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Jarvis Securities (JIM)

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Thursday 15 February, 2018

Jarvis Securities

Final Results

RNS Number : 9283E
Jarvis Securities plc
15 February 2018
 



15 February 2018

Jarvis Securities plc

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

 

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2017

 

HIGHLIGHTS

·      22% increase in profit before tax

·      10% increase in year on year interest income

·      34% growth in dividend per share

·      22% increase in EPS

 

CHAIRMAN'S STATEMENT

 

·      22% increase in profit before tax

·      10% increase in year on year interest income

·      34% growth in dividend per share

·      22% increase in EPS

 

I am delighted to report that 2017 has been the most commercially successful year at Jarvis by some margin. Market conditions have remained favourable and we continue to expand both the commercial and retail arms of the business.  Cash under administration has also grown. The share price, whilst volatile, is trading in a much higher range than this time last year.

 

Whilst the financial results are excellent, the dominant theme for Jarvis during 2017 has been regulatory changes which have taken place and are due in the coming year. Considerable time and resources have been, and continue to be, spent preparing and satisfying the requirements of MIFID II and GDPR. Whilst we accept that the legislation and regulations improve transparency, reduce market abuse, tax avoidance and generally strengthen the financial system, it should not be forgotten that these all come at a commercial cost for the firms' required to implement and enforce them. In the latter half of the year, and going forward, we will be incurring higher costs on software, data feeds and higher staff numbers to ensure policies are correctly implemented and monitored as a result of additional monitoring and reporting requirements. The introduction of MIFID II has also restricted the activities of investors in "complex instruments" such as ETFs and this has resulted in a significant number of clients, especially within our commercial relationships requesting to be classified as professional in order to circumvent some of the trading restrictions.

 

These changes coincide with what I feel is a maturing of Jarvis as a company. Realistically we can no longer consider ourselves to be a small company. We now have considerable client assets in custody and under administration - though we are nowhere near the size of the largest brokers in the industry. Our market capitalisation is now over five times that of ten years ago. The challenge Jarvis has over the coming years is to embrace the change that growth requires without losing sight of the factors that have brought commercial success to the business in the first place. This challenge should not be under estimated, although I am confident we have the right staff and culture to succeed.

 

With that in mind I am urging investors to be realistic about near term results. As highlighted above our cost base has increased, so revenues will need to increase at a higher rate to maintain the growth of the past. That is not to say it cannot be done, especially if interest rates increase.

 

As a result of the growth in the business and the complexities of the Financial Services industry in general we will in future be extending the time we give ourselves to prepare and issue our financial annual statements. We will still be comparably prompt, but the current 6 weeks of the year end is now proving to be an unnecessarily short, self-imposed time frame for both Jarvis and its advisers.  Future dates will be added to our investor website as usual.

 

The Company will today dispatch to shareholders its Annual Report and Accounts for the year ended 31 December 2017, together with a notice convening the Annual General Meeting ("AGM"), to be held at the Company's offices on 22 March 2018 at 9am. The Annual Report and Accounts and Notice of AGM will also be available from the Company's website, www.jarvissecurities.co.uk.

 

 

Andrew Grant

Chairman

 

Enquiries:

Jarvis Securities plc Tel: 01892 510515

Andrew Grant

Jolyon Head

 

WH Ireland Limited 0113 3946619

Katy Mitchell

Ed Allsopp

 

 



 

Consolidated income statement for the year ended 31 december 2017

 

 


 

 

Year to

Year to

 


 

 

31/12/17

31/12/16

 

Notes





 


 

 

 

 

 


 

 

£

£

Continuing operations:


 

 

 

 

Revenue

3

 

 

9,423,436

8,322,844

 


 

 

 

 

Administrative expenses


 

 

(5,002,938)

(4,684,836)

 


 

 

 

 

 


 

 

 

 

Profit before income tax

5

 

 

4,420,498

3,638,008

 


 

 

 

 

Income tax charge

7

 

 

(867,168)

(728,162)

 


 

 

 

 

 


 

 

 

 

Profit for the period


 

 

3,553,330

2,909,846

 


 

 

 

 

 


 

 

 

 

Attributable to equity holders of the parent


 

 

3,553,330

2,909,846

 


