserve £ 000's	Own shares £ 000's	FVOCI reserve £ 000's	Foreign currency translation reserve £ 000's	Retained earnings £ 000's	Total £ 000's
At 1 January 2017	567	3,331	195	(3,556)	165	105	26,376	27,183
Profit for the year	-	-	-	-	-	-	7,211	7,211
Loss on FVOCI financial assets net of tax	-	-	-	-	(107)	-	-	(107)
Exchange differences on translation of foreign operations	-	-	-	-	-	(105)	-	(105)
Total comprehensive income for the year	-	-	-	-	(107)	(105)	7,211	6,999
Transfer of shares to employee share plans	-	-	-	66		-	-	66
Transfer of shares from share plans to employees	-	-	-	194	-	-	(194)	-
Acquisition of own shares by EBT	-	-	-	(549)	-	-	-	(549)
Credit to equity for equity-settled share-based payments	-	-	-	-	-	-	1,250	1,250
Dividends paid	-	-	-	-	-	-	(5,201)	(5,201)
At 31 December 2017	567	3,331	195	(3,845)	58	-	29,442	29,748
Profit for the year	-	-	-	-	-	-	2,349	2,349
Loss on FVOCI financial assets net of tax	-	-	-	-	(122)	-	-	(122)
Derecognition of FVOCI financial asset	-	-	-	-	(29)	-	23	(6)
Total comprehensive income for the year	-	-	-	-	(151)	-	2,372	2,221
Transfer of shares from share plans to employees	-	-	-	535	-	-	(473)	62
Acquisition of own shares	-	-	-	(2,353)	-	-	-	(2,353)
Credit to equity for equity-settled share-based payments	-	-	-	-	-	-	1,486	1,486
Dividends paid	-	-	-	-	-	-	(3,573)	(3,573)
At 31 December 2018	567	3,331	195	(5,663)	(93)	-	29,254	27,591

Notes to the consolidated financial statements

1. Accounting policies

General information

The consolidated financial information contained within this announcement does not constitute statutory accounts for the year ended 31 December 2018 within the meaning of Section 434 of the Companies Act 2006, but is derived from those audited accounts. The auditors reported on those accounts and their report was unqualified and did not contain any statement under section 498(2) or section 498(3) of the Companies Act 2006. The statutory accounts for the year ended 31 December 2018 will be delivered to the Registrar of Companies in due course. The annual report and audited statutory accounts will be sent to shareholders and will be made available to the public on the Company's website: www.cenkos.com or, upon request, copies may be obtained from the Company Secretary at the registered office of Cenkos Securities plc, 6.7.8. Tokenhouse Yard, London, EC2R 7AS. The Company's Annual General Meeting will be held on 15 May 2019.

The consolidated financial information contained within these financial statements has been prepared on the historical cost

basis, except for the revaluation of certain financial instruments.

Going concern

The Group's business activities, together with the factors likely to affect its future development and performance, the financial position of the Group, its cash flows and liquidity position are set out in the Strategic Report. The financial statements of the Group have been prepared on a going concern basis as the Directors have satisfied themselves that, at the time of approving the financial statements and having taken into consideration the strength of the Group's statement of financial position and cash balances, the Group has adequate resources to continue in operational existence for at least the next 12 months from the signing of these financial statements.

Basis of accounting

The consolidated financial information contained within these financial statements has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and in accordance with International Financial Reporting Interpretations Committee (IFRIC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, and are in accordance with the accounting policies that were applied in the Group's statutory accounts for the year ended 31 December 2018.

2. Dividends

					2018	2017
Amounts recognised as distributions to equity holders in the year:					£ 000's	£ 000's
Final dividend for the year ended 31 December 2017 of 4.5p (2016: 5.0p) per share					2,484	2,743
Interim dividend for the period to 30 June 2018 of 2.0p (June 2017: 4.5p) per share					1,089	2,458
					3,573	5,201
A final dividend of 2.5p per share has been proposed for the year ended 31 December 2018 (2017: 4.5p). The proposed final dividend is subject to approval at the Annual General Meeting and is not recognised as a liability as at 31 December 2018. Under the Compensatory Award Plan 2009 ("CAP"), the payment of a dividend to ordinary shareholders will trigger a cash payment to holders of options under the CAP. The payment of the final dividend will increase staff costs by £0.3 million in the first half of 2019 (2017: final dividend of 4.5p increased staff costs by £0.52 million in the first half of 2018). The final dividend will be paid on 31 May 2019 to the shareholders on the register at 3 May 2019, subject to approval at the Annual General Meeting to be held on 15 May 2019.

3. Events after the reporting period

There were no material events to report on that occurred between 31 December 2018 and the date at which the Directors signed the Annual 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.

 

END

 

 

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