Half Yearly Report

RNS Number : 8655R

Cenkos Securities PLC

17 September 2014

 



UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2014

Cenkos Securities plc (the "Company" or "Cenkos") together with its subsidiaries (the "Group") is an independent, specialist institutional securities group, focused on UK small and mid-cap companies and investment funds. The Company's principal activity is institutional stockbroking.

Cenkos' shares are admitted to trading on AIM. The Company is authorised and regulated by the Financial Conduct Authority ("FCA") and is a member of the London Stock Exchange ("LSE").

Highlights

		30 June 2014	30 June 2013
Revenue	+ 226%	£65.2m	£20.0m
Profit before tax	+ 653%	£23.5m	£3.1m
Basic earnings per share	+ 700%	31.2p	3.9p
Interim dividend per share declared	+ 100%	7.0p	3.5p
Cash	+ 164%	£43.2m	£16.3m
Nominated adviser or corporate broker / financial adviser to		127 companies	122 companies

Commenting on the interim results, Chief Executive Officer Jim Durkin noted:

"Our successful strategy of being a leading UK institutional broker to listed growth companies has led to us being profitable in every year since our formation in 2005. This approach continues to bear fruit and I am pleased to report a very strong performance for the first six months of 2014. Revenues, profits and earnings per share all increased significantly. The first half results reflected the completion of a particularly large transaction in addition to the completion of a good number of regular transactions.

Given the overall result, the Board has declared an interim dividend of 7p per share, up 100% on last year. The Board anticipates paying a full year dividend that is higher than last year and is additionally evaluating other means of delivering returns to shareholders during the remainder of this year, in particular share buy-backs, such that total distributions to shareholders for the year are expected to be significantly higher than last year.

We have made a good start to the second half of the year with an encouraging pipeline of deals."   

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

Business Review

Strategy and business model

Our strategy

Our prime strategy is to become the principal UK institutional broker to growth companies and investment funds who are admitted to trading or listed on a UK market. We aim to achieve this through:  

-       understanding the needs of our clients, enabling us to provide successful fundraising and advice through an innovative and entrepreneurial approach;

-       delivering sustainable, diversified and growing income streams;

-       adding high quality individuals to our teams; and

-       managing costs and risks carefully

thereby providing shareholder value through earnings growth as well as attractive cash returns to shareholders.

Our business model

We provide corporate finance, corporate broking and securities services to small and mid-cap growth companies across a wide range of industry sectors, including 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 listed 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 clientsadvice and access to equity finance at all stages of their development.

Revenue streams

We earn fees from primary and secondary equity fundraising, acting as a key intermediary between growth companies or investment funds and institutional providers of capital. From when we were founded in 2005 to the end of June 2014 we have raised almost £11 billion for our clients - mainly acting 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, broker and/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.

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;

-       provide appropriate dealing liquidity in their company's shares; and

-       advise on all pertinent market and regulatory issues.

Management systems and controls

We operate an efficient and flexible business model, well adapted to a highly regulated environment. It is therefore important that we continue to maintain an appropriate and proportionate level of systems and controls, commensurate with our size and complexity. 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 net income generation. This cost flexibility allows us to manage economic downturns better 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, core trading systems and associated support are outsourced.

Culture and people

Our success is based on maintaining experienced and stable teams, whose members build professional relationships and achieve results through a committed and entrepreneurial approach. 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 Company.

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

Our key objectives are to:

-       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 quantity of staff deployed to support this; and

-       reward our shareholders by remaining profitable and generating a high return on equity (within acceptable risk limits), leading to an attractive dividend yield and strong share price growth.

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

-       profit before tax and earnings per share;

-       the size and quality of our corporate client base (Nomad / broker appointments); and

-       various key risk indicators, including capital resources and cash.

Commentary on KPIs is included in the review of performance noted below.

Review of performance

Overall performance

The Company is pleased to report that it had a very strong performance for the six months ending 30 June 2014. As at 30 June 2014 we were nominated adviser, broker or financial adviser to 127 companies or trusts (30 June 2013: 122). Revenues grew on the back of increased fundraising for our growing list of clients. Costs rose primarily due to greater performance-related pay on the back of increased profitability.

Profit before tax was £23.5m (H1 2013: £3.1m). As noted below, this 653% increase reflected a very material rise in revenues and the benefits of operational gearing in the business. This has meant that basic earnings per share rose by 700% to 31.2p (H1 2013: 3.9p) and diluted earnings per share rose by 662% to 29.7p (H1 2013: 3.9p).

Our business model is built around a low fixed cost base and a remuneration structure which is highly geared to performance. We maintain a positive operating cash cycle and a limited exposure to credit and market risk. This, combined with the high quality, dedication and experience of our employees, has enabled Cenkos to produce this performance.

Revenues

Revenue for the period increased by 226% to £65.2m (H1 2013: £20.0m). The economic recovery the UK is experiencing has clearly benefited equity markets with the total funds being raised by all companies on AIM rising by 161% to £3,707m from H1 2013 to H1 2014 (source: LSE AIM factsheet June 2014). We have been well positioned to benefit from this tailwind given our strong market position and continued profitability. We remain ranked as one of the leading brokers in London for growth companies, as demonstrated by Adviser Rankings' July 2014 'AIM Adviser Rankings Guide' where we were ranked second in terms of both 'Nomad' and 'Stockbroker' for all AIM clients by number of clients, as well as being ranked top 'Nomad' for Oil and Gas and Consumer Services, second for Industrial clients and third for both Financials and Technology companies by number of AIM clients.

During the period we completed eighteen transactions - including six IPOs - and helped our clients raise a total of £2,209m, including £1,385m on the IPO of the AA plc (H1 2013: £422m). In the period we also completed four M&A corporate finance transactions (H1 2013: two). Our corporate finance revenue (including fees from placings) rose 315% to £54.2m in H1 2014 (H1 2013: £13.1m).