 

 

 

 

 


 

 

 

 

Earnings per share

8

 

 

P

P

 


 

 

 

 

Basic


 

 

32.40

26.45

Diluted


 

 

32.40

26.38

 


 

 

 

 

 

 

 

Consolidated statement of comprehensive income for the year

 

 

Notes

 

 

Year to

Year to

 


 

 

31/12/17

31/12/16

 


 

 

£

£

Profit for the period


 

 

3,553,330

2,909,846

Total comprehensive income for the period

 

 

3,553,330

2,909,846

Attributable to equity holders of the parent


 

 

3,553,330

2,909,846

 

 

 

Consolidated STATEMENT OF FINANCIAL POSITION at 31 december 2017

 


 

 

 

 

 


 

 

31/12/17

31/12/16

 

Notes





 


 

 

£

£

Assets


 

 

 

 

Non-current assets


 

 

 

 

Property, plant and equipment

9

 

 

219,940

229,620

Intangible assets

10

 

 

149,662

162,549

Goodwill

10

 

 

342,872

342,872

 


 

 

712,474

735,041

Current assets


 

 

 

 

Trade and other receivables

12

 

 

2,947,626

8,233,866

Investments held for trading

13

 

 

13,546

1,712

Cash and cash equivalents

14

 

 

13,175,503

5,103,122

 


 

 

16,136,675

13,338,700

Total assets


 

 

16,849,149

14,073,741

 


 

 

 

 

Equity and liabilities


 

 

 

 

Capital and reserves


 

 

 

 

Share capital

15

 

 

111,828

111,518

Share premium


 

 

1,576,669

1,522,729

Merger reserve


 

 

9,900

9,900

Capital redemption reserve


 

 

9,845

9,845

Share option reserve


 

 

-

136,556

Retained earnings

Own shares held in treasury

 

15

 

 

4,723,986

(859,587)

3,610,339

(616,943)

Total equity attributable to the equity holders of the parent


 

 

5,572,641

4,783,944

 


 

 

 

 

Current liabilities

16

 

 

 

 

Trade and other payables

16

 

 

10,658,206

8,878,155

Deferred tax

16

 

 

32,929

6,312

Income tax

16

 

 

585,373

405,330

Total current liabilities

16

 

 

11,276,508

9,289,797

Total equity and liabilities


 

 

16,849,149

14,073,741

 

 

CoMPANY STATEMENT OF FINANCIAL POSITION at 31 december 2017

 

 


 

 

31/12/17

31/12/16

 

Notes





 


 

 

£

£

Assets


 

 

 

 

Non-current assets


 

 

 

 

Property, plant and equipment

9

 

 

219,940

229,620

Intangible assets

10

 

 

149,662

162,549

Goodwill

10

 

 

342,872

342,872

Investment in subsidiaries

11

 

 

284,239

284,239

 


 

 

996,713

1,019,280

Current assets


 

 

 

 

Trade and other receivables

12

 

 

70,481

799,517

Cash and cash equivalents

14

 

 

3,503,452

1,705,986

 


 

 

3,573,933

2,505,503

Total assets


 

 

4,570,646

3,524,783

 


 

 

 

 

Equity and liabilities


 

 

 

 

 


 

 

 

 

Capital and reserves


 

 

 

 

Share capital

15

 

 

111,828

111,518

Share premium


 

 

1,576,669

1,522,729

Capital redemption reserve


 

 

9,845

9,845

Share option reserves


 

 

-

136,556

Retained earnings

Own shares held in treasury

 

15

 

 

2,116,007

(859,587)

1,795,050

(616,943)

Total equity attributable to the equity holders


 

 

2,954,762

2,958,755

 


 

 

 

 

Current liabilities

16

 

 

 

 

Trade and other payables

16

 

 

1,139,278

183,876

Deferred tax

16

 

 

32,929

6,312

Income tax

16

 

 

443,677

375,840

Total current liabilities

16

 

 

1,615,884

566,028

Total equity and liabilities


 

 

4,570,646

3,524,783

 

The parent company's profit for the financial year was £3,438,880 (2016: £3,122,402).

