Final Results

RNS Number : 9661S

Cenkos Securities PLC

23 March 2016

 

23 March 2016

Cenkos Securities plc

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015

Cenkos Securities plc (the "Company" or "Cenkos"), together with its subsidiaries (the "Group"), today announces its final results for the year ended 31 December 2015. Cenkos is an independent, specialist institutional securities group, focused on small and mid-cap companies and investment funds.

Highlights		31-Dec-15	31-Dec-14
Revenue	- 14%	£76.5 m	£88.5 m
Profit before tax	- 26%	£19.9 m	£27.0 m
Cash	+ 1%	£33.1 m	£32.9 m
Basic earnings per share	- 23%	27.2 p	35.2 p
Full year dividend per share paid and proposed	- 18%	14.0 p	17.0 p
Buy-backs: equivalent dividend per share		30.0 p	0.0 p
Since it was admitted to trading on AIM in 2006, the Company will have returned £102.2 million of cash to shareholders (equivalent to 154.8p per share) following the payment of dividends declared and proposed.

Commenting on the results, Jim Durkin, Chief Executive Officer, said:

"Despite challenging market conditions since the start of 2016, there continues to be good institutional demand to fund high quality companies and ideas. Since January we have been engaged in a number of significant fund raisings for clients and our current pipeline is satisfactory given the current market environment."

For further information contact:

Jim Durkin                                                                              [phone]

Chief Executive Officer

Cenkos Securities plc                                                                                        

Dr Azhic Basirov / David Jones / Ben Jeynes                  [phone]

Nominated Adviser

Smith & Williamson Corporate Finance Limited

David Rydell / Duncan Mayall / James Newman           [phone]

Bell Pottinger

Strategic report

Introduction

The Board of Cenkos is pleased to present its Strategic Report on the development and performance of Cenkos during the year ended 31 December 2015, its financial position as at 31 December 2015 and the principal risks to which Cenkos is exposed. This report covers our strategy, business model, how well the business is performing (including a review of our key performance indicators) and the principal risks we face.

Our revenue of £76.5m and profits before tax of £19.9m were at our second highest level after 2014's record year, on the back of over £3 billion of equity fundraising for clients in the year, including £1 billion for BCA Marketplace plc. We are ranked as one of the leading brokers in London for growth companies. Corporate Adviser Rankings Guide for February 2016 shows the Company as the number one Financial Adviser on AIM by client market capitalisation, and number two by number of AIM clients.

Our strategy

The Company was founded in 2004 and over the past 11 years has established a successful platform that has been profitable in every year of its existence and delivered strong returns to shareholders. 

Our prime strategy is to build from these solid foundations to become the pre-eminent UK institutional broker to growth companies and investment funds admitted to trading or listed on a UK market. We aim to achieve this through:

n  Understanding the needs of our clients, enabling us to provide successful fund raising and advice through an innovative and entrepreneurial approach;

n  Delivering sustainable, diversified and growing income streams;

n  Adding high quality individuals to the teams; and

n  Managing costs and risks carefully.

Thereby delivering a high return on equity and shareholder value through earnings growth and attractive cash returns to shareholders.

Our business model

We provide corporate finance, corporate broking, research and execution services to small and mid-cap growth companies and, increasingly, larger companies, across a wide range of industry sectors, as well as investment funds. We focus on companies that seek admission of their shares to trading on AIM or the LSE's main market, or companies that are already quoted on those markets. For growing companies that require access to capital and international exposure, AIM's flexibility, with its Nominated Adviser ("Nomad") arrangements, provides a firm foundation for financing and corporate development. We offer our clients advice and access to equity finance at all stages of their development.

Our resources are allocated as follows:

n  Corporate finance (22 staff): as well as providing strategic advice and regulatory guidance to clients, the team provides specialist corporate finance and technical advice on all forms of corporate transactions including IPOs, fundraisings, mergers and acquisitions, disposals, restructurings and tender offers;

n  Corporate broking, sales and investor relations (31 staff): we provide an effective and dedicated interface between investing institutions and corporates. Our business revolves around building and maintaining relationships with our retained corporate brokerships through which we act as the intermediary between our clients' Boards, shareholders and potential institutional investors. We have a proven track record of raising a significant amount of equity finance for a wide range of companies utilising our network of institutional investors. As corporate broker, our clients' Boards engage us to create and maintain supportive shareholder registers, provide an informed and effective interface with shareholders and potential investors and advise on all pertinent market issues;

n  Research (18 staff): our research analysts provide research on both corporate and non-corporate clients covering over 197 companies across 12 sectors;

n  Execution services, including market-making and sales trading (13 staff): we actively provide liquidity to the market via our Retail Service Providers and facilitate institutional business in both small and large-cap equities and investment funds. We strive to achieve a leading market share in the trading of all our broking clients and thus have superior visibility of buyers and sellers. Our market-making capital is used to facilitate market liquidity for investors, not to trade proprietary positions; and

n  Support functions (37 staff) covering areas such as finance, compliance, operations, HR, IT, risk, internal audit and facilities.