We make markets in the securities of all the companies where we have a broking relationship to support the other services we provide to our clients. We actively provide liquidity to the market and facilitate institutional business in both small and large cap equities. Our trading desks now make markets in the shares of 340 (H1 2013: 333) companies and investment trusts.

Our corporate broking, market-making, research and commission revenues rose 59% to £11.0m in H1 2014 (H1 2013: £6.9m) on the back of more favourable trading conditions. However, the pressure on secondary commissions shows no sign of relenting, including the potential impact of recent FCA initiatives in terms of payment for equity research. We are confident that we can continue to prosper in this environment because of our flexible cost model.

Our execution business is primarily focused on client facilitation. We believe that this enhances Cenkos' overall service offering to its expanding client base.

Costs

Costs rose by £24.8m (143%) in the period, primarily due to higher performance-related pay on the back of increased profitability. Additionally, we have grown our staff numbers by 10% and incurred a £0.9m rise in costs due to staff bonuses resulting from the Compensatory Award Phantom Dividend Plan 2009 ("CAP"). Payments under this scheme are only triggered by the payment of a dividend to ordinary shareholders. This amounted to an 8.5p final dividend for 2013 paid in H1 2014 (4p for 2012's final dividend paid in H1 2013).

Profit before tax increased by 653% to £23.5m (H1 2013: £3.1m) and profit after tax increased by 702% to £18.8m (H1 2013: £2.3m).

Statement of consolidated financial position and cash flow

At 30 June 2014, our net trading investments were £26.0m, and cash held was £43.2m (H1 2013: £16.3m). During the six months to 30 June 2014 there was a net increase in cash and cash equivalents of £12.9m. This is largely due to the cash inflow from the Company's profitable trading in H1 2014 offset partly by the payment of accrued bonuses in respect of 2013, the 2013 final dividend of 8.5p per share and corporation tax payments.

Dividend and capital levels

As we have consistently stated, we intend to retain sufficient capital and reserves to meet the Company's regulatory capital and cash requirements after taking account of the likely future working capital needs and potential growth requirements of the Company. Since our flotation onto AIM in October 2006, we have paid out 84.5p in dividends prior to the 7p proposed interim dividend for 2014 and bought back 9.3m shares at a cost of £6.5m for cancellation, thereby increasing the Company's prospective earnings per share. In addition, 3.1 m shares have been purchased by the Cenkos Securities Employee Benefit Trust ("EBT") at a cost of £3.2m.

The Board proposes an interim dividend of 7p per share, an increase of 100% on last year's interim dividend of 3.5p per share. The payment of this interim dividend will trigger payments to staff under the CAP of £1.1m in the second half of 2014 (second half 2013: £0.8m). The dividend will be paid on 6 November 2014 to all shareholders on the register at 10 October 2014. The Board anticipates paying a full year (ie interim and final) dividend that is higher than the 12p paid with respect to 2013. Given the strong results in H1 2014, the Board is also evaluating other means of delivering returns to shareholders during the remainder of the year, in particular share buy-backs, such that total distributions to shareholders for the year are expected to be significantly higher than last year.

People

The continued professionalism of our employees has enabled us to achieve the robust performance for the period.  We continue to look to recruit staff who are attracted by our culture and business model, and a further nine staff joined us in H1 2014. 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 Company. Their skill, commitment and determination will continue to provide us with a solid platform on which to continue to build our franchise. In July 2014 we launched two HM Revenue and Customs approved all staff share schemes - a Share Incentive Plan and Save As You Earn Sharesave Scheme - both of which were well received by staff.

Principal risks and uncertainties

The principal risks and uncertainties that Cenkos currently faces, and how these are managed, have not materially changed from those outlined in the Strategic Report section of our 2013 Annual Report, namely the health of UK equity markets as well as reputational, operational, regulatory, conduct and market risk. Aside from the health of UK equity markets, the key changes that may impact Cenkos' risk profile over the next six months - and how they are being managed - relate to:

-       The pace of change in the regulatory environment - we continue to focus heavily on our regulatory risks to ensure the appropriate systems and controls, reporting, capital and liquidity requirements, resources and culture are all in place to meet the ongoing obligations of an FCA regulated (IFPRU Investment) firm; and

-       Ensuring that we continue to retain and attract high quality staff. We continue to pursue a policy of maintaining a low fixed cost base including low basic salaries and rewarding net income generation.

Outlook

Our successful strategy of being a leading UK institutional broker to listed growth companies has led to us being profitable in every year since our formation in 2005. This approach continues to bear fruit and, given our results for the first half of the year, the Board has declared an interim dividend of 7p per share, up 100% on last year. The Board anticipates paying a full year dividend that is higher than last year. The Board is also evaluating other means of delivering additional distributions to shareholders during the remainder of this year, in particular share buy-backs, such that total distributions for the year are expected to be significantly higher than last year.

We have made a good start to the second half of 2014 with an encouraging pipeline of deals.

Jim Durkin

Chief Executive Officer

16 September 2014

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 2014, and

b) The interim management report set out in the Business Review includes a fair review of the development and performance of the business and the position of Cenkos Securities plc and the undertakings included in the consolidation taken as a whole, together 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.