 

 

       

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


 

Share capital

 

Share premium

 

Merger reserve

Capital redemption reserve

Share option reserve

Retained earnings

 

 

Own shares held in Treasury

Total equity


£

£

£

£

£

£

£

£

At 1 January 2016

111,503

1,520,119

9,900

9,845

136,556

2,626,295

(301,514)

4,112,704

Share options exercised during the year

15

2,610

-

-

-

-

-

2,625

Profit for the financial year

-

-

-

-

-

2,909,846

-

2,909,846

Dividends

Purchase of own shares held in treasury

-

-

 

-

-

 

-

-

 

-

-

 

-

-

 

(1,925,802)

-

 

-

(315,429)

 

(1,925,802)

(315,429)

 

At 31 December 2016

111,518

1,522,729

9,900

9,845

136,556

3,610,339

(616,943)

4,783,944

Share options exercised during the year

310

53,940

-

-

-

-

-

54,250

Profit for the financial year

-

-

-

-

-

3,553,330

-

3,553,330

Dividends

Purchase of own shares held in treasury

Transfer to retained earnings

-

-


-

-

-


-

-

-


-

 

-

-


-

-

-


(136,556)

(2,576,239)

-


136,556

-

(242,644)


-

(2,576,239)

(242,644)


-

At 31 December 2017

111,828

1,576,669

9,900

9,845

-

4,723,986

(859,587)

5,572,641

 

 

COMPANY STATEMENT OF CHANGES IN EQUITY


Share capital

Share premium

Capital redemption reserve

Share option reserve

Retained earnings

Own shares held in treasury

Total equity


£

£

£

£

£

£

£

At 1 January 2016

111,503

1,520,119

9,845

136,556

598,450

(301,514)

2,074,959

Share options exercised during the year

15

2,610

-

-

-

-

 

2,625

Profit for the financial year

-

-

-

-

3,122,402

-

3,122,402

Dividends

Purchase of own shares held in treasury

-

-

 

-

-

 

-

-

 

-

-

 

(1,925,802)

-

 

-

(315,429)

 

(1,925,802)

(315,429)

 

At 31 December 2016

111,518

1,522,729

9,845

136,556

1,795,050

(616,943)

2,958,755

Share options exercised during the year

310

53,940

-

-

-

-

 

54,250

Profit for the financial year

-

-

-

-

2,760,640

-

2,760,640

Dividends

Purchase of own shares held in treasury

Transfer to retained earnings

-

-

 

-

-

-

 

-

-

-

 

-

-

-

 

(136,556)

(2,576,239)

-

 

136,556

-

(242,644)

 

-

(2,576,239)

(242,644)

 

-

At 31 December 2017

111,828

1,576,669

9,845

-

2,116,007

(859,587)

2,954,762

 

 

 

statement OF cashflows

for the year ended 31 december 2017

 

 


 

CONSOLIDATED

 


Year to

Year to

Year to

Year to

 


31/12/17

31/12/16

31/12/17

31/12/16

 

Notes

 

 

 


 


£

£

£

£

Cash flow from operating activities

 

 

 

 

 

Profit before income tax

 

4,420,498

3,638,009

3,438,880

3,728,647

Depreciation and amortisation

5

90,714

75,421

90,714

75,421

 

 

4,511,212

3,713,430

3,529,594

3,804,068

 

 

 

 

 

 

Decrease/(Increase) in trade and other receivables

3,390,264

(4,360,107)

729,036

(2,886)

(Decrease) /Increase in trade payables

 

3,676,029

(1,150,847)

955,402

(341,664)

Cash generated from operations

 

11,577,505

(1,797,524)

5,214,032

3,459,518

 

 

 

 

 

 

Income tax (paid)/received

 

(660,510)

(656,832)

(583,786)

(546,830)

Net cash from operating activities

 

10,916,995

(2,454,356)

4,630,246

2,912,688

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of property, plant and equipment

 

(549)

(4,454)

(549)

(4,454)

Receipt from sale of investment

 

-

-

-

-

Purchase of investments held for trading

Proceeds from sale of investments held for trading

Purchase of intangible assets

 

(1,644,356)

1,632,522


(67,598)

(3,822,741)

3,898,086


(52,743)

-

-


(67,598)

-

-


(52,743)

 

 

(79,981)

18,148

(68,147)

(57,197)

