Results for the year ended 31

RNS Number : 9139G

Jarvis Securities plc

10 February 2010

 



10 February 2010

Jarvis Securities plc

("Jarvis" or "the Company" or "the Group")

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009

HIGHLIGHTS

·      Average daily trade volume up 64% on the prior year

·      Derivatives income up 88% on 2008

·      Profit before income tax excluding bad debts £1.8M

·      Client cash balances up 108% on 31 December 2008

·      Total client assets administered up 155% on 31 December 2008

·      Client numbers have grown 29% during 2009

·      Revenue excluding interest share up 13% on the prior year

Enquiries:

Jarvis Securities plc     Tel: [phone]

Andrew Grant

Mathew Edmett

Arbuthnot Securities    Tel: [phone]

Alasdair Younie

Notes:

Jarvis Securities plc is the holding company for Jarvis Investment Management Limited (AIM: JIM.L) a stock broking company and outsourced service provider for bespoke tailored financial administration. Jarvis was established in 1984 and is a member of the London Stock Exchange; a broker dealer member of PLUS Markets, authorised and regulated by the Financial Services Authority and an HM Revenue & Customs approved ISA manager.  Jarvis has more than 40,000 retail clients and a growing number of institutional clients.  As well as normal retail broking Jarvis provides cost effective and flexible share trading facilities within ISA and SIPP wrappers.

Jarvis provides outsourced and partnered financial administration services to a number of third party organisations.  These organisations include advisers, stockbrokers, banks and fund managers.  Jarvis can tailor its administration processes to the requirements of each organisation and has a strong reputation for flexibility and cost-effectiveness.

CHAIRMAN'S STATEMENT

This year saw the 25th anniversary of the formation of our trading subsidiary, Jarvis Investment Management Limited.  It is interesting to reflect on all the ups and downs that the market and indeed, our business, has experienced over that time.  Without any doubt though, the current economic conditions are truly without precedent in living memory.

In particular, the Bank of England base rate is at its lowest since the Bank's formation in 1694. One of our significant areas of revenue has traditionally been the difference generated between interest received on pooling cash deposits and that paid to clients.  This has come under pressure during the year, as anticipated, and has a noticeable impact upon our financial results.  With client assets and cash balances having grown so much over the year however, the business is very well placed for the widely expected upturn in interest rates late in 2010.

It is reassuring that our business has such robust foundations and that these have enabled us to generate a similar level of turnover and profit to last year, despite the extraordinary impact on a large proportion of our overall income. Indeed, we have been actively diversifying our income to prevent reliance on any one area.  It is a shame that the financials cloud the wider, extremely positive, view of progress in the business.  A glance at the Highlights Page will detail some of these impressive results.

Our derivatives income continues to grow strongly and trade volumes are up by more than 60%.  Both client cash and asset levels are more than double that of just twelve months ago, and in such a competitive market segment it is a great achievement to have increased our client numbers by nearly 30% in just one year.  The early signs for 2010 confirm the continuation of these trends.

We are entrepreneurial by nature at Jarvis and believe that difficult conditions favour better businesses over the long term.  We have been able to react to the cash pressures in the market by taking the financing and spread of certain trades in house through matched principal trading, which has provided a material new revenue stream. We have also been able to launch an ultra low cost web only product. Our efficiency affords us a very low marginal cost per trade and the ability to be at the cutting edge of execution-only pricing.  Despite only having a soft launch so far, this new product is already exceeding expectations and promises to be an exciting development for our future.

Our commercial client base continues to grow with a good pipeline of enquiries at various stages too.  The transfer of the dealing service for a major building society from a competitor has now completed successfully and is running well.  We hope to help expand this service for our client, with encouraging early signs, and also to extend our offering of fully-outsourced branded services to other institutions off the back of our performance in this case.  Unfortunately, a number of existing commercial clients went into administration during the period, however as a result of contractual arrangements this resulted in their businesses being transferred to Jarvis.  Further details are provided in note 11 on the impact to these accounts of these failed contracts.

I would like to thank every member of the Jarvis team for their continued commitment throughout the year and for once again rising to the many and varied challenges of these times.  Jarvis has achieved a great deal over 2009 and this leaves us excellently placed to capitalise on this financially over the coming years.

Andrew Grant - Chairman

Consolidated income statement for the year ended 31 december 2009

				Year to	Year to
				31/12/09	31/12/08
	Notes
				£	£
Continuing operations:
Revenue	3			4,653,690	4,885,249
Administrative expenses				(2,948,162)	(2,908,718)
Finance costs	5			(12,436)	(39,320)
Profit before income tax	6			1,693,092	1,937,211
Income tax charge	8			(494,588)	(627,525)
Profit for the period	19			1,198,504	1,309,686
Attributable to equity holders of the parent				1,198,504	1,309,686
Earnings per share	9			p	p
Basic				11.46	12.30
Diluted				11.14	11.36

Consolidated STATEMENT OF FINANCIAL POSITION at 31 december 2009

				31/12/09	31/12/08
	Notes
				£	£
Assets
Non-current assets
Property, plant and equipment	10			267,105	333,286
Intangible assets	11			439,481	39,396
Goodwill	11			342,872	342,872
Investments held to maturity	12			39,601	39,601
Available-for-sale investments	13			112,001	57,500
Deferred income tax	8			-	3,143
				1,201,060	815,798
Current assets
Trade and other receivables	15			9,581,911	5,342,108
Investments held for trading	16			26,722	50,848
Cash and cash equivalents	17			8,522,615	4,697,721
				18,131,248	10,090,677
Total assets				19,332,308	10,906,475
Equity and liabilities
Capital and reserves	19
Share capital	18			105,000	105,000
Share premium	19			779,934	779,934
Merger reserve	19			9,900	9,900
Capital redemption reserve	19			9,845	9,845
Fair value reserve	19			85,902	56,401
Share option reserve	19			74,394	54,099
Retained earnings	19			328,206	1,255,387
Own shares held in treasury	19			(83,319)	(83,319)
Total equity	19			1,309,862	2,187,247
Non-current liabilities
Deferred income tax	8			1,599	-
Current liabilities	20
Trade and other payables	20			17,602,538	8,135,670
Income tax	20			418,309	583,558
Total liabilities	20			18,020,847	8,719,228
Total equity and liabilities				19,332,308	10,906,475