Condensed consolidated income statement for the six months ended 30 June 2014
				Unaudited	Unaudited	Audited
				Six months ended	Six months ended	Year ended
			Notes	30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Continuing operations
Revenue			2	65,225	19,995	51,433
Administrative expenses				(41,757)	(16,969)	(40,856)
Operating profit				23,468	3,026	10,577
Investment income - interest income				77	102	135
Interest expense				(1)	-	(1)
Profit before tax from continuing operations				23,544	3,128	10,711
Tax			3	(4,751)	(786)	(2,122)
Profit after tax				18,793	2,342	8,589
Attributable to:
Equity holders of the parent				18,793	2,342	8,589
Basic earnings per share			5	31.2p	3.9p	14.2p
Diluted earnings per share			5	29.7p	3.9p	14.2p
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2014
				Unaudited	Unaudited	Audited
				Six months ended	Six months ended	Year ended
				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Profit				18,793	2,342	8,589
Total comprehensive income				18,793	2,342	8,589
Attributable to:
Equity holders of the parent				18,793	2,342	8,589

Condensed consolidated statement of financial position as at 30 June 2014
				Unaudited	Unaudited	Audited
			Notes	30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Non-current assets
Property, plant and equipment			6	480	499	387
Deferred tax asset			11	2,794	330	1,024
				3,274	829	1,411
Current assets
Trade and other receivables			7	47,777	30,857	19,349
Available-for-sale financial asset				1,000	1,000	1,080
Other current financial assets			8	29,876	10,144	13,706
Cash and cash equivalents			9	43,156	16,343	30,343
				121,809	58,344	64,478
Total assets				125,083	59,173	65,889
Current liabilities
Trade and other payables			10	(79,929)	(33,451)	(35,508)
Other current financial liabilities			8	(3,915)	(4,029)	(4,289)
				(83,844)	(37,480)	(39,797)
Net current assets				37,965	20,864	24,681
Total liabilities				(83,844)	(37,480)	(39,797)
Net assets				41,239	21,693	26,092
Equity
Share capital			12	635	635	635
Share premium				9	-	-
Capital redemption reserve				93	93	93
Own shares			13	(3,228)	(3,180)	(3,228)
Retained earnings				43,730	24,145	28,592
Total equity				41,239	21,693	26,092
The figures as at 30 June 2013 have been restated to reflect the transfer of the nominal value of the shares purchased and cancelled by the Company to capital redemption reserve.

Condensed consolidated cash flow statement for the six months ended 30 June 2014
				Unaudited	Unaudited	Audited
				Six months ended	Six months ended	Year ended
				30 June	30 June	31 December
			Notes	2014	2013	2013
				£ 000's	£ 000's	£ 000's
Profit				18,793	2,342	8,589
Adjustments for:
Net finance income				(76)	(102)	(134)
Tax expense				4,751	786	2,122
Depreciation of property, plant and equipment				185	159	311
Shares in lieu of fees and options received in kind				(11,961)	(2,005)	(1,335)
Share-based payment expense				57	76	138
Operating cash flows before movements in working capital				11,749	1,256	9,691
(Increase) / decrease in net trading investments				(4,503)	2,828	(1,212)
Increase in trade and other receivables				(28,436)	(15,255)	(3,742)
Increase in trade and other payables				41,131	9,326	10,406
Cash flow from / (used in) operating activities				19,941	(1,845)	15,143
Interest paid				(1)	-	(1)
Tax paid				(1,816)	(1,055)	(1,871)
Net cash flow from / (used in) operating activities				18,124	(2,900)	13,271
Investing activities
Interest received				85	34	62
Purchase of property, plant and equipment			6	(277)	(108)	(148)
Net cash flow (used in) investing activities				(192)	(74)	(86)
Financing activities
Dividends paid				(5,128)	(2,430)	(4,541)
Proceeds from issue of own shares				9	-	-
Acquisition of own shares by the EBT				-	(235)	(283)
Acquisition of own shares for cancellation				-	(289)	(289)
Net cash (used in) financing activities				(5,119)	(2,954)	(5,113)
Net increase / (decrease) in cash and cash equivalents				12,813	(5,928)	8,072
Cash and cash equivalents at beginning of period				30,343	22,271	22,271
Cash and cash equivalents at end of period			9	43,156	16,343	30,343
The figures for the six months ended 30 June 2013 have been restated to reflect the transfer of the nominal value of the shares purchased and cancelled by the Company to capital redemption reserve.

Condensed consolidated statement of changes in equity for the six months ended 30 June 2014
	Share capital	Share premium	Capital redemption reserve	Own shares	Retained earnings	Total
	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's
Attributable to equity holders of the parent at 1 January 2013	638	-	90	(2,945)	24,446	22,229
Profit	-	-	-	-	2,342	2,342
Total comprehensive income	-	-	-	-	2,342	2,342
Own shares acquired in the period	-	-	-	(235)	-	(235)
Own shares acquired for cancellation in the period	(3)	-	3	-	(289)	(289)
Credit to equity for equity-settled share-based payments	-	-	-	-	76	76
Dividends paid	-	-	-	-	(2,430)	(2,430)
Attributable to equity holders of the parent at 30 June 2013	635	-	93	(3,180)	24,145	21,693
Profit	-	-	-	-	6,247	6,247
Total comprehensive income	-	-	-	-	6,247	6,247
Own shares acquired in the period	-	-	-	(48)	-	(48)
Credit to equity for equity-settled share-based payments	-	-		-	62	62
Credit to equity for day 1 valuation of acquired share options	-	-	-	-	12	12
Deferred tax on share-based payments	-	-	-	-	237	237
Dividends paid	-	-	-	-	(2,111)	(2,111)
Attributable to equity holders of the parent at 31 December 2013	635	-	93	(3,228)	28,592	26,092
Retained profit	-	-	-	-	18,793	18,793
Total comprehensive income	-			-	18,793	18,793
Shares issued in the period	-	9	-	-	-	9
Credit to equity for equity-settled share-based payments	-	-	-	-	57	57
Deferred tax on share-based payments	-	-	-	-	1,416	1,416
Dividends paid	-	-	-	-	(5,128)	(5,128)
At 30 June 2014	635	9	93	(3,228)	43,730	41,239
The figures as at 1 January 2013 and for six months ended 30 June 2013 have been restated to reflect the transfer of the nominal value of the shares purchased and cancelled by the Company to capital redemption reserve.