Cash flows from financing activities

 

 

 

 

 

Issue of share capital   

 

54,250

2,625

24,250

2,625

Repurchase of ordinary share capital

Sale of treasury shares

Dividends paid

 

(242,644)

-

(2,576,239)

(315,429)

-

(1,925,802)

(242,644)

-

(2,576,239)

(315,429)

-

(1,925,802)

Net cash used in financing activities

 

(2,764,633)

(2,238,606)

(2,794,633)

(2,238,606)

 

 

 

 

 

 

Net increase/(decrease) in cash & cash equivalents

8,072,381

(4,674,814)

1,797,466

616,885

Cash and cash equivalents at the start of the year

5,103,122

9,777,936

1,705,986

1,089,101

Cash and cash equivalents at the end of the year

13,175,503

5,103,122

3,503,452

1,705,986

Cash and cash equivalents:

 

 

 

 

Balance at bank and in hand

5,218,686

3,404,516

3,503,452

1,705,986

Cash held for settlement of market transactions

7,956,817

1,698,606

-

-

 

13,175,503

5,103,122

3,503,452

1,705,986

 

 

 

 

 

 

 

 

 

 


 

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 financial assets 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.

 

New standards, not yet effective

A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in some cases have not yet been adopted by the EU.

 

The Directors have assessed the application of IFRS 16, and note that once effective it will have a material impact on the results of the group. Application of this standard will result in changes in presentation of information within the Group's financial statements due to the capitalisation of the Group's operating leases noted in note 18.

 

The Directors have considered the impact of IFRS 9 and IFRS 15 on the financial statements. They considers there to be no material impact.

 

Significant judgements and estimates

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 20.

 

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report on pages 2 to 3 of the Annual Report and Accounts. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described within these financial statements. In addition, note 25 of the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk.

 

The Group has considerable financial resources, long term contracts with all its significant suppliers and a diversified income stream. The Group does not have any current borrowing or any anticipated borrowing requirements. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

 

The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

 

2. Summary of significant accounting policies

 

(a) Revenue

Income is recognised as earned in the following way:

 

Commission - we charge commission on a transaction basis. Commission rates are fixed according to account type. When a client instructs us to act as an agent on their behalf (for the purchase or sale of securities) our commission is recognised as income when the instruction is executed in the market. Our commission is deducted from the cash given to us by the client in order to settle the transaction on the client's behalf or from the proceeds of the sale in instance where a client sells securities.

 

Management fees - these are charged quarterly or bi-annually depending on account type. Fees are either fixed or are a percentage of the assets under administration. Fees are accrued up to the time they are charged using a day count and most recent asset level basis as appropriate.

 

Interest income - this is accrued on a day count basis up until deposits mature and the interest income is received. The deposits pay a fixed rate of interest. In accordance with FCA requirements, deposits are only placed with banks that have been approved by our compliance department.

 

(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, JIM Nominees Limited, Galleon Nominees Limited and Dudley Road Nominees Limited made up to 31 December 2017.

 

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.  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 income statement 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, or over the lease period if less than three years.

Office equipment

-     20% on cost

Land & Buildings

-     Buildings are depreciated at 2% on cost. Land is not depreciated.

 

 

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

-     20% 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) Trade receivables and payables

Trading balances incurred in the course of executing client transactions are measured at initial recognition at fair value. In accordance with market practice, certain balances with clients, Stock Exchange member firms and other counterparties are included as trade receivables and payables. The net balance is disclosed where there is a legal right of set off.

 

(j) Operating 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.

 

(k) Investments

 

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 and are considered to be level one assets in accordance with IFRS 13.

 

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.

 

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 decline in the fair value below its carrying value 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.

 

(l) Foreign Exchange

The group offers settlement of trades in various currencies, predominately Sterling, US dollars and Euros. 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 minimal foreign exchange risk.

 

(m) 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.

 
(n) 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.

 

(o) 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.  

 
(p) 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 paid to shareholders and final dividends are approved by the company's shareholders.

 

(q) Share based payments

The Group applies the requirements of IFRS 2 Share-based Payment.

 

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.

 

The share option reserve represents the accumulated share option charge. The balance in the reserve has been transferred to retained earnings as all remaining options have been exercised during the year.