Revenue streams

Cenkos earns fees from primary and secondary equity fundraising, providing access to capital through acting as a key intermediary between growth companies or investment funds and institutional providers of capital. In 2015 we raised over £3 billion of funds for our clients. We have raised a total of almost £15 billion for our clients from our first equity placing in 2005 to the end of December 2015 - predominantly in transactions where we acted as sole broker.

We aim to provide equity financing and strong and supportive shareholder lists for companies and healthy returns for institutional investors. Corporate finance fees are earned from providing strategic advice and regulatory guidance to clients, as well as advice on all forms of corporate transactions including fundraisings, mergers and acquisitions, disposals, restructurings and tender offers. Fees are also generated from acting as Nomad, Sponsor, broker or financial adviser to our corporate clients. Commission is earned from execution and research services and revenue is also generated from our market-making activities.

Management systems and controls

We operate an efficient and flexible business model in the context of a highly regulated environment. It is therefore critical that we continue to maintain an appropriate and proportionate level of systems and controls, commensurate with our size, complexity, activities and risk exposure. The regulatory environment continues to evolve at a rapid pace with additional regulations coming in to force year on year, including an increased focus on conduct, culture, managing conflicts of interest and heightened regulatory scrutiny. The industry is working on further changes that will come into play in 2016 and beyond, including EU driven legislation such as MIFID II and the Market Abuse Regulations ("MAR"). We are therefore dedicating increasing levels of resources to monitoring, assessing and then implementing these changes, putting our clients' interests at the centre of everything we do and ensuring that we have an appropriate governance and assurance framework to oversee and manage this.

We manage our cost base carefully. We offer our client-facing staff relatively low basic salaries but reward their performance based on factors that include their revenues and costs, as well as risk factors. This cost flexibility allows us to operate during economic downturns more successfully than many of our competitors who have higher levels of fixed or guaranteed pay. We selectively use outsourcing partners to help us maintain this cost flexibility in areas where volumes can be unpredictable. Our settlement and core trading systems and associated support are outsourced.

Culture and people

Our success is based on putting our corporate and institutional clients at the core of what we do. To achieve this, we seek to maintain experienced and stable teams, whose members build professional relationships and achieve results through a committed and entrepreneurial approach, acting with honesty, fairness, reliability and competency. We endeavour to remunerate our staff to a level which not only retains them but also motivates them to perform in line with the longer-term growth objectives of the Group.

Our key objectives and key performance indicators ("KPIs")

Our key objectives are to:

n  Grow the business by both retaining existing corporate clients and winning new ones, helping clients achieve their strategies through the provision of advice and fundraising capabilities, ensuring we have the right calibre and number of staff deployed to support this; and

n  Reward our shareholders by generating a high return on equity (within acceptable risk limits), leading to an attractive dividend yield - or other returns to shareholders such as share buy-backs where appropriate - and share price growth.

Our KPIs include, but are not limited to, measures such as:

n  The size of our corporate client base (Nomad / Sponsor / broker / financial adviser appointments): this decreased slightly from 130 in 2014 to 124 as at 31 December 2015. A number of our clients were acquired in the year and some smaller clients were potentially better suited to other Nomads;

n  Funds raised for clients: in 2015 we raised £3,068 million (2014: £2,816 million) for our clients. We achieved a market share of 17% of all fundraisings on AIM in 2015 and demonstrated our ability to raise funds not only on AIM but also for larger companies and listed investment funds on the LSE's main market;

n  Revenue per head: although funds raised were slightly ahead of 2014, a combination of lower placing income and market-making revenues, as well as higher staff numbers, meant that revenue per head fell from £0.77 million in 2014 to £0.63 million in 2015. This is still at a level well above our peers;

n  Profit before tax: this fell 26% to £19.9 million in 2015 (2014: £27.0 million). Performance related pay fell on the back of lower net revenues and bonus deferrals, but this was partially offset by continued investment in our business to enable us to execute larger and more complex deals. We also opened a new office in Singapore; and

n  Basic earnings per share ("EPS"): this fell 23% to 27.2p (2014: 35.2p) due to lower profits being partially offset by the impact of the two share buy-backs we undertook in 2015.

