TIDMCNKS
RNS Number : 1404O
Cenkos Securities PLC
17 September 2013
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTH PERIOD
ENDED 30 JUNE 2013
Cenkos Securities plc. (the "Company" or "Cenkos") together with
its subsidiaries is an independent, specialist institutional
stockbroking business, focused on small and mid-cap companies and
investment funds.
Cenkos' shares are admitted to trading on the Alternative
Investments Market ("AIM"). The Company is authorised and regulated
by the Financial Conduct Authority (FCA) and is a member of the
London Stock Exchange (LSE).
Financial highlights 30 June 2013 30 June 2012
Revenue from continuing operations GBP20.0m GBP20.2m
Underlying profit before tax from continuing
operations * GBP4.1m GBP3.8m
Profit before tax from continuing operations GBP3.1m GBP3.5m
Underlying profit after tax from continuing
operations * GBP3.1m GBP2.7m
Profit after tax from continuing operations GBP2.3m GBP2.5m
Basic and diluted earnings per share from
continuing operations 3.9p 3.6p
Interim dividends per share declared 3.5p 3.5p
Cash and cash equivalents GBP16.3m GBP22.9m
Capital resources in excess of Pillar 1 and
2 regulatory capital requirements GBP6.4m GBP7.4m
Operational highlights
Nominated adviser, corporate broker 122 companies 118 companies
or financial adviser to
* The Company uses non-Generally Accepted Accounting Practice
("non-GAAP") financial measures, "Underlying operating profit from
continuing operations, Underlying profit before tax from continuing
operations and Underlying profit after tax from continuing
operations", in addition to those reported under IFRS. This gives a
clearer picture of the underlying financial and operating
performance of the Company, since it adjusts for the impact of
payments made under the Compensatory Award Plan 2009 ("CAP"). The
quantum of payment made is determined by the last dividend declared
on ordinary shares, and is recorded in the period in which the
dividend is declared.
Commenting on the interim results, Chief Executive Officer Jim
Durkin noted:
"I am pleased to report a solid, profitable performance for the
first six months of 2013. We have increased our earnings per share
on continuing operations and continue to raise funds for our
expanding client base.
Our successful strategy of being a leading UK institutional
broker to listed growth companies through understanding our
clients' needs, delivering sustainable, diversified and growing
income streams, adding high quality individuals to our teams and
managing our costs and risks carefully has led to us being
profitable in every year since our formation in 2005. This approach
continues to bear fruit and we have made an encouraging start to
the second half of 2013 with a healthy pipeline of deals."
For further information contact:
Jim Durkin 020 7397 8900 David Rydell / Duncan Mayall / Guy
020 7861 3232
Chief Executive Officer Scarborough
Cenkos Securities plc. Pelham Bell Pottinger
Nick Donald 020 7991 1504
HSBC (Nomad)
Business Review
Strategy and business model
Our strategy
Our prime strategy is to become the principal UK institutional
broker to growth companies which are admitted to trading or listed
on a UK market. We aim to achieve this through:
- Understanding the needs of our clients, enabling us to provide
successful fund raising and advice through an innovative and
entrepreneurial approach;
- Delivering sustainable, diversified and growing income streams;
- Adding high quality individuals to our teams; and
- Managing costs and risks carefully;
thereby providing shareholder value through earnings growth and
an attractive dividend yield.
Our business model
We provide corporate advice, broking and a complete securities
service to growth companies across a wide range of industry sectors
including investment funds. We focus on companies that want their
shares to be admitted to trading on AIM or are already traded on
AIM or listed on the LSE's main market.For growing companies that
require access to capital and international exposure, AIM's
flexibility, with its Nominated Advisor (Nomad) system of control,
provides a strong basis for financing and corporate development. We
offer our clients advice and access to equity finance at all stages
of their development.
Revenue streams
Cenkos earns fees from primary and secondary equity fund
raising, acting as a key intermediary between growth companies or
investment funds and institutional providers of capital. From when
we were founded in 2005 to the end of June 2013 we have raised
circa GBP7.8 billion for our clients. We aim to provide strong and
supportive shareholder lists for companies and healthy returns for
institutional investors. Corporate finance fees are earned from
providing strategic advice and regulatory guidance to clients, as
well as advice on all forms of corporate transactions including
fundraisings, mergers and acquisitions, disposals, restructurings
and tender offers. Fees are also generated from acting as Nomad or
broker or financial advisor to our corporate clients. Our
experienced trading teams make trading profits from market making
activities and commission is generated from sales, sales trading
and research activities in the shares of companies traded on
numerous execution venues including AIM and the LSE Official
List.