CoMPANY STATEMENT OF FINANCIAL POSITION at 31 december 2009

				31/12/09	31/12/08
	Notes
				£	£
Assets
Non-current assets
Property, plant and equipment	10			267,105	333,286
Intangible assets	11			439,481	39,396
Goodwill	11			342,872	342,872
Investments held to maturity	12			39,601	39,601
Available-for-sale investments	13			112,001	57,500
Investment in subsidiaries	14			266,388	111,204
Deferred income tax	8			-	3,143
				1,467,448	927,002
Current assets
Trade and other receivables	15			218,608	1,842,509
Cash and cash equivalents	17			7,581	1
				226,189	1,842,510
Total assets				1,693,637	2,769,512
Equity and liabilities
Capital and reserves	19
Share capital	18			105,000	105,000
Share premium	19			779,934	779,934
Capital redemption reserve	19			9,845	9,845
Fair value reserve	19			85,902	56,401
Share option reserves	19			74,394	54,099
Retained earnings	19			262,033	26,547
Own shares held in treasury	19			(83,319)	(83,319)
Total equity	19			1,233,789	948,507
Non-current liabilities
Deferred income tax	8			9,475	-
Current liabilities	20
Trade and other payables	20			433,104	1,725,056
Income tax	20			17,269	95,949
Total liabilities	20			450,373	1,821,005
Total equity and liabilities				1,693,637	2,769,512

Consolidated statement of comprehensive income for the year

	Notes				Year to	Year to
					31/12/09	31/12/08
					£	£
Purchase of own shares	19				-	(842,962)
Sale of shares from treasury	19				-	41,250
Deferred tax asset on share options	8				-	(29,305)
Net income recognised directly in equity					-	(831,017)
Profit for the period	19				1,198,504	1,309,686
Total comprehensive income for the period					1,198,504	478,669
Attributable to equity holders of the parent					1,198,504	478,669

COMPANY statement of comprehensive income for the year

	Notes			Year to	Year to
				31/12/09	31/12/08
				£	£
Purchase of own shares	19			-	(842,962)
Sale of shares from treasury	19			-	41,250
Deferred tax asset on share options	8			-	(29,305)
Net income recognised directly in equity				-	(831,017)
Profit for the period	19			2,361,171	675,285
Total comprehensive income for the period				2,361,171	(155,732)
Attributable to equity holders of the company				2,361,171	(155,732)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital	Share premium	Merger reserve	Capital redemption reserve	Fair value reserve	Share option reserve	Retained earnings	Own shares held in treasury	Total equity
	£	£	£	£	£	£	£	£	£
At 1 January 2008	108,000	779,934	9,900	6,845	-	34,010	695,329	(1,930)	1,632,088
Purchase of own shares	-	-	-	-	-	-	-	(842,962)	(842,962)
Sale of shares from treasury	-	-	-	-	-	-	-	41,250	41,250
Deferred tax charged to equity	-	-	-	-	-	-	(29,305)	-	(29,305)
Net income recognised directly in equity	-	-	-	-	-	-	(29,305)	(801,712)	(831,017)
Cancellation of own shares	(3,000)	-	-	3,000	-	-	(720,323)	720,323	-
Expense of employee options	-	-	-	-	-	20,089	-	-	20,089
Profit for the financial year	-	-	-	-	-	-	1,309,686	-	1,309,686
Investment revaluation	-	-	-	-	56,401	-	-	-	56,401
At 31 December 2008	105,000	779,934	9,900	9,845	56,401	54,099	1,255,387	(83,319)	2,187,247
Deferred tax charged to equity	-	-	-	-	-	-	-	-	-
Net income recognised directly in equity	-	-	-	-	-	-	-	-	-
Expense of employee options	-	-	-	-	-	20,295	-	-	20,295
Profit for the financial year	-	-	-	-	-	-	1,198,504	-	1,198,504
Dividends	-	-	-	-	-	-	(2,125,685)	-	(2,125,685)
Investment revaluation	-	-	-	-	29,501	-	-	-	29,501
At 31 December 2009	105,000	779,934	9,900	9,845	85,902	74,394	328,206	(83,319)	1,309,862

COMPANY STATEMENT OF CHANGES IN EQUITY

	Share capital	Share premium	Capital redemption reserve	Fair value reserve	Share option reserve	Retained earnings	Own shares held in treasury	Total equity
	£	£	£	£	£	£	£	£
At 1 January 2008	108,000	779,934	6,845	-	34,010	100,890	(1,930)	1,027,749
Purchase of own shares	-	-	-	-	-	-	(842,962)	(842,962)
Sale of shares from treasury	-	-	-	-	-	-	41,250	41,250
Deferred tax charged to equity	-	-	-	-	-	(29,305)	-	(29,305)
Net income recognised directly in equity	-	-	-	-	-	(29,305)	(801,712)	(831,017)
Cancellation of own shares	(3,000)	-	3,000	-	-	(720,323)	720,323	-
Expense of employee options	-	-	-	-	20,089	-	-	20,089
Profit for the financial year	-	-	-	-	-	675,285	-	675,285
Investment revaluation	-	-	-	56,401	-	-	-	56,401
At 31 December 2008	105,000	779,934	9,845	56,401	54,099	26,547	(83,319)	948,507
Deferred tax charged to equity	-	-	-	-	-	-	-	-
Net income recognised directly in equity	-	-	-	-	-	-	-	-
Expense of employee options	-	-	-	-	20,295	-	-	20,295
Profit for the financial year	-	-	-	-	-	2,361,171	-	2,361,171
Dividends	-	-	-	-	-	(2,125,685)	-	(2,125,685)
Investment revaluation	-	-	-	29,501	-	-	-	29,501
At 31 December 2009	105,000	779,934	9,845	85,902	74,394	262,033	(83,319)	1,233,789