n  Post tax return on average equity: Our post tax return on average equity fell from 60% in 2014 to 43% in 2015. This level is far above industry averages, reflecting both our profitability and careful management of surplus capital;

n  Total shareholder returns: these were 20.7% (2014: 38.9%); and

n  Various key risk indicators, including capital resources and cash. As at 31 December 2015 we held £33.1 million (2014: £32.9 million) of cash and a capital resources surplus of £11.0 million (2014: £12.4 million) in excess of our overall regulatory capital requirements after undertaking £18.8 million (2014: nil) of share buy-backs and paying £9.7 million (2014: £9.4 million) of dividends in the year. We continue to maintain healthy cash reserves, reflecting our positive cash flow cycle.

Review of the year

Financial results

Overall performance

Following on from our record year in 2014, we are pleased to report that performance in 2015 was very strong - our second best year ever. As at 31 December 2015 we were Nomad, broker or financial adviser to 124 companies or trusts (2014: 130). Revenues fell 14% despite an increase in funds raised due to a slight change in the mix of fund raising (with more emphasis on investment funds tap issues and a larger average deal size) and lower market making activity. Costs fell primarily due to lower performance-related pay on the back of lower net revenues and bonus deferrals, offset partially by increased investment in the business - in staff, systems and processes - to enable us to execute larger and more complex deals in the face of increasingly demanding regulatory requirements.   Profit before tax was £19.9 million (2014: £27.0 million). Basic earnings per share fell by 23% to 27.2p (2014: 35.2p).

Revenues

Revenue fell by 14% to £76.5 million. 2014's revenues of £88.5 million reflected our best ever year on the back of the £1,385 million fundraise on the IPO of The AA plc onto the main market of the LSE. Our largest deal in 2015 was the £1,029 million fundraise for BCA Marketplace plc. Both 2014 and 2015 therefore demonstrate our on-going ability to raise in excess of £1bn of equity on a single transaction.

We were pleased to have raised over £3 billion for our clients in 2015, against a backdrop of unpredictable markets and fewer IPO opportunities. The total funds raised by all companies on AIM in 2015 was £5,463 million, a 7% fall on 2014 (source: LSE AIM factsheet December 2015), with IPOs making up £1,158 million of that figure (down 55% on 2014). Despite this, we maintained a strong market position and helped our clients raise around 17% of all of the funds raised on AIM in 2015. During the year we completed 32 transactions - including three IPOs. During the year we also completed nine M&A corporate finance transactions (2014: seven). Our corporate finance revenue (including fees from placings) fell 13% to £60.1 million in 2015 (2014: £69.1 million).

We are ranked as one of the leading brokers in London for growth companies, as demonstrated by AIM Advisers Rankings Guide for January 2016 where we were ranked as number one Nomad by client market capitalisation and by number of AIM 100 clients and second in terms of Nomad for all AIM clients by number of clients. We are also ranked top Nomad for Oil and Gas and Consumer Services and third for both Financial and Industrial companies by number of AIM clients.

We make markets in the securities of all the companies where we have a broking relationship to support the other services we provide. We actively provide liquidity to the market and facilitate institutional business in small, mid and selected large-cap equities. Our trading desks make markets in the shares of 415 (2014: 413) companies and investment trusts. Importantly, we maintained a top three market share in 80% of our clients' stock and the top market share in over half. Despite this, we continue to restrict the amount of capital committed to this activity to limit market risk exposure without adversely affecting our market-making services and the revenue generated.

Our corporate broking, market-making, research and commission revenues fell 15% to £16.4 million in 2014 (2014: £19.4 million) as we experienced tougher trading conditions in line with the general market (average daily values of trades on AIM fell by 28% to £121.6 million in 2015 - source: LSE AIM factsheet December 2015). Our corporate broking income rose marginally and commission income was broadly flat, helped in part by new staff hired in the year. However, the pressure on secondary commissions shows no sign of relenting, including the potential impact of MiFID II in terms of the unbundling of dealing commission and payment for equity research. The potential financial impact on Cenkos as a whole is expected to be relatively modest given that such commission is not a major income stream for us and we believe that institutions will continue to need to access (and be prepared to pay for) insightful research on companies.