Notes to the condensed consolidated financial statements

1. Accounting policies

General information

The interim condensed consolidated financial statements of Cenkos Securities plc. ("Cenkos" or the "Company" together with its subsidiaries) for the six months ended 30 June 2014 are unaudited and were approved by the Board of Directors for issue on 16 September 2014. The Company is incorporated in the United Kingdom under the Companies Act 2006 (company registration No. 05210733), whose 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 generally accepted accounting principles 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.

These financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments.

Prior year comparatives have been amended to reflect the transfer of the nominal value of the shares purchased and cancelled by the Company from retained earnings to the capital redemption reserve. The impact of this is solely within total equity.

Basis of accounting

The interim condensed consolidated financial statements for the six months ended 30 June 2014 have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company's annual financial statements for the year ended 31 December 2013.

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company's annual financial statements for the year ended 31 December 2013, which are prepared in accordance with International Financial Reporting Standards ("IFRS")  as adopted by the European Union.

The financial information contained in these interim condensed consolidated 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 2013 does not constitute the statutory accounts for that financial period. Those accounts have been reported on by the Company's auditors 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 Company's business activities, together with the factors likely to affect its future development and performance, its principal risks and uncertainties and the financial position of the Company, are set out in the Company's Annual Report for the year ended 31 December 2013. The Directors are satisfied that the Company 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.

Adoption of new and revised standards

During the period, a number of amendments to IFRS's became effective and were adopted by the Company, none of which had a material impact on the Company's net cash flows, financial position, statement of comprehensive income or earnings per share.

2. Business and geographical segments

Cenkos is managed as an integrated UK 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 Company and arises solely within the UK.

Major clients

In the six months ended 30 June 2014, one of Cenkos' clients contributed more than 10% of Cenkos' total revenue. The amount was £31.50 million (six months ended 30 June 2013: nil; year ended 31 December 2013: £6.43 million).

3. Tax				Six months ended	Six months ended	Year ended
				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
The tax charge comprises:
Current tax
United Kingdom corporation tax at 21.50% (2013: 23.25%) based on the profit for the period				5,105	843	2,612
Adjustment in respect of prior period
United Kingdom corporation tax at 23.25% (2012: 24.5%)				-	-	25
Total current tax				5,105	843	2,637
Deferred tax
Credit on account of temporary differences				(354)	(57)	(495)
Deferred tax prior year				-	-	(20)
Total deferred tax				(354)	(57)	(515)
Total tax on profit on ordinary activities				4,751	786	2,122
The tax charge for the period differs from that resulting from applying the standard rate of UK corporation tax of 21.50% (2013: 23.25%) to the profit before tax for the reasons set out in the following reconciliation:

				Six months ended	Six months ended	Year ended
				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Profit before tax				23,544	3,128	10,711
Tax on profit on ordinary activities at the UK corporation tax rate of 21.50% (2013: 23.25%)				5,062	727	2,491
Tax effect of:
Expenses that are not deductible in determining taxable profits				43	64	104
Income not subject to corporation tax				-	(15)	(15)
Recognition of deferred tax on share-based payments previously unrecognised				(390)	-	(621)
Deferred tax rate change adjustment				36		148
Adjustment for loss relief not claimed				-	10	10
Adjustment in respect of prior period deferred tax				-	-	(20)
Adjustment in respect of prior period current tax				-	-	25
Tax expense for the period				4,751	786	2,122
In addition to the amount credited to the income statement, deferred tax relating to share-based payments amounting to £1,416,548 has been charged directly to equity (six months ended 30 June 2013: £ nil, year ended 31 December 2013: £236,520).

4. Dividends
				Six months ended	Six months ended	Year ended
				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2013 of 8.5p (2012: 4.0p) per share				5,128	2,430	2,430
Interim dividend for the period to 30 June 2013 of 3.5p (June 2012: 3.5p) per share				-	-	2,111
				5,128	2,430	4,541
The proposed interim dividend for 30 June 2014 of 7p (30 June 2013: 3.5p) per share was approved by the Board on 16 September 2014 and has not been included as a liability as at 30 June 2014. The dividend will be payable on 6 November 2014 to all shareholders on the register at 10 October 2014.
Under the Compensatory Award Plan ("CAP"), as described in the 2013 Annual Report, the payment of a dividend to ordinary shareholders will trigger a cash payment to holders of options under the CAP. The payment of this interim dividend will increase staff costs by £1.11 million in H2 2014 (3.5p 2013 interim dividend increased staff costs by £0.77 million in H2 2013).

5. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

				Six months ended	Six months ended	Year ended
				30 June	30 June	31 December
				2014	2013	2013
Basic earnings per share				31.2p	3.9p	14.2p
Diluted earnings per share				29.7p	3.9p	14.2p
Earnings for the purpose of basic and diluted earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
				£ 000's	£ 000's	£ 000's
Earnings for the purpose of basic and diluted earnings per share being net profit attributable to equity holders of the parent				18,793	2,342	8,589
Number of shares				No.	No.	No.
Weighted average number of ordinary shares for the purpose of basic earnings per share				60,327,458	60,725,002	60,525,904
Effect of dilutive potential ordinary shares:
Share options				2,857,571	-	-
Weighted average number of ordinary shares for the purpose of diluted earnings per share				63,185,029	60,725,002	60,525,904
The loans associated with the B shares were fully paid up by 30 June 2013 and the B shares converted to Ordinary shares. The calculation of the weighted average number of shares in prior periods included the total number of B shares, even though they were partly paid, as these shares were entitled to a full dividend payout.
The Board has agreed to continue to fund the Company'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 period, however, no further shares were purchased. As at 30 June 2014 the EBT held a total of 3,158,477 ordinary shares at an aggregate consideration of £3.23 million, as shown in note 13. These shares are held by the trust in treasury and have been excluded from the weighted average number of shares calculation.