statement OF cashflows for the year ended 31 december 2009

		CONSOLIDATED		COMPANY
		Year to	Year to	Year to	Year to
		31/12/09	31/12/08	31/12/09	31/12/08
		£	£	£	£
Cash flow from operating activities
Profit before income tax		1,693,092	1,937,211	2,370,211	2,025,988
Loss on disposal of property, plant and equipment		-	13,904	-	13,904
Depreciation and amortisation		167,554	134,626	167,554	134,626
Goodwill released to the income statement		(131,049)	-	(131,049)
Cost of share options		20,295	20,089	14,811	14,607
Finance costs		12,436	39,320	372	100
		1,762,328	2,145,150	2,421,899	2,189,225
(Increase)/decrease in trade and other receivables		1,699,619	(1,131,217)	1,623,901	(1,413,739)
(Increase)/decrease in investments held for trading		24,126	(29,249)	-	-
(Decrease)/increase in trade payables		(63,763)	265,559	(1,289,934)	441,584
Increase in investments in subsidiaries		-	-	(149,700)	-
Cash generated from operations		3,422,310	1,250,243	2,606,166	1,217,070
Interest paid		(12,436)	(39,320)	(372)	(100)
Income tax (paid)/received		(655,095)	(600,100)	(75,103)	(5,308)
Net cash from operating activities		2,754,779	610,823	2,530,691	1,211,662
Cash flows from investing activities
Purchase of property, plant and equipment		(74,481)	(395,381)	(74,481)	(395,381)
Purchase of intangible assets		(295,928)	-	(295,928)	-
Purchase of other long term assets		(25,000)	(20,700)	(25,000)	(20,700)
		(395,409)	(416,081)	(395,409)	(416,081)
Cash flows from financing activities
Proceeds from sale of treasury shares		-	41,250	-	41,250
Purchase of own shares		-	(842,962)	-	(842,962)
Dividends paid		(2,125,685)	-	(2,125,685)	-
Net cash used in financing activities		(2,125,685)	(801,712)	(2,125,685)	(801,712)
Net (decrease)/increase in cash & cash equivalents		233,685	(606,970)	9,597	(6,131)
Cash and cash equivalents at the start of the year		273,621	880,591	(2,016)	4,115
Cash and cash equivalents at the end of the year		507,306	273,621	7,581	(2,016)
Cash and cash equivalents:
Cash at bank and in hand		507,306	275,638	7,581	1
Bank overdraft		-	(2,017)	-	(2,017)
		507,306	273,621	7,581	(2,016)

Notes forming part of the financial statements

1. Basis of preparation

The company has adopted the requirements of International Financial Reporting Standards (IFRS) and IFRIC interpretations endorsed by the European Union (EU) and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.  The financial statements have been prepared under the historical cost convention as modified by the revaluation of available-for-sale financial assets, and financial assets and liabilities at fair value through profit or loss.

These financial statements have been prepared in accordance with the accounting policies set out below, which have been consistently applied to all the years presented.  These accounting policies comply with applicable IFRS standards and IFRIC interpretations issued and effective at the time of preparing these statements.

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

IFRS 1 - First-time Adoption of International Financial Reporting Standards (Revised)

IFRS 3 - Business Combinations (Revised 2008)

IFRS 9 - Financial Instruments

IAS 24 - Related party disclosures (Revised 2009)

IAS 27 - Consolidated and Separate Financial Statements (Revised 2008)

IAS 39 - Financial Instruments: Recognition and Measurement (Amendment) - Eligible Hedged Items

IFRIC 17 - Distributions of Non-cash Assets to Owners

IFRIC 18 - Transfers of Assets from Customers

IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments

Amendments to IFRS 1 Additional Exemptions for First-time Adopters

Amendments to IFRS 2 Group Cash-settled Share-based Payment Transactions

Amendment to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Amendment to IAS 32 Classification of Rights Issues

Amendment to IFRIC 14 Prepayments of a minimum funding requirement

Adoption of these Standards and Interpretations is not expected to have a material impact on the financial statements of the Company or Group.

The preparation of financial statements in accordance with IFRS requires the use of certain accounting estimates.  It also requires management to exercise judgement in the process of applying the Company's accounting policies.  The areas involving a high degree of judgement or complexity, or areas where the assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 24.

2. Summary of significant accounting policies

(a) Revenue

Revenue represents net sales of services, commissions and interest excluding value added tax. Management fees charged in arrears are accrued pro-rata for the expired period of each charging interval.  Interest is accrued on cash deposits pro-rata for the expired period of the deposit. Commission income is recognised as earned.

(b) Basis of consolidation

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than half of the voting rights.  The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.  They are deconsolidated from the date on which control ceases.  The group financial statements consolidate the financial statements of Jarvis Securities plc, Jarvis Investment Management Limited, Sharegain Limited, JIM Nominees Limited, Galleon Nominees Limited and Dudley Road Nominees Limited made up to 31 December 2009.

The Group uses the purchase method of accounting for the acquisition of subsidiaries.  The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.  Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.  The cost of acquisition over the fair value of the Group's share of identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group's share of the net assets of the subsidiary acquired, the difference is recognised in the income statement.

Intra-group sales and profits are eliminated on consolidation and all sales and profit figures relate to external transactions only.  No profit and loss account is presented for Jarvis Securities plc as provided by S408 of the Companies Act 2006.

(c) Property, plant and equipment

All property, plant and equipment is shown at cost less subsequent depreciation and impairment.  Cost includes expenditure that is directly attributable to the acquisition of the items.  Depreciation is provided on cost in equal annual instalments over the lives of the assets at the following rates:

Leasehold improvements	-	33% on cost
Motor vehicles	-	15% on cost
Office equipment	-	20% on cost

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Gains and losses on disposals are determined by comparing proceeds with carrying amount.  These are included in the income statement.  Impairment reviews of property, plant and equipment are undertaken if there are indications that the carrying values may not be recoverable or that the recoverable amounts may be less than the asset's carrying value.

(d) Intangible assets

Intangible assets are carried at cost less accumulated amortisation.  If acquired as part of a business combination the initial cost of the intangible asset is the fair value at the acquisition date.  Amortisation is charged to administrative expenses within the income statement and provided on cost in equal annual instalments over the lives of the assets at the following rates:

Databases	-	4% on cost
Customer relationships	-	7% on cost
Software developments	-	33% on cost
Website	-	33% on cost

Impairment reviews of intangible assets are undertaken if there are indications that the carrying values may not be recoverable or that the recoverable amounts may be less than the asset's carrying value.