Costs, profit and earnings per share

Administrative expenses fell by £5.0 million (8%) in the year, primarily driven by lower performance-related pay on the back of lower profitability and the impact of a newly launched deferred bonus scheme, partly offset by investing for the future, in staff, systems and processes, to enable us to execute larger transactions for our clients more frequently in the future. We have grown our average staff numbers by 5% to 121 including the establishment in Singapore of Cenkos Securities Asia Pte Limited.

Profit before tax fell by 26% to £19.9 million (2014: £27.0 million). The tax charge for the year from continuing operations as presented in the income statement was £4.5 million (2014: £5.6 million), which equates to an effective rate of tax of 23% (2014: 21%). Profit after tax fell by 28% to £15.4 million (2014: £21.3 million). Basic earnings per share fell by less than this - 23% - to 27.2p (2014: 35.2p) reflecting that we bought back and cancelled 9% of our shares in January 2015 at a cost of £10.8 million and a further 7.3% at a cost of £8.0 million in December 2015 (thereby increasing the Company's prospective earnings per share in 2016) and that we received £3.1 million by way of subscription for new shares through the exercise of share options in the year.

Financial position and cash flow

As at 31 December 2015, our net trading investments were £10.2 million (2014: £7.3 million). Cash held at 31 December 2015 was £33.1 million (2014: £32.9 million). The year to 31 December 2015 saw a net inflow of cash of £0.2 million (2014 inflow: £2.6 million). This reflects a number of factors including our profitable trading in 2015, offset by the factors such as £18.8 million of share buy-backs, £9.7 million in dividend payments, the payment of corporation tax, a decrease in net trading investments after adjusting for shares and options received in lieu of fees and an increase in trade payables. As part of our Individual Liquidity Adequacy Assessment process, we review our liquidity requirements over the medium term to ensure that we will always have adequate liquidity, even after the application of a variety of stress tests. 

Dividend and capital levels

We aim to retain sufficient capital and reserves to meet our regulatory capital and cash requirements, after taking into account anticipated future working capital needs and potential growth requirements.

As at 31 December 2015, we had a capital resources surplus of £11.0 million (2014: £12.4 million) in excess of our overall regulatory capital requirements before including H2 2015's retained earnings. This fall reflects, inter alia, our profitable trading in H1 less dividends paid in the year and two tender offers to buy-back and cancel our shares:

n  In January 2015 we returned £10.8 million of surplus capital to shareholders through the purchase and subsequent cancellation of 5.73 million ordinary shares in Cenkos (equivalent to 16.9p or 9% of the issued share capital at the time).

n  In December 2015 we returned a further £8.0 million of surplus capital to shareholders through the purchase and subsequent cancellation of 4.45 million ordinary shares in Cenkos (equivalent to 13.1p or 7.3% of the issued share capital at the time).

Hence in aggregate 10.18 million ordinary shares were bought back by Cenkos for cancellation in the year (2014: none). No shares were acquired by Cenkos Securities Employee Benefit Trust ("EBT") in the year (2014: none).

We have paid an interim dividend of 7p in November 2015 and declared a second interim dividend of 6p payable on 24 March 2016. The Board proposes a final dividend of 1p per share (2014: final dividend of 10p per share). This makes a total dividend of 14p for the year (2014: 17p). Since our flotation on AIM in October 2006, we will have paid out 115.5p in dividends (including the 6p in respect of the second interim and 1p proposed final dividend for 2015) and bought back 19.5 million ordinary shares at a cost of £25.4 million for cancellation, thereby increasing the Company's prospective earnings per share. We will have therefore returned £102.2 million of cash to shareholders, equivalent to 154.8p per share (once 2015's second interim dividend of 6p has been paid and providing the final dividend of 1p is approved and paid) since our admission to trading on AIM at 140.5p in 2006.  

In setting the level of the second interim and the final dividends, the Board considered, inter alia, H2's performance, the receipt of £3.1 million in capital in respect of share options exercised in the year and the two share buy-backs undertaken in the year as well as regulatory capital and cash requirements, working capital needs and potential growth requirements.

Subject to approval at the Annual General Meeting to be held on 17 May 2016, the final dividend will be paid on 27 May 2016 to all shareholders on the register at 29 April 2016. In line with existing shareholder authorisation, the Board will continue to assess opportunities for share buy-backs, tender offers and the funding of share purchases by the EBT where this is beneficial to shareholders.