6. Property, plant & equipment
During the period, the Company spent approximately £276,565 (30 June 2013: £107,965, 31 December 2013: £147,953) on property, plant and equipment. This mostly related to the purchase of IT equipment and leasehold improvements.

7. Trade and other receivables				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Current assets
Market and client receivables				45,606	28,188	17,396
Unpaid share capital and loans due from staff				-	-	2
Prepayments and accrued income				1,573	1,898	1,244
Other receivables				598	771	707
				47,777	30,857	19,349

8. Financial assets and liabilities				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Financial assets at FVTPL
Trading investments carried at fair value				29,380	9,522	12,567
Derivative financial assets				496	622	1,139
				29,876	10,144	13,706
Financial liabilities at FVTPL
Contractual obligation to acquire securities				(3,915)	(4,029)	(4,289)
9. Cash and cash equivalents
				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Cash and cash equivalents				43,156	16,343	30,343
10. Trade and other payables
				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Trade creditors				40,822	22,102	14,401
Corporation tax payable				5,105	838	1,816
Accruals and deferred income				33,508	9,730	18,724
Other creditors				494	781	567
				79,929	33,451	35,508

11. Deferred tax asset
Deferred tax arises on all taxable and deductible temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. In the table below, the Company has recognised deferred tax assets on temporary differences relating to bonus payments, fixed assets and share options.

			Bonus	Fixed	Share
			payments	assets	options	Total
			£ 000's	£ 000's	£ 000's	£ 000's
At 31 December 2012			243	29	-	272
Increase on account of temporary differences - current year			38	-	-	38
Increase on account of temporary differences - prior year			20	-	-	20
At 30 June 2013			301	29	-	330
(Decrease) / increase on account of temporary differences - current year			(71)	(2)	530	457
Charge to equity			-	-	237	237
At 31 December 2013			230	27	767	1,024
(Decrease) / increase on account of temporary differences - current year			(36)	(1)	391	354
Charge to equity			-	-	1,416	1,416
At 30 June 2014			194	26	2,574	2,794
The £2,573,846 deferred tax asset arising from share options reflects the increase in the Company's share price, with the share price at 30 June 2014 being above the options' exercise price.
The Finance Bill 2013 was substantively enacted on 2 July 2013.  The reduction to the standard rate of corporation tax from 21% to 20% will be effective from 1 April 2015. Accordingly, the deferred tax balances at 30 June 2014 have been stated at 20% as this is expected the prevailing rate when the individual temporary differences are expected to reverse.
The Group has unutilised capital losses on which a deferred tax asset has not been recognised as future utilisation of the losses is dependent on future chargeable gains which are uncertain. The unrecognised deferred tax asset in respect of capital losses carried forward is gross £302,261 (net £60,452 at 20%).
12. Share capital
The issued share capital as at 30 June 2014 amounted to £634,921 (30 June 2013: £634,821, 31 December 2013: £634,821).
1 January 2013 to 31 December 2013
On 29 January 2013, 50,000 B shares of 1p each were converted into 50,000 ordinary shares of 1p each.
On 14 May 2013, 20,338 B shares of 1p each were converted into 20,338 ordinary shares of 1p each.
On 21 May 2013, 91,183 B shares of 1p each were converted into 91,183 ordinary shares of 1p each.
On 24 May 2013, 257,357 B shares of 1p each were converted into 257,357 ordinary shares of 1p each.
On 28 May 2013, 525,368 B shares of 1p each were converted into 525,368 ordinary shares of 1p each.
On 17 June 2013, 1,200,000 B shares of 1p each were converted into 1,200,000 ordinary shares of 1p each.
On 19 June 2013, 540,000 B shares of 1p each were converted into 540,000 ordinary shares of 1p each.
On 29 January 2013, the Company purchased in the market 215,837 ordinary shares of 1p at 75p each.  These shares were cancelled by the Company and an amount equivalent to the nominal value of the shares was transferred to the capital redemption reserve.
On 24 May 2013, the Company purchased in the market 140,000 ordinary shares of 1p at 90p each.  These shares were cancelled by the Company and an amount equivalent to the nominal value of the shares was transferred to the capital redemption reserve.
The ordinary shares are admitted to trading on AIM.  The B shares were not admitted to trading on AIM. The B shares were issued on a partly-paid basis to certain employees prior to the Company's admission and trading on AIM in October 2006. Holders of the B shares were required to pay the required premium which was specified at the time of allotment of the B shares. Upon payment of the required premium the B shares convert automatically into ordinary shares and are admitted to trading on AIM. All shares have equal voting rights. The required premium was paid up in full by 30 June 2013 and all B shares were converted into ordinary shares and admitted to trading on AIM.
1 January 2014 to 30 June 2014
On 23rd April 2014, 10,000 ordinary shares of 1p each were issued following the exercise of 10,000 options in accordance with the Company's Long Term Incentive Plan.

13. Own shares
The purpose of the Company's EBT is to assist and encourage the holding of shares in the Company by employees for their benefit with a view to facilitating their recruitment, retention and motivation. During the period no further shares were purchased. As at 30 June 2014 the EBT held a total of 3,158,477 ordinary shares at an aggregate consideration of £3.23 million, as shown in the table below.
	Six months ended		Six months ended		Year ended
	30 June 2014		30 June 2013		31 December 2013
	Number		Number		Number
	of shares	£ 000's	of shares	£ 000's	of shares	£ 000's
At 1 January	3,158,477	3,228	2,843,724	2,945	2,843,724	2,945
Acquired during the period	-	-	263,503	235	314,753	283
At the period ended	3,158,477	3,228	3,107,227	3,180	3,158,477	3,228

14. Financial instruments
Capital risk management
The Company manages capital to ensure that the Company and its subsidiaries will be able to continue as a going concern while aiming to maximise the return to shareholders. The capital structure of the Company consists of equity attributable to equity holders of the parent comprising issued capital, reserves and retained earnings as disclosed in the condensed consolidated statement of changes in equity. At present the Company has no gearing and it is the responsibility of the Board to review the Company's gearing levels on an ongoing basis. As at 30 June 2014, Cenkos Securities plc had a solvency ratio of 145% (30 June 2013: 205%, 31 December 2013: 196%).
Externally imposed capital requirement
The Company has to retain sufficient capital to satisfy the UK Financial Conduct Authority's ("FCA") capital requirements. These requirements vary from time to time depending on the business conducted by the Company. The Company always retains a buffer above the FCA minimum requirement and has complied with these requirements during the period under review.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 of the Company's financial statements for the year ended 31 December 2013.