 

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 Strategic Report.


2017


2016


£


£

Gross interest earned from treasury deposits, cash at bank and overdrawn client accounts

3,808,064


3,458,611

Commissions

Fees

4,141,315

1,474,057


3,661,488

1,202,745


9,423,436


8,322,844

 

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.

 

The group is not reliant on any one customer and no customer accounts for more than 10% of the group's external revenues.

 

As the Group's sole business activity is the provision of stock broking services and all revenue is derived in the UK, management have not had occasion to define any factors to identify reportable segments.

 

 

5. Profit before income tax

 

 

2017


 

2016

Profit before income tax is stated after charging/(crediting):

£


£

Directors' emoluments

621,648


586,391

Depreciation - owned assets

10,229


10,370

Amortisation (included within administrative expenses in the consolidated income statement)

80,485


65,051

Operating lease rentals - hire of machinery

8,842


9,052

Operating lease rentals - land and buildings

70,850


65,300

Impairment of receivable charge

72,604


116,300

Bank transaction fees

70,071


71,918


Details of Directors' annual remuneration as at 31 December 2017 are set out below:






2017


2016


£


£

Short-term employee benefits

544,853


480,435

Post-employment benefits

67,463


97,023

Benefits in kind

9,332


8,933


621,648


586,391

Details of the highest paid director are as follows:




Aggregate emoluments

330,943


275,080

Company contributions to personal pension scheme

2,167


37,950

Benefits in kind

8,396


7,906


341,506


320,936







Emoluments & Benefits in kind

Pension


Total

Directors





£

£


£

Andrew J Grant





339,339

2,167


341,506

Nick J Crabb





100,269

40,865


141,134

Jolyon C Head





99,577

24,431


124,008

Graeme McAusland





15,000

-


15,000

TOTAL





554,185

67,463


621,648

 

During the year benefits accrued for three directors (2016: three 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:


2017


2016

Management and administration

50


47

The aggregate payroll costs of these persons were as follows:

£


£

Wages, salaries & social security

1,983,639


1,715,577

Pension contributions including salary sacrifice

82,818


105,165

Share based payment expense

-


-


2,066,457


1,820,742

 

  Key personnel

  The directors disclosed above are considered to be the key management personnel of the group.

 

 

6. Auditors' remuneration

 




During the year the company obtained the following services from the company's auditors as detailed below:


2017


2016


£


£

Fees payable to the company's auditors for the audit of the company's annual financial statements

 

22,000


 

21,500

Fees payable to the company's auditors and its associates for other services:




The audit of the company's subsidiaries, pursuant to legislation

9,500


12,300

Total audit fees

31,500


33,800

Taxation Compliance

4,500


4,375

Other taxation advisory services not relating to compliance

5,220


-


41,220


38,175

 

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

 

7. Income and deferred tax charges - group

2017


2016


£


£

Based on the adjusted results for the year:




UK corporation tax

845,095


730,695

Adjustments in respect of prior years

(4,544)


393

Total current income tax

840,551


731,088

Deferred income tax:




Origination and reversal of timing differences

6,561


(2,063)

Adjustment in respect of prior years

20,056


(863)

Total deferred tax (credit) / charge

26,617


(2,926)


867,168


728,162

 

 

 

The income tax assessed for the year is more than the standard rate of corporation tax in the UK (19.25%). The differences are explained below:

 

 

Profit before income tax

4,420,498


3,638,008

Profit before income tax multiplied by the standard rate of corporation tax in the UK of

19.25% (2016 - 20%)

 

850,794


 

727,602

Effects of:




Expenses not deductible for tax purposes

572


-

Adjustments to tax charge in respect of previous years

15,512


(471)

Exercise of options

-


641

Ineligible depreciation

Adjust deferred tax rate to average rate of 19.25%

375

(85)


390

-

Current income tax charge for the years

867,168


728,162

 

Movement in (assets) / provision - group and company:




Provision at start of year

6,312


9,238

Deferred income tax (creditor) / charged in the income statement in the year

26,617


(2,926)

(Asset) / Provision at end of year

32,929


6,312





 

 

The deferred tax balances arise from taxable temporary differences in respect of the following:



Share Based Payments

Deferred tax (asset) / liability brought forward



(12,398)

Prior year



12,398

(Asset) at end of year



-

 

 



 

Tangible Assets

Deferred tax liability brought forward



18,710

Current year

Prior year



6,561

7,658

Liability at end of year



32,929

 

8. Earnings per share



2017


2016





£


£

Earnings:

Earnings for the purposes of basic and diluted earnings per share





(profit for the period attributable to the equity holders of the parent)


3,553,330


2,909,846

 

Number of shares:




Weighted average number of ordinary shares for the purposes of basic earnings per share

10,966,610


10,999,237





Effect of dilutive potential ordinary shares:




Share option scheme

-


31,000


10,966,610


11,030,237

 

Shares held in treasury are deducted for the purpose of calculating earnings per share. 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.

 

9. Property, plant & equipment - group & company

 

Leasehold & Property

 

Leasehold

Improvements

 

Office

Equipment


 

Total

 

Cost:




£

£

£


£

At 1 January 2016




222,450

4,014

253,614


480,078

Additions




-

-

4,454


4,454

Disposals




-

-

-


-

At 31 December 2016




222,450

4,014

258,068


484,532

Additions




-

-

549


549

Disposals




-

-

-


-

At 31 December 2017




222,450

4,014

258,617


485,081

Depreciation:









At 1 January 2016




7,309

1,826

235,407


244,542

Charge for the year




1,949

478

7,943


10,370

On Disposal




-

-

-


-

At 31 December 2016




9,258

2,304

243,350


254,912

Charge for the year




1,949

357

7,923


10,229

On Disposal




-

-

-


-

At 31 December 2017




11,207

2,661

251,273


265,141

Net Book Value:









At 31 December 2017




211,243

1,353

7,344


219,940










At 31 December 2016




213,192

1,710

14,718


229,620

 

The net book value of non-depreciable land is £125,000 (2016: £125,000).

 

 

10. Intangible assets & goodwill - group & company

 

 


 

 

Intangible assets


 

Goodwill


Customer

Relationships

Databases

 

Software

Development

Website


Total

 



£


£

£

£

£


£

Cost:










At 1 January 2016


342,872


177,981

25,000

217,961

103,519


524,461

Additions


-


-

-

-

52,743


52,743

At 31 December 2016


342,872


177,981

25,000

217,961

156,262


577,204

Additions


-


-

-

-

67,598


67,598

At 31 December 2017


342,872


177,981

25,000

217,961

223,860


644,802

Amortisation:










At 1 January 2016


-


120,307

12,719

113,059

103,519


349,604

Charge for the year


-


18,291

1,000

36,575

9,185


65,051

At 31 December 2016


-


138,598

13,719

149,634

112,704


414,655

Charge for the year


-


18,292

1,000

36,574

24,619


80,485

At 31 December 2017


-


156,890

14,719

186,208

137,323


495,140

Net Book Value:










At 31 December 2017


342,872


21,091

10,281

31,753

86,537


149,662











At 31 December 2016


342,872


39,383

11,281

68,327

43,558


162,549

 

Goodwill represents the difference between the consideration paid and the fair value of assets acquired on the acquisition of a business in 2003.  In accordance with the transitional provisions in IFRS 1 the group elected not to apply IFRS 3 retrospectively to past business combinations. Therefore the goodwill balance represents an acquired customer base, that continues to trade with group to this day and, more fundamentally, systems, processes and a registration that dramatically reduced the group's dealing costs.  These systems and the registration contributed significantly to turning the group into the low cost effective provider of execution only stockbroking solutions that it is today. The key assumptions used by the directors in their annual impairment review are that the company can benefit indefinitely from the reduced dealing costs and the company's current operational capacity remains unchanged. The recoverable amount of the goodwill has been assessed using the value in use method and there is significant headroom based on this calculation. There are no reasonable changes in assumptions that would cause the cash generating unit value to fall below its carrying amount.