(e) Goodwill

Goodwill represents the excess of the fair value of the consideration given over the aggregate fair values of the net identifiable assets of the acquired trade and assets at the date of acquisition.  Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.  Any negative goodwill arising is credited to the income statement in full immediately.

(f) Deferred income tax

Deferred income tax is provided in full, using the liability method, on differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.  The deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting or taxable profit or loss.  Deferred income tax is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the timing difference is controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future.

(g) Segmental reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments.  The directors regard the operations of the Group as a single segment.

(h) Pensions

The group operates a defined contribution pension scheme. Contributions payable for the year are charged to the income statement.

(i) Stockbroking balances

The gross assets and liabilities of the group relating to stockbroking transactions on behalf of clients are included in trade receivables, trade payables and cash and cash equivalents.

(j) Operating leases and finance leases

Costs in respect of operating leases are charged on a straight line basis over the lease term in arriving at the profit before income tax.  Where the company has entered into finance leases, the obligations to the lessor are shown as part of borrowings and the rights in the corresponding assets are treated in the same way as owned fixed assets.  Leases are regarded as finance leases where their terms transfer to the lessee substantially all the benefits and burdens of ownership other than right to legal title.

(k) Finance lease interest

The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

(l) Investments

The Group classifies its investments in the following categories: investments held to maturity, investments held for trading and available-for-sale investments.  The classification depends on the purpose for which the investments were acquired.  Management determines the classification of its investments at initial recognition and re-evaluates this designation at every reporting date.

Investments held to maturity

Investments held to maturity are stated at cost.  Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity.  Assets in this category are classified as non-current.

Investment held for trading

Investments held for trading are stated at fair value.  An investment is classified in this category if acquired principally for the purpose of selling in the short term.  Assets in this category are classified as current.

Available-for-sale investments

Available-for-sale investments are stated at fair value.  They are included in non-current assets unless management intends to dispose of them within 12 months of the balance sheet date.

Purchases and sales of investments are recognised on the trade-date - the date on which the Group commits to purchase or sell the asset.  Investments are initially recognised at fair value.  Investments are derecognised when the rights to receive cash flows from the investments have expired or been transferred and the Group has transferred substantially all the risks and rewards of ownership.  Realised and unrealised gains and losses arising from changes in fair value of investments held for trading are included in the income statement in the period in which they arise.  Unrealised gains and losses arising in changes in the fair value of available-for-sale investments are recognised in equity.  When investments classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities.

The fair value of quoted investments is based on current bid prices.  If the market for an investment is not active, the Group establishes fair value by using valuation techniques.  These include the use of recent arm's length transactions, reference to other instruments that are substantially the same, or discounted cash flow analysis refined to reflect the issuer's specific circumstances.

The Group assesses at each balance sheet date whether there is objective evidence that an investment is impaired.  In the case of investments classified as available-for-sale, a significant or prolonged decline in the fair value below its cost is considered in determining whether the security is impaired.

Investments in subsidiaries

Investments in subsidiaries are stated at cost less provision for any impairment in value.

(m) Cashflow statement

Cash movements relating to stockbroking balances derived from client trading are excluded from the cashflow statement on the basis that these amounts do not form part of the cashflow position of the group.  DVP cash is client funds held in trust for delivery versus payment transactions in order to pay market counterparties for the purchase of equities and other instruments settled via CREST, the electronic mechanism for the simultaneous and irrevocable transfer of cash and securities operated by CRESTCo Limited.  Hence such cash and cash equivalents are not readily available for use by the company as they relate to client transactions.

(n) Foreign Exchange

The group offers settlement of trades in sterling, US dollars, euros, Canadian dollars, Australian dollars, South African rand and Swiss francs.  The group does not hold any assets or liabilities other than in sterling and converts client currency on matching terms to settlement of trades realising any currency gain or loss immediately in the income statement. Consequently the group has no foreign exchange risk.

(o) Share Capital

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from proceeds, net of income tax.  Where the company purchases its equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income tax), is deducted from equity attributable to the company's equity holders until the shares are cancelled, reissued or disposed of.  Where such shares are subsequently sold or reissued, any consideration received, net of any directly incremental transaction costs and the related income tax effects, is included in equity attributable to the company's equity holders.

(p) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

(q) Current income tax

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the balance sheet date.  They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate based on the taxable profit for the year.

(r) Dividend distribution

Dividend distribution to the company's shareholders is recognised as a liability in the group's financial statements in the period in which interim dividends are notified to shareholders and final dividends are approved by the company's shareholders.

(s) Share based payments

The Group has applied the requirements of IFRS 2 Share-based Payment.  In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005.  The Company has also adopted IFRIC 11 from 1 January 2008.

The Group issues equity-settled share-based payments to certain employees and other personnel. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant.  The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effects of non market-based vesting conditions.

Fair value is measured by use of a Black-Scholes option pricing model.  The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

3. Group revenue

The revenue of the group during the year was made in the United Kingdom and the revenue of the group for the year derives from the same class of business as noted in the Directors' Report.

	2009		2008
	£		£
Interest received on stockbroking accounts net of interest paid to clients	1,493,617		2,091,042
Fees, commissions, foreign exchange gains and other revenue	3,160,073		2,794,207
	4,653,690		4,885,249

4. Segmental information

All of the reported revenue and operational results for the period derive from the group's external customers and continuing financial services operations.  All non-current assets are held within the United Kingdom.