Categories of financial instruments				Carrying value
				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Available-for-sale investments				1,000	1,000	1,080
Financial assets at fair value through profit and loss (FVTPL)
Trading investments carried at fair value				29,380	9,522	12,567
Derivative financial assets				496	622	1,139
Financial liabilities at fair value through profit and loss (FVTPL)
Trading investments carried at fair value				3,915	4,029	4,289
Financial liabilities held at amortised cost
Amortised cost				79,929	33,451	35,508
Financial risk management objectives
The Chief Executive Officer monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including price risk), credit risk and liquidity risk. Summaries of these reports are reviewed by the Board. Compliance with policies and exposure limits is reviewed by the Chief Executive Officer and senior management on a continuous basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
Interest rate risk management
The Company is exposed to interest rate risk because it has financial instruments on its statement of financial position which are at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate instruments. The Company's exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity and interest rate risk table section of this note.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the balance sheet date. For floating rate assets, the analysis is prepared based on the average rate due on the asset or liability through the period. A 25 basis points increase or decrease is used when reporting interest rate risk internally to senior management and represents management's assessment of a reasonably possible change in interest rates. If interest rates had been 25 basis points higher / lower and all other variables were held constant, the Company's: • profit for the period ended 30 June 2014 would increase / decrease by £0.04 million (30 June 2013: increase / decrease by £0.03 million, 31 December 2013: increase / decrease by £0.03 million). This is mainly attributable to the Company's exposure to interest rates on its variable rate instruments; and • other comprehensive income for the period ended 30 June 2014 would increase / decrease by £0.04 million (30 June 2013: increase/decrease by £0.03 million, 31 December 2013: increase / decrease by £0.03 million).
Equity price risks
The Company is exposed to equity price risks arising from equity investments. The financial instruments represent investments in listed equity securities that present the Company with opportunity for return through dividend income and trading gains. There are limits set for each financial instrument to limit the concentration of risks.
Equity price sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to equity price risks at the reporting date and, in the opinion of senior management, a material movement in equity prices. This is based on the largest fall in the All Share AIM index in one day and over a two week period. These parameters are also considered in the Company's Individual Liquidity Adequacy Assessment (ILAA). If equity prices had been 10% higher/lower:
• Net profit for the 6 months ended 30 June 2014 would have been £2.55 million higher / lower (30 June 2013: £0.55 million higher / lower, 31 December 2013: £1.05 million higher / lower) due to a change in the value of FVTPL held-for-trading investments.
The Company's exposure to equity price risk is closely managed. The Company has built a framework of overall and individual stock limits and these are actively monitored by the Chief Executive Officer and senior management on a daily basis. This framework also limits the concentration of risks. The Company's overall appetite for exposure to equity price risk is set by the Board.
Foreign currency risk
The Company does not have any material dealings in foreign currency, as the majority of transactions are in UK based equities and hence denominated in sterling.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. These parties may default on their obligations due to bankruptcy, lack of liquidity, operational failure and other reasons. The exposure of the Company to its counterparties is closely monitored and limits are set to minimise the concentration of risks. The vast majority of the Company's credit risk arises from the settlement of security transactions. However, the settlement model primarily used by the Company does not expose the Company to counterparty risk as a principal to a trade. Rather, the Company's exposure lies solely with Pershing Securities Limited ("Pershing"), a wholly owned subsidiary of the Bank of New York Mellon Corporation, a AA- (2013: AA-) rated bank. In addition, in circumstances in which the Company does act as principal when acting as a market maker, the counterparty will normally be an FCA regulated market counterparty rather than a corporate or individual trader. The Company does not have any significant credit risk exposure to any single counterparty with the exception of Pershing. Cash resources also give rise to potential credit risk. The Company's cash balances are held with HSBC Bank plc (an AA- rated bank), Royal Bank of Scotland plc (an A rated bank), Barclays Bank plc (an A rated bank) and Pershing. The banks with which the Company deposits money are reviewed at least annually by the Board and are required to have at least an investment grade credit rating. To limit the concentration risk in relation to cash deposits, the maximum amount which may be deposited with any one financial institution is set at no more than 100% of the Company's regulatory capital.
Trade receivables not related to the settlement of market transactions consist almost entirely of outstanding corporate finance fees and retainers and are spread across a wide range of industries. All new corporate finance clients are subject to a review by the New Business Committee. This committee considers, amongst other issues, the financial soundness of any client taken on.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Company's maximum exposure to credit risk without taking account of the value of any collateral obtained.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
The table below summarises the Company's exposure to credit risk by asset class according to whether the exposure is collateralised.

Exposure to Credit Risk				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Derivative financial assets		Uncollateralised		496	622	1,139
Market and client receivables		Uncollateralised		45,607	28,188	17,396
Unpaid share capital and loans due from staff		Collateralised		-	4	-
Unpaid share capital and loans due from staff		Uncollateralised		2	-	2
Prepayments and accrued income		Uncollateralised		1,573	1,897	1,244
Other receivables		Uncollateralised		595	768	707
Cash and cash equivalents		Uncollateralised		43,156	16,343	30,343
				91,429	47,822	50,831

The table below summarises the Company's exposure to credit risk by asset class according to credit rating.