People

The commitment of our employees has enabled us to achieve a robust performance for the year. We continue to look to recruit staff attracted by our culture and business model and our average staff numbers grew by 5% in the year. We aim to take advantage of further regional opportunities in the UK and in Asia. We expanded our teams in London, Edinburgh and Liverpool. Cenkos Securities Asia Pte Limited, our newly established subsidiary in Singapore, received agreement in principle from the Monetary Authority of Singapore to its Capital Markets Services Licence in February 2016. Our Singapore office will help facilitate flows between Asia and the UK. In particular, we plan to use this office to assist our clients in capital raising in the region, to help Asian corporates raise capital and to help Asian corporates sell or list their UK assets. We also plan to apply to become a Catalist sponsor on the Singapore Exchange (SGX), a role similar to that of being a Nomad on AIM.

We endeavour to remunerate our staff to a level and in a manner which not only retains but also motivates them to perform in line with the longer-term growth objectives of the Group. Our staff's skill, commitment and determination will continue to provide us with a solid platform on which to continue to build our franchise. In recognition of the contribution our staff made to help build the franchise that Cenkos now enjoys, we implemented a further issue of an HM Revenue & Customs approved Share Incentive Plan scheme for all UK staff in addition to their annual performance related bonus.

Principal risks

We face a range of risks which could affect both our financial performance and the achievement of our strategic objectives. One of our key risks is that our income is dependent on the health of the financial markets and in particular the economic conditions of the UK and how they impact equity fundraising. Our business model has been designed to cushion the impact of lower revenues by ensuring that performance-related pay also falls to help compensate for this. The primary economic environment in which we operate is the UK and the majority of our transactions are in UK-based equities.

Aside from the health of UK equity markets, the remaining risks, which we believe have the potential to have a significant detrimental impact on our financial performance and future prospects include reputational risk, operational risk (including regulatory, people and litigation risk) and credit, market and liquidity risk. These risks will be laid out in our Annual Report.

Outlook

Despite challenging market conditions since the start of 2016, there continues to be good institutional demand to fund high quality companies and ideas. Since January we have been engaged in a number of significant fund raisings for clients and our current pipeline is satisfactory given the current market environment.

Jim Durkin

Chief Executive Officer

Consolidated income statement

For the year ended 31 December 2015

					2015	2014
				Note	£ 000's	£ 000's
Continuing operations
Revenue				2	76,513	88,516
Administrative expenses					(56,751)	(61,704)
Operating profit					19,762	26,812
Investment income - interest receivable				3	138	161
Interest expense				4	(4)	(1)
Profit before tax from continuing operations for the year				6	19,896	26,972
Tax				7	(4,525)	(5,644)
Profit after tax					15,371	21,328
Attributable to:
Equity holders of Cenkos Securities plc					15,371	21,328
Basic earnings per share				9	27.2p	35.2p
Diluted earnings per share				9	26.8p	33.5p
The profit attributable to the Company in the year ended 31 December 2015 was £15.7 million (31 December 2014: £21.3 million).

Consolidated statement of comprehensive income

For the year ended 31 December 2015

					2015	2014
					£ 000's	£ 000's
Profit for the year					15,371	21,328
Amounts that will be recycled to profit or loss in future periods
Gain on available-for-sale financial assets					(2)	132
Tax on available-for-sale financial assets					-	(28)
					(2)	104
Total comprehensive income for the year					15,369	21,432
Attributable to:
Equity holders of Cenkos Securities plc					15,369	21,432

.Consolidated statement of financial position

As at 31 December 2015

					2015	2014
					£ 000's	£ 000's
Non-current assets
Property, plant and equipment					296	421
Deferred tax asset					1,330	2,042
					1,626	2,463
Current assets
Trade and other receivables					18,354	19,717
Available-for-sale financial assets					559	729
Other current financial assets					12,706	10,014
Cash and cash equivalents					33,106	32,932
					64,725	63,392
Total assets					66,351	65,855
Current liabilities
Trade and other payables					(34,881)	(23,583)
Other current financial liabilities					(2,551)	(2,711)
					(37,432)	(26,294)
Net current assets					27,293	37,098
Non-current liabilities
Trade and other payables					(351)	-
Total liabilities					(37,783)	(26,294)
Net assets					28,568	39,561
Equity
Share capital					567	637
Share premium					3,321	232
Capital redemption reserve					195	93
Own shares					(3,193)	(3,218)
Available-for-sale reserve					102	104
Retained earnings					27,576	41,713
Total equity					28,568	39,561