5. Finance costs		2009		2008
		£		£
Interest on bank loans, overdrafts and income tax		12,436		39,320
		12,436		39,320
6. Profit before income tax		2009		2008
Profit before income tax is stated after charging/(crediting):		£		£
Directors' emoluments		461,544		403,386
Depreciation - owned assets		140,662		115,681
Amortisation		26,892		18,945
Expenses and income relating to business acquired:
Negative goodwill	(386,143)
Bad debt charge relating to businesses acquired	255,094
		(131,049)		-
Operating lease rentals - hire of machinery		10,566		10,566
Operating lease rentals - land and buildings		63,500		63,500
Loss on disposal of fixed assets		-		13,905
Finance costs		12,436		39,320
Directors' emoluments
Fees Pension contributions		385,719 24,484		350,215 18,314
Cost of share options		14,811		10,832
Benefits in kind		36,530		24,025
		461,544		403,386
Details of the highest paid director are as follows:
Aggregate emoluments		195,493		195,976
Company contributions to personal pension scheme		18,664		13,464
Cost of share options		6,585		6,585
Benefits in kind		18,382		12,467
		239,124		228,492

Benefits are accruing for two directors (2008 two directors) under a money purchase pension scheme. Staff Costs
The average number of persons employed by the group, including directors, during the year was as follows:
	Number		Number
Management and administration	30		26
The aggregate payroll costs of these persons were as follows:	£		£
Wages and salaries	1,045,197		900,189
Pension contributions	24,484		18,314
Social security	108,906		97,921
Cost of share options	20,295		16,314
	1,198,882		1,032,738

Key personnel

The executive directors are considered to be the key management personnel of the company.

7. Auditors' remuneration
During the year the company obtained the following services from the company's auditors as detailed below:
	2009		2008
	£		£
Fees payable to the company's auditors for the audit of the company's annual financial statements	10,635		9,525
Fees payable to the company's auditors and its associates for other services:
The audit of the company's subsidiaries, pursuant to legislation	10,400		8,000
Total audit fees	21,035		17,525
Other services relating to taxation	2,350		2,080
All other services	13,500		20,420
	36,885		40,025

The audit costs of the subsidiaries were invoiced to and met by Jarvis Securities plc.

8. Income and deferred tax charges	2009		2008
	£		£
Based on the adjusted results for the year:
UK corporation tax	509,087		583,598
Adjustments in respect of prior years	(19,241)		(3,032)
Total current income tax	489,846		580,566
Deferred income tax:
Origination and reversal of timing differences	(12,972)		(7,281)
Deferred tax on share options granted	17,714		54,240
Income tax on profit	494,588		627,525

The income tax assessed for the year is greater than the standard rate of corporation tax in the UK (28%). The differences are explained below:
Profit before income tax	1,693,092		1,937,211
Profit before income tax multiplied by the standard rate of corporation tax in the UK of 28% (2008 - 28.5%)	474,066		552,105
Effects of:
Expenses not deductible for tax purposes	11,444		24,428
Income not taxable for tax purposes	-		4,848
Adjustments to tax charge in respect of previous years	(1,526)		(3,032)
Capital allowances in excess of depreciation	-		4,300
Small companies rate marginal relief	(5,756)		(2,083)
Depreciation on non-qualifying assets	16,360		-
Current income tax charge for the year	494,588		580,566
Movement in provision:
Provision at start of year	(3,143)		(79,407)
Deferred income tax charged in the income statement for the year	4,742		(7,281)
Adjustment in respect of prior periods	-		54,240
Deferred income tax charged to equity for the year	-		29,305
Provision at end of year	1,599		(3,143)
Provision for deferred income tax:
Accelerated capital allowances	9,475		(3,143)
Short term timing differences	(7,876)		-
	1,599		(3,143)

9. Earnings per share				2009		2008
				£		£
Earnings: Earnings for the purposes of basic and diluted earnings per share
(profit for the period attributable to the equity holders of the parent)				1,198,504		1,309,686
Number of shares:
Weighted average number of ordinary shares for the purposes of  basic earnings per share				10,462,000		10,649,180
Effect of dilutive potential ordinary shares:
Share option scheme				299,298		880,000
				10,761,298		11,529,180

Treasury shares have been deducted from the number of shares in issue for the purpose of calculating the weighted average number of shares in issue for the period.  Options exercised or those lapsed as relating to former employees have been deducted for the purpose of calculating the diluted weighted average number of shares in issue for the period.

10. Property, plant & equipment - group & company				Leasehold Improvements	Motor Vehicles	Office Equipment		Total
Cost:				£	£	£		£
At 1 January 2008				56,212	27,057	214,314		297,583
Additions				284,561	36,601	54,363		375,525
Disposals				(52,431)	-	(31,570)		(84,001)
At 31 December 2008				288,342	63,658	237,107		589,107
Additions				-	34,000	40,481		74,481
Disposals				-	-	(76,213)		(76,213)
At 31 December 2009				288,342	97,658	201,375		587,375
Depreciation:
At 1 January 2008				41,191	7,912	161,133		210,236
Charge for the year				77,006	9,092	29,583		115,681
On Disposal				(42,438)	-	(27,658)		(70,096)
At 31 December 2008				75,759	17,004	163,058		255,821
Charge for the year				96,105	12,523	32,034		140,662
On Disposal				-	-	(76,213)		(76,213)
At 31 December 2009				171,864	29,527	118,879		320,270
Net Book Value:
At 31 December 2009				116,478	68,131	82,496		267,105
At 31 December 2008				212,583	46,654	74,049		333,286

11. Intangible assets & goodwill - group & company		Goodwill		Intangible assets
				Customer Relationships	Databases	Software Development	Website		Total
		£		£	£	£	£		£
Cost:
At 1 January 2008		342,872		-	25,000	93,521	70,185		188,706
Additions		-		-	-	972	18,884		19,856
Disposals		-		-	-	-	-		-
At 31 December 2008		342,872		-	25,000	94,493	89,069		208,562
Additions		-		-	-	28,034	12,800		40,834
Amounts released to the income statement:
Negative goodwill		-		386,143	-	-	-		386,143
Disposals		-			-	(87,486)	-		(87,486)
At 31 December 2009		342,872		386,143	25,000	35,041	101,869		548,053
Amortisation:
At 1 January 2008		-		-	4,427	89,379	56,415		150,221
Charge for the year		-		-	1,250	2,834	14,861		18,945
On Disposal		-		-	-	-	-		-
At 31 December 2008		-		-	5,677	92,213	71,276		169,166
Charge for the year		-		8,421	1,000	4,190	13,281		26,892
On Disposal		-		-	-	(87,486)	-		(87,486)
At 31 December 2009		-		8,421	6,677	8,917	84,557		108,572
Net Book Value:
At 31 December 2009		342,872		377,722	18,323	26,124	17,312		439,481
At 31 December 2008		342,872		-	19,323	2,280	17,793		39,396

In reviewing the value of goodwill for impairment, the directors have assumed an attrition rate of 7.0% based upon the actual rate for the previous period and a discount rate of 2.0%.  The discounted cashflow is calculated over a period of 5 years.  For impairment to the goodwill value to occur, the attrition rate would need to exceed 85.5% or the discount rate would need to exceed 25.5%.