Exposure to Credit Risk				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Derivative financial assets		Unrated		496	622	1,139
Market and client receivables		Unrated		24,413	18,672	11,404
Market and client receivables		AA-		14,915	9,516	5,102
Market and client receivables		A		4,089	-	556
Market and client receivables		A-		2,190	-	-
Market and client receivables		BBB		-	-	334
Unpaid share capital and loans due from staff		Unrated		2	4	2
Prepayments and accrued income		Unrated		1,573	1,897	1,244
Other receivables		Unrated		595	768	707
Cash and cash equivalents		AA-		37,739	9,810	15,290
Cash and cash equivalents		A		5,417	6,533	15,053
				91,429	47,822	50,831
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board. It has, however, delegated day-to-day management to the Chief Executive Officer. The Company has in place an appropriate liquidity risk management framework for its management of its short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Given the nature of the Company's business, the Company does not run any material liquidity mismatches, financial liabilities are on the whole short-term and the Company has sufficient liquid assets to cover all of these liabilities.
Liquidity and interest risk tables
The following tables detail the Company's remaining contractual maturity for its non-derivative financial assets and liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company is required to pay. The table includes both interest and principal cash flows. The tables also detail the Company's expected maturity for its non-derivative financial assets. The tables below have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets.
Liquidity and interest rate table
		Weighted	No		More
		average	maturity	Less than	than
		effective	date	1  month	1  month	Total
As at 30 June 2014		interest rates	£ 000's	£ 000's	£ 000's	£ 000's
Available-for-sale financial assets	Non-interest bearing		1,000	-	-	1,000
Financial assets at FVTPL	Non-interest bearing		29,380	-	496	29,876
Trade and other receivables	Non-interest bearing		-	47,777	-	47,777
Financial liabilities at FVTPL	Non-interest bearing		-	(3,915)	-	(3,915)
Trade and other payables	Non-interest bearing		-	(79,929)	-	(79,929)
Cash and cash equivalents	Variable interest rate instruments	0.60%	-	5,330	-	5,331
Cash and cash equivalents	Variable interest rate instruments	0.30%	-	87	-	87
Cash and cash equivalents	Variable interest rate instruments	0.25%	-	37,739	-	37,738
			29,380	7,089	496	36,965
Liquidity and interest risk tables
		Weighted	No		More
		average	maturity	Less than	than
		effective	date	1  month	1  month	Total
As at 30 June 2013		interest rates	£ 000's	£ 000's	£ 000's	£ 000's
Available-for-sale financial assets	Non-interest bearing		1,000	-	-	1,000
Financial assets at FVTPL	Non-interest bearing		9,522	440	182	10,144
Trade and other receivables	Non-interest bearing		-	30,857	-	30,857
Financial liabilities at FVTPL	Non-interest bearing		-	(4,029)	-	(4,029)
Trade and other payables	Non-interest bearing		-	(33,451)	-	(33,451)
Cash and cash equivalents	Fixed interest rate instruments	1.00%	-	2,750	-	2,750
Cash and cash equivalents	Variable interest rate instruments	0.30%	-	3,750	-	3,750
Cash and cash equivalents	Variable interest rate instruments	0.25%	-	9,843	-	9,843
			9,522	10,160	182	19,864
		Weighted	No		More
		average	maturity	Less than	than
		effective	date	1  month	1  month	Total
As at 31 December 2013		interest rates	£ 000's	£ 000's	£ 000's	£ 000's
Available-for-sale financial assets	Non-interest bearing		1,080	-	-	1,080
Financial assets at FVTPL	Non-interest bearing		12,567	-	1,139	13,706
Trade and other receivables	Non-interest bearing		-	19,349	-	19,349
Financial liabilities at FVTPL	Non-interest bearing		-	(4,289)	-	(4,289)
Trade and other payables	Non-interest bearing		-	(35,508)	-	(35,508)
Cash and cash equivalents	Variable interest rate instruments	1.00%	-	3,284	-	3,284
Cash and cash equivalents	Variable interest rate instruments	0.30%	-	11,768	-	11,768
Cash and cash equivalents	Variable interest rate instruments	0.25%	-	15,290	-	15,290
			12,567	9,894	1,139	23,600
The carrying amounts of financial assets recorded at amortised cost in the financial statements approximate their fair values.
Fair value hierarchy All financial instruments carried at fair value are categorised in three categories, defined as follows: Level 1 - Quoted market prices Level 2 - Valuation techniques (market observable) Level 3 - Valuation techniques (non-market observable) As at 30 June 2014, the Company held the following financial instruments measured at fair value:
			Level 1	Level 2	Level 3	Total
As at 30 June 2014			£ 000's	£ 000's	£ 000's	£ 000's
Available-for-sale financial assets			-	-	1,000	1,000
Financial assets at FVTPL
Derivative financial assets			-	-	496	496
Non-derivative financial assets held for trading			29,380	-	-	29,380
			29,380	-	496	29,876
			29,380	-	1,496	30,876
Financial liabilities at FVTPL
Non-derivative financial liabilities held for trading			3,915	-	-	3,915
There were no transfers between Level 1, 2 and 3 during the period.
			Level 1	Level 2	Level 3	Total
As at 30 June 2013			£ 000's	£ 000's	£ 000's	£ 000's
Available-for-sale financial assets			-	-	1,000	1,000
Financial assets at FVTPL
Derivative financial assets			-	-	622	622
Non-derivative financial assets held for trading			9,522	-	-	9,522
			9,522	-	622	10,144
			9,522	-	1,622	11,144
Financial liabilities at FVTPL
Non-derivative financial liabilities held for trading			4,029	-	-	4,029
There were no transfers between Level 1, 2 and 3 during the period.
			Level 1	Level 2	Level 3	Total
As at 31 December 2013			£ 000's	£ 000's	£ 000's	£ 000's
Available-for-sale financial assets			-	-	1,080	1,080
Financial assets at FVTPL
Derivative financial assets			-	-	1,139	1,139
Non-derivative financial assets held for trading			12,567	-	-	12,567
			12,567	-	1,139	13,706
			12,567	-	2,219	14,786
Financial liabilities at FVTPL
Non-derivative financial liabilities held for trading			4,289	-	-	4,289
There were no transfers between Level 1, 2 and 3 during the year. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lower level input that is significant to the fair value measurement as a whole) at the end of the reporting period.
Reconciliation of recurring fair value measurements categorised within Level 3 of the fair value hierarchy
				Unlisted securities	Share options and warrants	Total
				£ 000's	£ 000's	£ 000's
Opening balance 1 January 2014				1,080	1,139	2,219
Share options and warrants exercised				-	(521)	(521)
Share options and warrants granted				-	10	10
Net unrealised loss recognised in income statement relating to assets held at the end of the period				-	(132)	(132)
Unlisted securities redeemed				(80)	-	(80)
Closing balance 30 June 2014				1,000	496	1,496
Level 3 financial instruments consist of derivative financial assets and unlisted shares received in lieu of fees. The unlisted equity shares are carried as available-for-sale financial assets, classified as Level 3 within the fair value hierarchy. A number of valuation techniques have been used to provide a range of possible values for this shareholding in accordance with the International Private Equity and Venture Capital ("IPEV") valuation guidelines. As the carrying value is within this range - and there have been no other factors brought to the Board's attention which would suggest that there has been an impairment - the carrying value has been maintained at £1 million. The derivative financial assets are carried as financial assets at FVTPL classified as Level 3 within the fair value hierarchy and comprise equity options and warrants over listed securities.
Impact of reasonably possible alternative assumptions The significant unobservable input used in the fair value measurement of Cenkos holdings of share options and warrants is the volatility measure. Significant increases (decreases) in the volatility measure would result in a significantly higher (lower) fair value measurement. A sensitivity analysis based on a 10% increase / decrease in the volatility measure used as an input in the valuation of the share options and warrants shows the impact of such a movement would be an increase of £55,679 / decrease of £53,211 respectively the profit in the income statement.
Determination of fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial instruments measured at fair value on an on-going basis include trading assets and liabilities and financial investments classified as available-for-sale.
Fair values are determined according to the following hierarchy: (a) Level 1 - Quoted market price Financial instruments with quoted prices for identical instruments in active markets. (b) Level 2 - Valuation technique using observable inputs Financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable. (c) Level 3 - Valuation technique with significant non-observable inputs Financial instruments valued using models where one or more significant inputs are not observable. The best evidence of fair value is a quoted price in an actively traded market. In the event that the market for a financial instrument is not active, a valuation technique is used. The majority of valuation techniques employ only observable market data and so the reliability of the fair value measurement is high. However, certain financial instruments are valued on the basis of valuation techniques that feature one or more significant market inputs that are not observable. For these instruments, the fair value derived is more judgemental. 'Not observable' in this context means that there are few or no current market data available from which to determine the level at which an arm's length transaction would be likely to occur. It generally does not mean that there is absolutely no market data available upon which to base a determination of fair value (for example, historical data may be used). Furthermore, the assessment of hierarchy level is based on the lowest level of input that is significant to the fair value of the financial instrument. The valuation models used where quoted market prices are not available incorporate certain assumptions that the Company anticipates would be used by a third party market participant to establish fair value.
	Fair value at 30/06/14	Valuation Technique		Unobservable input		Range
	£ 000's
Share options and warrants	496	Monte Carlo simulation		Volatility		38-66%
Unlisted securities	1,000	IPEV valuation guidelines		n/a		n/a
	1,496