Consolidated cash flow statement

For the year ended 31 December 2015

					2015	2014
					£ 000's	£ 000's
Profit for the year					15,371	21,328
Adjustments for:
Net finance income					(134)	(160)
Tax expense					4,525	5,644
Tax expense arising on available-for-sale asset					-	28
Depreciation of property, plant and equipment					241	386
(Loss) / gain on available-for-sale financial assets					(2)	104
Shares and options received in lieu of fees					(4,967)	(3,443)
Share-based payment expense					502	250
Operating cash flows before movements in working capital					15,536	24,137
Decrease in net trading investments					2,285	5,976
Decrease / (increase) in trade and other receivables					1,367	(379)
Increase / (decrease) in trade and other payables					12,538	(12,940)
Net cash flow from operating activities					31,726	16,794
Interest paid					(4)	(1)
Tax paid					(5,049)	(4,815)
Net cash flow from operating activities					26,673	11,978
Investing activities
Interest received					133	173
Purchase of property, plant and equipment					(174)	(420)
Reclassification of stamp duty					58	-
Net cash inflow / (outflow) from investing activities					17	(247)
Financing activities
Dividends paid					(9,740)	(9,386)
Proceeds from issue of own shares					3,099	234
Transfer of shares by EBT to employee share plans					47	10
Acquisition of own shares for cancellation					(18,777)	-
Acquisition of CAP options cancelled as part of tender offer buy-back					(1,145)	-
Net cash used in financing activities					(26,516)	(9,142)
Net increase in cash and cash equivalents					174	2,589
Cash and cash equivalents at beginning of year					32,932	30,343
Cash and cash equivalents at end of year					33,106	32,932

Consolidated statement of changes in equity

For the year ended 31 December 2015

	Equity attributable to equity holders of the parent
	Share capital	Share premium	Capital redemption reserve	Own Shares	Available-for-sale reserve	Retained earnings	Total
	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's
At 1 January 2014	635	-	93	(3,228)	-	28,592	26,092
Profit for the year	-	-	-	-	-	21,328	21,328
Gain on available-for-sale financial assets net of tax	-	-	-	-	104	-	104
Total comprehensive income for the year	-	-	-	-	104	21,328	21,432
Shares issued in the year	2	232	-	-	-	-	234
Transfer of shares to employee share plans	-	-	-	10		-	10
Credit to equity for equity-settled share-based payments	-	-	-	-	-	250	250
Credit to equity for day 1 valuation of acquired share options	-	-	-	-	-	68	68
Deferred tax on share-based payments	-	-	-	-	-	818	818
Current tax on share-based payments	-	-	-	-	-	43	43
Dividends paid	-	-	-	-	-	(9,386)	(9,386)
At 31 December 2014	637	232	93	(3,218)	104	41,713	39,561
Profit for the year	-	-	-	-	-	15,371	15,371
Gain on available-for-sale financial assets	-	-	-	-	(2)	-	(2)
Total comprehensive income for the year	-	-	-	-	(2)	15,371	15,369
Shares issued in the year	32	3,067	-	-	-	-	3,099
Transfer of shares to employee share plans	-	22	-	25	-	-	47
Acquisition of own shares for cancellation	(102)	-	102		-	(18,777)	(18,777)
Charge to equity for cancelled CAP options	-	-	-	-	-	(1,145)	(1,145)
Credit to equity for equity-settled share-based payments	-	-	-	-	-	502	502
Deferred tax on share-based payments	-	-	-	-	-	(903)	(903)
Current tax on share-based payments	-	-	-	-	-	555	555
Dividends paid	-	-	-	-	-	(9,740)	(9,740)
At 31 December 2015	567	3,321	195	(3,193)	102	27,576	28,568

Notes to the consolidated financial statements

1. Accounting policies

Basis of preparation

The consolidated financial information contained within this announcement does not constitute statutory accounts for the year ended 31 December 2015 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. The statutory accounts for the year ended 31 December 2015 will be delivered to the Registrar of Companies in due course. The annual report and statutory accounts will be sent to shareholders and 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 17 May 2016.

The consolidated financial information contained within this announcement 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.

Accounting policies

The consolidated financial information contained within the 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 2014.

2. Business and geographical segments

Cenkos is managed as an integrated institutional stockbroking business and although it has different revenue streams, the nature of its activities is considered to be subject to similar economic characteristics. The internal reports used by the Chief Executive Officer for the purpose of monitoring performance and allocating resources reflect that Cenkos is managed as a single business unit.