During the period the businesses of seven commercial clients were acquired following the failure of those businesses under the terms of the contractual agreements in place.  The turnover and profit attributable to these intangible assets is not material for the period and has therefore not been separately disclosed.  The failure of the businesses resulted in a bad debt expense being recognised of £255,094.  The fair value of the customer contractual and non-contractual relationships was £386,143.  To estimate their fair value, a discounted cashflow method, specifically the income approach, was used with reference to the contractual terms and management estimates of the level of revenue which will be generated from the customer relationships.  An attrition rate of 7% and weighted average cost of capital of 2% was used for the valuation.  This valuation resulted in recognition of negative goodwill of £386,143, which was credited to the consolidated income statement.

12. Investments held to maturity	Group				Company
	2009		2008		2009		2008
Unlisted Investments:	£		£		£		£
Cost:
At 1 January 2009	39,601		19,800		39,601		19,800
Additions	-		19,801		-		19,801
As at 31 December 2009	39,601		39,601		39,601		39,601

Unlisted investments held to maturity are stated at cost. Unlisted investments are interests held in the following company registered in the United Kingdom:
	Shareholding	Holding	Business
Alexander David Securities Group plc	£39,601 at par	Loan notes	Stockbrokers

13. Available-for-sale investments	Group				Company
	2009		2008		2009		2008
Listed Investments:	£		£		£		£
Cost:
At 1 January 2009	57,500		200		57,500		200
Additions	25,000		899		25,000		899
On revaluation	29,501		56,401		29,501		56,401
As at 31 December 2009	112,001		57,500		112,001		57,500

Listed investments are stated at their market value at 31 December 2009. Listed investments are interests held in the following company registered in the United Kingdom:
	Shareholding			Holding			Business
Alexander David Securities Group plc	2.7%	11,500,096		1p Ordinary shares			Stockbrokers
14. Investments in subsidiaries							Company
							2009		2008
Unlisted Investments:							£		£
Cost:
At 1 January 2009							111,204		105,722
Additions							149,700		-
Capital contributions re share option costs							5,484		5,482
As at 31 December 2009							266,388		111,204

	Shareholding		Holding	Business
Jarvis Investment Management Limited	100%	25,000,000	1p Ordinary shares	Financial administration
Dudley Road Nominees Limited*	100%	2	£1 Ordinary shares	Dormant nominee company
JIM Nominees Limited*	100%	1	£1 Ordinary shares	Dormant nominee company
Galleon Nominees Limited*	100%	2	£1 Ordinary shares	Dormant nominee company
Sharegain Limited*	100%	1	£1 Ordinary shares	Dormant company
* indirectly held

For the year ended 31 December 2009, the profit after income tax for Jarvis Investment Management Limited was £1,237,334 (2008 £1,228,840) and at the end of the year the total equity was £342,462 (2008 £1,349,944).

15. Trade and other receivables	Group				Company
Amounts falling due within one year:	2009		2008		2009		2008
	£		£		£		£
Trade receivables	8,822,978		2,937,120		38,144		100,384
Amounts owed by group undertakings	-		17,319		-		156,900
Other receivables	75,274		317,752		17,508		20,875
Charge against ordinary shares	-		1,393,345		-		1,393,345
Prepayments and accrued income	683,659		676,572		162,956		171,005
	9,581,911		5,342,108		218,608		1,842,509

Trade receivables include £8,772,031 (2008 £2,832,609) in respect of delivery versus payment transactions for the settlement of client bargains.

16. Investments held for trading	Group				Company
	2009		2008		2009		2008
Listed Investments:	£		£		£		£
Valuation:
At 1 January 2009	50,848		21,599		-		-
Additions	522,106		655,949		-		-
Disposals	(546,232)		(626,700)		-		-
As at 31 December 2009	26,722		50,848		-		-
Listed investments are stated at their market value at 31 December 2009.

17. Cash and cash equivalents	Group				Company
	2009		2008		2009		2008
	£		£		£		£
Balance at bank and in hand - group/company	507,306		275,638		7,581		1
Balance at bank and in hand - client balances	8,015,309		4,422,083		-		-
	8,522,615		4,697,721		7,581		1

Cash at bank includes £8,015,309 (2008 £4,422,083) received in the course of settlement of bargains.  This amount is held by the company in trust on behalf of clients and is only available to complete the settlement of outstanding bargains.

18. Share capital	2009		2008
	£		£
Authorised:
16,000,000 Ordinary shares of 1p each	160,000		160,000
Allotted, issued and fully paid:
10,500,000 (2008: 10,800,000) Ordinary shares of 1p each	105,000		105,000

38,000 shares purchased during the previous year continue to be held in treasury at the year end.

A total of 600,000 options were granted to directors and employees on admission of the company to trading on AIM on 23 December 2004 and a further 50,000 to a director on 20 January 2008 (now exercised).  These options were granted with an exercise price of 82.5p and were first exercisable on 23 December 2009 and with a last exercise date of 23 December 2014. In addition, 230,000 options were granted on 18 May 2007 to directors and employees with an exercise price of 175p and are first exercisable on 17 May 2012 and with a last exercise date of 17 May 2017. On 12 May 2009, 100,000 options were granted to a director with an exercise price of 200p and first exercisable on 12 May 2014 and with a last exercise date of 12 May 2019.  The total number of options unexercised and in issue at the year end is 920,000.