15. Related party transactions
Transactions with related parties are made at arm's length. Transactions or balances between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and, in accordance with IAS 24, are not disclosed in this note. The Board includes all employees considered to be key management personnel.
				30 June	30 June	31 December
				2014	2013	2013
Amounts owed by related parties				£ 000's	£ 000's	£ 000's
Cenkos Nominees Limited				242	317	119

The compensation of the key management personnel of the Company (including the Directors) and their interests in the shares and options over the shares of Cenkos Securities plc were as follows:

				Six months ended		Year ended
				30 June	30 June	31 December
				2014	2013	2013
				£ 000's	£ 000's	£ 000's
Aggregate emoluments				6,575	1,616	5,296

There were no Directors who were members of any Company pension scheme as at the period end (2013: none). The Board (excluding the Chairman) have reviewed the Chairman's remuneration arrangements to ensure that they reflect his contribution to the Company. The executive Directors have proposed - and the Remuneration Committee (excluding the Chairman) has agreed - that a further £125,000 is to be paid in respect of the additional work he undertook in 2013.
Related party interests in ordinary shares of Cenkos Securities plc
				30 June	30 June	31 December
				2014	2013	2013
				No.	No.	No.
Number of shares				14,487,294	14,487,294	14,487,294
Percentage interest				23%	23%	23%
Related party interests in share options	Six months ended		Six months ended		Year ended
	30 June 2014		30 June 2013		31 December 2013
	Number	Weighted	Number	Weighted	Number	Weighted
		average		average		average
		exercise		exercise		exercise
		price		price		price
Outstanding at beginning of the period	1,178,710	1.11	1,178,710	1.11	1,178,710	1.11
Lapsed during the period	-	-	-	-	-	-
Exercised during the period
Issued during the period	-	-	-	-	-	-
Outstanding at the end of the period	1,178,710	1.11	1,178,710	1.11	1,178,710	1.11
16. Events after the reporting period
There were no material events to report on that occurred between 30 June 2014 and the date at which the Directors signed this Interim Report.

 

END

 

 

IR KQLFFZKFXBBD