Revenue is wholly attributable to the principal activity of the Group and arises solely within the UK.

Major clients

In the year to 31 December 2015, one of Cenkos' clients contributed more than 10% of Cenkos' total revenue. The amount was £26.75 million. (2014: £33.29 million).

Revenue streams					2015	2014
					£ 000's	£ 000's
Corporate finance and placing fees					60,069	69,110
Corporate broking, market-making, research and commission revenue					16,444	19,406
					76,513	88,516

3. Investment income - interest receivable

					2015	2014
					£ 000's	£ 000's
Interest income generated from:
Cash and cash equivalents					138	161
Interest income generated from cash and cash equivalents comprises the interest generated from instant access deposits held with banks.

4. Interest expense

					2015	2014
					£ 000's	£ 000's
Interest on bank overdrafts and loans					(4)	(1)

5. Staff costs

					2015	2014
					£ 000's	£ 000's
Staff costs comprise:
Wages and salaries					38,780	45,538
Social security costs					5,832	6,188
Defined contribution pension					95	100
IFRS 2 share based payments					502	250
Cash-settled deferred bonus payments relating to the current year					351	-
					45,560	52,076
During 2014, in order to comply with the Pensions Act, Cenkos was required to enrol all qualifying employees in a defined contribution pension scheme. Under the scheme, qualifying employees are required contribute a percentage of their relevant earnings. The Company also contributes 1% of relevant earnings. In April 2015, Cenkos introduced a Deferred Bonus Scheme for executive Directors, senior managers and high earning employees. As a result, a net £1.13 million of staff costs has been removed from the current income statement and deferred to future years.
The average number of employees (including executive Directors) was:
					2015	2014
Corporate finance					22	22
Corporate broking					62	62
Administration					37	31
					121	115

6. Profit for the year

Profit for the year has been arrived at after charging / (crediting):
					2015	2014
					£ 000's	£ 000's
Operating lease rentals					589	524
Auditors' remuneration (refer to analysis below)					199	169
Depreciation of property, plant and equipment					241	386
Staff costs					45,560	51,976
Net gains from financial assets at FVTPL					(5,248)	(8,303)
Change in fair value of share options and warrants at FVTPL					(75)	196
					2015	2014
The analysis of auditors' remuneration is as follows:					£ 000's	£ 000's
Fees payable to the Group's auditor and their associates for the audit of the Group's annual accounts and consolidation					157	130
Total audit fees					157	130
Fees payable to the Group's auditor for other services to the Group:
- Half year review of the Group's interim statement					37	35
- Other advisory services - including taxation					5	4
Total non-audit fees					42	39
					199	169

7. Tax

					2015	2014
					£ 000's	£ 000's
Current tax
United Kingdom corporation tax at 20.25% (2014: 21.5%) based on the profit for the year					4,639	5,813
Adjustment in respect of prior period
United Kingdom corporation tax at 20.25% (2014: 21.5%)					76	31
Total current tax					4,715	5,844
Deferred tax
Credit on account of temporary differences					(112)	(173)
Deferred tax prior year adjustment					(78)	(27)
Total deferred tax					(190)	(200)
Total tax on profit on ordinary activities from continuing operations					4,525	5,644

A reconciliation of the tax expense for 2015 and 2014 and the accounting profit multiplied by the standard rate of UK corporation tax of 20.25% (2014: 21.5%) is set out below:
					2015	2014
					£ 000's	£ 000's
Profit before tax from continuing operations					19,896	26,972
Tax on profit on ordinary activities at the UK corporation tax rate of 20.25% (2014: 21.5%)					4,029	5,799
Tax effect of:
Non-deductible expenses for tax purposes					139	152
Current year losses of overseas subsidiary for which no deferred tax asset has been recognised					73	-
Share-based payments					166	(336)
Deferred tax rate change adjustment					120	25
Adjustment in respect of prior period deferred tax					(78)	(27)
Adjustment in respect of prior period current tax					76	31
Tax expense for the year					4,525	5,644
The effective tax rate for the Group during the year is 22.7% (2014: 20.9%).