The following options were granted to directors:

	at 82.5p		at 175p		at 200p
A J Grant	273,500		76,500		-
M J Edmett	175,000		50,000		-
N J Crabb	-		-		100,000

19. Consolidated capital and reserves

	Share capital	Share premium	Merger reserve	Capital redemption reserve	Fair value reserve	Share option reserve	Retained earnings	Own shares held in treasury	Total equity
	£	£	£	£	£	£	£	£	£
At 1 January 2008	108,000	779,934	9,900	6,845	-	34,010	695,329	(1,930)	1,632,088
Purchase of own shares	-	-	-	-	-	-	-	(842,962)	(842,962)
Sale of shares from treasury	-	-	-	-	-	-	-	41,250	41,250
Deferred tax charged to equity	-	-	-	-	-	-	(29,305)	-	(29,305)
Net income recognised directly in equity	-	-	-	-	-	-	29,305	(801,712)	(831,017)
Cancellation of own shares	(3,000)	-	-	3,000	-	-	(720,323)	720,323	-
Expense of employee options	-	-	-	-	-	20,089	-	-	20,089
Profit for the financial year	-	-	-	-	-	-	1,309,686	-	1,309,686
Investment revaluation	-	-	-	-	56,401	-	-	-	56,401
At 31 December 2008	105,000	779,934	9,900	9,845	56,401	54,099	1,255,387	(83,319)	2,187,247
Deferred tax charged to equity	-	-	-	-	-	-	-	-	-
Net income recognised directly in equity	-	-	-	-	-	-	-	-	-
Expense of employee options	-	-	-	-	-	20,295	-	-	20,295
Profit for the financial year	-	-	-	-	-	-	1,198,504	-	1,198,504
Dividends	-	-	-	-	-	-	(2,125,685)	-	(2,125,685)
Investment revaluation	-	-	-	-	29,501	-	-	-	29,501
At 31 December 2009	105,000	779,934	9,900	9,845	85,902	74,394	328,206	(83,319)	1,309,862

19. Company capital and reserves

	Share capital	Share premium	Capital redemption reserve	Fair value reserve	Share option reserve	Retained earnings	Own shares held in treasury	Total equity
	£	£	£	£	£	£	£	£
At 1 January 2008	108,000	779,934	6,845	-	34,010	100,890	(1,930)	1,027,749
Purchase of own shares	-	-	-	-	-	-	(842,962)	(842,962)
Sale of shares from treasury	-	-	-	-	-	-	41,250	41,250
Deferred tax charged to equity	-	-	-	-	-	(29,305)	-	(29,305)
Net income recognised directly in equity	-	-	-	-	-	(29,305)	(801,712)	(831,017)
Cancellation of own shares	(3,000)	-	3,000	-	-	(720,323)	720,323	-
Expense of employee options	-	-	-	-	20,089	-	-	20,089
Profit for the financial year	-	-	-	-	-	675,285	-	675,285
Investment revaluation	-	-	-	56,401	-	-	-	56,401
At 31 December 2008	105,000	779,934	9,845	56,401	54,099	26,547	(83,319)	948,507
Deferred tax charged to equity	-	-	-	-	-	-	-	-
Net income recognised directly in equity	-	-	-	-	-	-	-	-
Expense of employee options	-	-	-	-	20,295	-	-	20,295
Profit for the financial year	-	-	-	-	-	2,361,171	-	2,361,171
Dividends	-	-	-	-	-	(2,125,685)	-	(2,125,685)
Investment revaluation	-	-	-	29,501	-	-	-	29,501
At 31 December 2009	105,000	779,934	9,845	85,902	74,394	262,033	(83,319)	1,233,789

Share option reserve relates to the provision for the estimated cost of employee share options.

20. Trade and other payables	Group				Company
Amounts falling due within one year:	2009		2008		2009		2008
	£		£		£		£
Bank loans and overdrafts	-		2,017		-		2,017
Trade payables	17,091,059		7,436,589		29,451		4,025
Amounts owed to group companies	-		7,199				1,212,759
Other taxes and social security	67,696		65,774				5,097
Other provisions	416,648		610,066		388,518		487,133
Accruals	27,135		14,025		15,135		14,025
Trade and other payables	17,602,538		8,135,670		433,104		1,725,056
Income tax	418,309		583,558		17,269		95,949
Total liabilities	18,020,847		8,719,228		450,373		1,821,005

Trade payables include £16,787,340 (2008 £7,254,693) in respect of delivery versus payment transactions for the settlement of client bargains.

21. Dividends	2009		2008
	£		£
Final dividends paid on Ordinary 1p shares	648,000		-
Interim dividends paid on Ordinary 1p shares	1,477,685		-
	2,125,685		-
Dividend per Ordinary 1p share	20p		-

22. Operating lease commitments

At 31 December 2009 the group was committed to making the following payments in respect of operating leases which expire:

	Equipment				Land & buildings
	2009		2008		2009		2008
	£		£		£		£
Between one and five years:	40,468		51,069		-		-
After more than five years:	-		-		492,125		555,625

On 26 September 2007 the company entered into a lease with Sion Holdings Limited, a company controlled by A J Grant, for the rental of 78 Mount Ephraim, a self-contained office building.  The lease has an annual rental of £63,500, being the market rate on an arm's length basis, and expires on 26 September 2017.

In addition, on 24 October 2007, Jarvis Investment Management Limited entered into a lease agreement with Neopost Finance for the rental of various items of post management equipment.  The equipment is required to support the increasing volume of post received and sent by the group as a result of the growth of the business.  The lease has a term of 6 years.

23. Financial Instruments

The group's principal financial instruments comprise cash, short terms borrowings and various items such as trade receivables, trade payables etc. that arise directly from operations.  The main purpose of these financial instruments is the funding of the group's trading activities.

The main financial asset of the group is cash and cash equivalents which is denominated in sterling and which is detailed in note 17.  The group operates a low risk investment policy and surplus funds are placed on deposit with at least A rated banks or equivalent at floating interest rates.

The group also holds investments in equities and loan notes. 

Short-term receivables and payables are excluded from these disclosures.

24. Critical accounting estimates and judgements

The Group makes estimates and assumptions concerning the future.  These estimates and judgements are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  The resulting accounting estimates will, by definition, seldom equal the related actual results.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial year relate to goodwill, intangible assets and the expense of employee options.

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2 (e). These calculations require the use of estimates.  The assumptions and sensitivity relating to the impairment tests are detailed in note 11.