 

11. Investments in subsidiaries



Company






2017


2016

Unlisted Investments:





£


£

Cost:








At 1 January





284,239


284,239

Capital contributions re share option costs





-


-

As at 31 December





284,239


284,239

 


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






All subsidiaries are located in the United Kingdom.                 
* indirectly held

 

 

12. Trade and other receivables

 

Group


 

Company





Amounts falling due within one year:

2017


2016


2017


2016


£


£


£


£









Trade receivables

521,794


438,661


5,559


2,850

Settlement receivables

2,083,049


6,732,763


-


-

Other receivables

61,035


427,793


61,035


418,393

Prepayments and accrued income

Other taxes and social security

281,748

-


634,649

-


3,372

515


378,274

-


2,947,626


8,233,866


70,481


799,517

 

An analysis of trade and settlement receivables past due is given in note 20. There are no amounts past due included within other receivables or prepayments and accrued income.

 

13. Investments held for trading

Group


Company


2017


2016


2017


2016

Listed Investments:

£


£


£


£

Valuation:








At 1 January

1,712


77,057


-


-

Additions

1,644,356


3,822,741


-


-

Disposals

(1,632,522)


(3,898,086)


-


-

As at 31 December

13,546


1,712


-


-

Listed investments held for trading are stated at their market value at 31 December 2017 and are considered to be level one assets

in accordance with IFRS 13.

 

The directors consider the fair value movement on the investments held for trading are immaterial and as such have not

been presented separately in the above movement analysis and the statement of cash flows.

 

 

14. Cash and cash equivalents

 

Group


 

Company


2017


2016


2017


2016


£


£


£


£

Balance at bank and in hand - group/company

5,218,686


3,404,516


3,503,452


1,705,986

Cash held for settlement of market transactions

7,956,817


1,698,606


-


-


13,175,503


5,103,122


3,503.452


1,705,986

 

In addition to the balances shown above the group has segregated deposit and current accounts held in accordance with the client money rules of the Financial Conduct Authority. The group also has segregated deposits and current accounts on behalf of Counterparties and elected Professional clients of £14,555,830 not governed by client money rules therefore they are also not included in the statement of financial position of the group. This treatment is appropriate as the business is a going concern however, were an administrator appointed, these balances would be considered assets of the business.

 

 

15. Share capital

 

 

 

2017


 

 

2016

Authorised:

16,000,000 Ordinary shares of 1p each

160,000 

160,000


160,000 

160,000






2017


2016


£


£

At 1 January 2017

111,518


111,503

Allotted, issued and fully paid during the year

310


15

 

Allotted, issued and fully paid:




11,182,750 (2016: 11,151,750) Ordinary shares of 1p each

111,828


111,518

 

The company has one class of ordinary shares which carry no right to fixed income.

 

The Company had a share option scheme for certain employees of the Group. All options have now been exercised.

 

During the period 61,000 shares were purchased to be held in treasury. As at the period end 231,300 shares are held in treasury.

 

Details of the share options outstanding during the year are as follows:


2017


2016


Number of share options


Weighted average exercise price


Number of share options


Weighted average exercise price




Pence




Pence









Outstanding at the beginning of the year

31,000


175.00


32,500


175.00

Exercised during the year

(31,000)


175.00


(1,500)


175.00

Outstanding at year end

-


175.00


31,000


175.00

Exercisable at year end

-


175.00


31,000


175.00

 

16. Trade and other payables

Group


Company





Amounts falling due within one year:

2017


2016


2017


2016


£


£


£


£









Trade payables

198,049


110,644


11,368


1,212

Settlement payables

9,954,871


8,131,466


-


-

Amount owed to group undertaking

-


-


1,100,410


152,679

Other taxes and social security

52,117


81,499


-


110

Other payables

85,193


300,102


-


-

Accruals

367,976


254,444


27,500


29,875

Trade and other payables

10,658,206


8,878,155


1,139,278


183,876

Income tax

585,373


405,330


443,677


375,840

Deferred tax

32,929


6,312


32,929


6,312

Total liabilities

11,276,508


9,289,797


1,615,884


566,028

 

Settlement payables will be settled on their contracted date, which has a maximum allowed time of 20 days from trade date. Trade payables and other taxes and social security are all paid at the beginning of the month after the invoice was received or the liability created.