In addition to the tax expense presented in the income statement, the following amounts have been recognised directly in equity:
					2015	2014
					£ 000's	£ 000's
Other Comprehensive Income (OCI)
Current tax expense arising on available-for-sale financial asset					-	28
Statement of Changes in Equity (SOCIE)
Current tax credit arising on share-based payments					(555)	(43)
Deferred tax charge / (credit) arising on share-based payments					903	(818)
Total income tax recognised directly in equity					348	(833)

8. Dividends

					2015	2014
Amounts recognised as distributions to equity holders in the year:					£ 000's	£ 000's
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2014 of 10.0p (December 2013: 8.5p) per share					5,656	5,128
Interim dividend for the period to 30 June 2015 of 7.0p (June 2014: 7.0p) per share					4,084	4,258
					9,740	9,386
A second interim dividend has been declared of 6p per share and a final dividend of 1p per share has been proposed for the year ended 31 December 2015 (2014: 10.0p). Under the CAP, the payment of a dividend to ordinary shareholders will trigger a cash payment to holders of options under the CAP. The payment of this second interim dividend and the final dividend will increase staff costs by £0.82 million in the first half of 2016 (10.0p 2014 final dividend increased staff costs by £1.44 million in the first half of 2015).

9. Earnings per share

						Represented
					2015	2014
Basic earnings per share					27.2p	35.2p
Diluted earnings per share					26.8p	33.5p
						Represented
					2015	2014
The calculation of the basic and diluted earnings per share is based on the following data:					£ 000's	£ 000's
Earnings
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent					15,371	21,328
Effect of dilutive potential ordinary shares:
Share options					498	978
					15,869	22,306
The prior year figures have been represented to conform to the disclosure requirements of IAS 33 Earnings per share.
Number of shares					Number	Number
Weighted average number of ordinary shares for the purposes of basic earnings per share					56,512,222	60,530,876
Effect of dilutive potential ordinary shares:
Share options					2,804,098	6,132,434
Weighted average number of ordinary shares for the purpose of diluted earnings per share					59,316,320	66,663,310
The Board has agreed to continue to fund the Group's Employee Benefit Trust (EBT) so that it can make market purchases in Cenkos Securities plc shares as and when market conditions allow. During the year, no further ordinary shares were purchased (2014: none), however 25,400 (2014: 347,447) shares were transferred out at average cost to the Cenkos Securities plc Share Incentive Plan Trust to satisfy awards under that scheme. As at 31 December 2015 the EBT held a total of 2,785,630 (2014: 2,811,030) ordinary shares at an aggregate consideration of £2.85 million (2014: £2.87 million). These shares are held by the trust in treasury and have been excluded from the weighted average number of shares calculation. The table below shows the number of shares held by the Group's EBT.
					2015	2014
Number of shares held by the Group's EBT					Number	Number
At 1 January					2,811,030	3,158,477
Acquired during the year					-	-
Transferred to Cenkos Securities plc Share Incentive plan					(25,400)	(347,447)
					2,785,630	2,811,030

10. Deferred bonus scheme
In April 2015 Cenkos introduced a Deferred Bonus Scheme (the "Scheme"), whereby 10% of all staff bonus awards over £100,000 are deferred over a three year period. The deferred element of any bonus award is to be held in Cenkos Ordinary shares in an EBT and released to the employee evenly split on each of the three anniversaries of deferral into the Scheme. At the date of grant, where an employee already holds over £250,000 in Cenkos Ordinary Shares, or £250,000 in intrinsic value in Cenkos options, the deferral will be held in cash on the Group's statement of financial position and released in the same manner. The fair value of the cash deferral is recognised as a staff cost over a similar period with the recognition of a corresponding liability.
Under the Scheme, £1.68 million of 2015 bonus was deferred, of which £1.13 million will be charged to the P&L in future years over the life of the scheme.
	2015			2014
	Gross bonus deferred	Charge to income statement	Amount to be charged in future years	Gross bonus deferred	Charge to income statement	Amount to be charged in future years
	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's
2015 Cash-settled deferred bonus	1,078	351	727	-	-	-
2015 Equity-settled deferred bonus	599	198	401	-	-	-
	1,677	549	1,128	-	-	-
During the year the Company recognised expenses of £502,356 (2014: £249,545) related to equity-settled share-based payment transactions. This is made up of the charge in relation to share options of £28,119 (2014: £113,760), the SAYE of £67,790 (2014: £36,468), the SIP schemes of £208,033 (2014: £99,317) and the deferred bonus scheme of £198,414 (2014: Nil).
In addition the Company recognised expenses of £350,854 (2014: £nil) related to cash-settled payment transactions in respect of the deferred bonus scheme.

11. Events after the reporting period

There were no material events to report on that occurred between 31 December 2015 and the date at which the Directors signed this Annual Report.

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2015 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. The Annual Report and 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, 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 17 May 2016.

 

END

 

 

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