The Group considers at least annually whether there are indications that the carrying values of intangible assets may not be recoverable, or that the recoverable amounts may be less than the asset's carrying value, in which case an impairment review is performed.  These calculations require the use of estimates

Employee options are expensed equally in each year from issue to the date of first exercise.  The total cost is calculated on issue based on the Black Scholes method with a volatility rate of 30% and a risk free interest rate of 3.75%.  It is assumed that all current employees with options will still qualify for the options at the exercise date.

25. Immediate and ultimate parent undertaking

The company's immediate and ultimate parent undertaking is Sion Securities Limited, a company registered in England and Wales.  The largest set of accounts that Jarvis Securities plc is consolidated into is that of Sion Securities Limited. Sion Securities Limited is controlled by Mr A J Grant by virtue of his majority shareholding. Consolidated financial statements are available from Sion Securities Limited at its registered office address of Oxford House, 15-17 Mount Ephraim Road, Royal Tunbridge Wells, Kent, TN1 1EN.

26. Related party transactions

On 26 September 2007 the company entered into a lease with Sion Holdings Limited, a company controlled by A J Grant by virtue of his majority shareholding, for the rental of 78 Mount Ephraim, a self-contained office building.  The lease has an annual rental of £63,500, being the market rate on an arm's length basis, and expires on 26 September 2017.  During the year the company made a management charge of £10,000 to Sion Holdings Limited for office and administrative services and paid Sion Holdings Limited rent of £63,500 under the terms of the lease of 78 Mount Ephraim. Further the company paid Sion Holdings Limited a premium of £175,000 on the assignment of the new lease of 78 Mount Ephraim.  The premium related to the VAT position of the lease. As a financial services business, the group cannot reclaim VAT in full. Sion Holdings Limited opted not to tax on the lease in order to save the group the costs of the irrecoverable VAT and in return the company compensated Sion Holdings Limited for the effect of this decision over the lease term.

At the year end Sion Holdings Limited had an outstanding inter-company loan balance due from Jarvis Securities plc of nil (2008 £7,199).  In addition, group and company trade payables include £15,875 (2008 nil) due to Sion Holdings Limited at the year end for rent for the quarter commencing 24 December.

Jarvis Investment Management Limited paid a performance related management charge to Jarvis Securities plc of £180,000 (2008 £475,000) during the year. Jarvis Securities plc owed Jarvis Investment Management Limited nil (2008 £1,205,560) at the year end.

27. Event after the statement of financial position date

The issued share capital of the company was increased by 9,000 Ordinary 1p shares, to 10,509,000 Ordinary shares of 1p, after the date of the statement of financial position to satisfy the exercise of options by employees.

28. Capital commitments

The company had no capital commitments at 31 December 2009.

29. Fair value estimation

The fair value of financial instruments traded in active markets (such as trading and available for sale securities) is based on quoted market prices at the balance sheet date.  The quoted market price used for financial assets held by the company is the current bid price.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values.

30. Financial risk management objectives and policies

The directors consider that their main risk management objective is to monitor and mitigate the key risks to the Group, which are considered to be principally credit risk, compliance risk, liquidity risk and operational risk.  Several high-level procedures are already in place to enable all risks to be better controlled.  These include detailed profit forecasts, monthly management accounts and comparisons against forecast, regular meetings of the full Board of Directors, and more regular senior management meetings. 

The group's main credit risk is exposure to the trading accounts of clients.  This credit risk is controlled via the use of credit algorithms within the computer systems of the subsidiary.  These credit limits prevent the processing of trades in excess of the available maximum permitted margin at 50% of the current portfolio value of a client.

A further credit risk exists in respect of trade receivables.  The group's policy is to monitor trade and other receivables and avoid significant concentrations of credit risk.  Aged receivables reports are reviewed regularly and significant items brought to the attention of senior management.

The compliance risk of the group is controlled through the use of robust policies, procedures, the segregation of tasks, internal reviews and systems controls.  These processes are based upon the Rules and guidance notes of the Financial Services Authority and the London Stock Exchange and are overseen by the compliance officer together with the management team.  In addition, regular compliance performance information is prepared, reviewed and distributed to management.

The group aims to fund its expansion plans mainly from existing cash balances without making use of bank loans or overdraft facilities.  Financial risk is therefore mitigated by the maintenance of positive cash balances and by the regular review of the banks used by the Group.  Other risks, including operational, reputational and legal risks are under constant review at senior management level by the executive directors and senior managers at their regular meetings, and by the full board at their regular meetings. 

The Group derives a significant proportion of its revenue from interest earned on client cash deposits and does not have any borrowings.  Hence, the directors do not consider the Group to be materially exposed to interest rate risk in terms of the usual consideration of financing costs, but do note that there is a risk to earnings.  Given the current Bank of England base rate is at its lowest level since its foundation in 1694, and the business has remained profitable, this risk is not considered material in terms of a threat to the long term prospects of the Group.  However, interest earnings have been nearly £600,000 lower than the prior year.  To put this into a wider financial context, adjusting for the current level of cash balances held, this equates to a reduction in revenue of approximately £2.8M on comparative earn rates to 2008, and £4.2M versus the average base rate since 1975*.

The capital structure of the Group consists of issued share capital, reserves and retained earnings. Jarvis Investment Management Limited has an Internal Capital Adequacy Assessment Process ("ICAAP"), as required by the Financial Services Authority ("FSA") for establishing the amount of regulatory capital to be held by that company.  The ICAAP gives consideration to both current and projected financial and capital positions.  The ICAAP is updated throughout the year to take account of any significant changes to business plans and any unexpected issues that may occur.  The ICAAP is discussed and approved at a board meeting of the subsidiary at least annually. Capital adequacy is monitored daily by management. Jarvis Investment Management Limited uses the simplified approach to Credit Risk and the standardised approach for Operational Risk to calculate Pillar 1 requirements.  Jarvis Investment Management Limited observed the FSA's regulatory requirements throughout the period. Information disclosure under Pillar 3 of the Capital Requirements Directive is available from the Group's websites.

The directors do not consider that the Group is materially exposed to foreign exchange risk as the Group does not run open currency positions beyond the end of each working day.

* Source: Bank of England website

 

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