 

17. Dividends

2017


2016


£


£

Interim dividends paid on Ordinary 1p shares

2,576,239


1,925,802

Dividend per Ordinary 1p share

23.5p


17.5p

 

 

18. Operating lease commitments - group

 

At 31 December 2017 the group was committed to making the following payments in respect of operating leases which expire:

 


Equipment


Land & buildings


2017


2016


2017


2016


£


£


£


£

Not later than one year:

8,641


9,052


87,500


47,625

Later than one year and not later than five years:

After more than five years:

34,564

7,921


13,579

-


350,000

415,625


-

-

 

The equipment lease is for the use of postage processing and franking machines. The lease was terminated during the year and a new agreement lease entered by mutual agreement of both parties.

 

Operating lease commitments - company

 

At 31 December 2017 the company was committed to making the following payments in respect of operating leases which expire:

 




Land & buildings






2017


2016






£


£

Not later than one year:





87,500


47,625

Later than one year and not later than five years:

After more than five years:





350,000

415,625


-

-

 

 

The company has a lease with Sion Properties 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 £87,500, being the market rate on an arm's length basis, and expires on 26 September 2027.

 

19. 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. Cash and cash equivalents and trade and other receivables are categorised as loans and receivables, and trade and other payables are classified as financial liabilities. Other than investments held for trading all financial assets and liabilities are held at amortised cost and their carrying value approximates to their fair value.

 

The main financial asset of the Group is cash and cash equivalents which is denominated in Sterling and which is detailed in note 14. 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.

 

 

20. 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, bad debts 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 10.

 

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. The Group also calculates the implied levels of variables used in the calculations at which impairment would occur.

 

21. Immediate and ultimate parent undertaking

 

The company's immediate and ultimate parent undertaking is Sion Securities Limited, a company registered in England and Wales. Sion Securities Limited is controlled by Mr A J Grant by virtue of his controlling interest.

 

22. Related party transactions

 

The company has a lease with Sion Properties Limited, a company controlled by a director of the company, for the rental of 78 Mount Ephraim, a self-contained office building. The lease has an annual rental of £87,500, being the market rate on an arm's length basis, and expires on 26 September 2027.

 

During the year Jarvis Investment Management Limited paid Jarvis Securities Plc £7,000 (2016: £7,000) for rental of a disaster recovery site.

 

Jarvis Securities plc owed Jarvis Investment Management Limited £1,098,660 (2016: £150,929) at year end.

 

During the year, Directors, key staff and other related parties by virtue of control carried out share dealing transactions in the normal course of business. Commissions for such transactions are charged at various discounted rates.  The impact of these transactions does not materially or significantly affect the financial position or performance of the Company.   At 31 December 2017, these same related parties had cash balances of £1,332,833 (2016: £1,413,834) and interest was earned during the year amounting to £8,395 (2016: £925).  In addition to cash balances other equity assets of £40,589,819 (2016: £45,026,624) were held by JIM Nominees Ltd as custodian.

 

During the year Jarvis Securities Plc charged £3,564,550 to Jarvis Investment Management Limited for use of intellectual properties.

 

23. Capital commitments

 

As of 31 December 2017, the company had no capital commitments (2016: nil).

 

24. 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.

 

25. 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 in place to enable all risks to be better controlled. These include detailed profit forecasts, cash flow 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 100% 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 Conduct 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.

 

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 Conduct Authority ("FCA") 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 FCA'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.

 

As of 31 December 2017, trade receivables of £115,184 (2016: £398,765) were past due and were impaired and partially provided for. The amount of the provision was £84,995 as at 31 December 2017 (2016: £299,903). The individually impaired receivables relate to clients who are in a loan position and who do not have adequate stock to cover these positions. The amount of the impairment is determined by clients' perceived willingness and ability to pay the debt, legal judgements obtained in respect of, charges secured on properties and payment plans in place and being adhered to. Where debts are determined to be irrecoverable they are written off through the income and expenditure account. The group does not anticipate future write offs of uncollectable amounts will be significant as the group now imposes much more restrictive rules on clients who utilise extended settlement facilities.

 

 

 

Group


Company

Provision of impairment of receivables:

2017


2016


2017


2016


£


£


£


£









At 1 January

299,711


207,711


-


-

Charge / (credit) for the year

72,604


116,300


-


-

Uncollectable amounts written off

(287,320)


(24,108)


-


-

At 31 December

84,995


299,903


-


-

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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