Management systems and controls
We operate an efficient and flexible business model, well
adapted to a highly regulated environment. It is therefore
important that we continue to maintain an appropriate and
proportionate level of systems and controls, commensurate with our
size and complexity. We manage our cost base carefully. We offer
our client facing staff relatively low basic salaries but reward
their performance based on factors that include their net income
generation. This cost flexibility allows us to manage economic
downturns better than many of our competitors who have higher
levels of fixed or guaranteed pay. We selectively use outsourcing
partners to help us maintain this cost flexibility in areas where
volumes can be unpredictable. Our core trading systems, settlement
systems and internal audit function are all currently
outsourced.
Culture and people
Our success is based on maintaining experienced and stable
teams, whose members build professional relationships and achieve
results through a committed and entrepreneurial approach. We
endeavour to remunerate our staff to a level and in a manner which
not only retains but also motivates them to behave in line with our
required standards and the longer-term growth objectives of the
Company.
Key performance indicators (KPIs)
Cenkos' Key Performance Indicators (KPIs) include measures such
as:
- Profit before tax, earnings per share;
- The size and quality of our corporate client base (Nomad /
broker appointments), the aggregate funds raised for clients;
and
- Various key risk indicators, including capital resources and cash.
Commentary on KPIs is included in this Business Review.
Review of performance
Overall performance
The Company is pleased to report that it has remained profitable
and continues to grow its client base. As at 30 June 2013, Cenkos
was nominated adviser, broker or financial adviser to 122 companies
or trusts (H1 2012: 118). Revenues are broadly flat but as noted
below, cost rises due to dividend related payments have meant that
profits have fallen when compared to the same period last year.
This has been achieved against an on-going backdrop of fragile and
volatile equity markets. Our business model ensures a low fixed
cost base and a remuneration structure highly geared to
performance. We maintain a positive operating cash cycle and a
limited exposure to credit and market risk. This, combined with the
high quality, dedication and experience of our employees, has
enabled Cenkos to produce this performance.
Underlying profit before tax on continuing operations was GBP4.1
million (H1 2012: GBP3.8 million). As noted below, this 8% increase
reflected a fall in revenues but also a greater fall in
administrative expenses. Profit before tax on continuing operations
was GBP3.1 million (H1 2012: GBP3.5 million).
During 2012, we bought back and cancelled 12.3% of the Company's
issued share capital at a cost of GBP6.3m and in H1 2013 bought
back and cancelled 0.4 million shares. Additionally, in H1 2013 the
unpaid portion of the remaining 2.1 million B shares issued in 2009
were fully paid up. The net impact of these capital changes,
combined with lower profit after tax, meant that basic and diluted
earnings per share on continuing operations rose by 7% to 3.9p (H1
2012: 3.6p).
Cenkos continues to maintain a firm control over risk, enjoys
healthy cash levels and remains well capitalised against regulatory
requirements.
Revenues
Total revenue on continuing operations for the period decreased
by 1% to GBP20.0 million (H1 2012: GBP20.2 million). The economic
slowdown continues to impact equity markets with the total funds
being raised by all companies on AIM falling by 19% to GBP1,418
million from H1 2012 to H1 2013 (source: LSE AIM factsheet June
2013). This fall continues to impact the stockbroking and advisory
industry's profitability and is leading to on-going consolidation
amongst our competitors. Given our strong market position and
continued profitability, this continued turmoil provides us with an
opportunity to win new clients and to continue to add high quality
individuals to our existing teams. We are ranked as one of the
leading brokers in London for growth companies. Cenkos remains
highly placed in its chosen markets, as noted in Adviser Rankings'
July 2013 'AIM Adviser Rankings Guide' where we were ranked second
in terms of both 'Nomad' and 'Stockbroker' for all AIM clients by
number of clients, top 'Nomad' for Oil and Gas companies and second
'Nomad' for both Financials and Technology companies by number of
AIM clients.
During the period we completed 18 transactions and helped our
clients raise a total of GBP322 million excluding GBP100m of tap
issues for our investment fund clients (H1 2012: GBP306 million
excluding GBP47m of tap issues for our investment fund clients). In
the period we also completed two M&A corporate finance
transactions (H1 2012: two). This performance is particularly
encouraging as it was achieved during a period where there was
limited transactional revenue and continued competitive pressure.
Our corporate finance revenue (including fees from placings) rose
from GBP12.9m in H1 2012 to GBP13.1m in H1 2013.
We make markets in the securities of all the companies where we
have a broking relationship to support the other services we
provide to our clients. We actively provide liquidity to the market
and facilitate institutional business in both small and large cap
equities. Our trading desks now make markets in the shares of 333
(2012: 351) companies and investment trusts. We continue to
actively restrict the amount of capital committed to this activity
to limit the market risk exposure without adversely affecting the
revenue generated. Our corporate broking, market making, research
and commission revenues fell from GBP7.3m in H1 2012 to GBP6.9m in
H1 2013. Although we have increased the number of clients we
advise, trading volumes were slightly more subdued in H1 2013. The
pressure on secondary commissions shows no sign of relenting,
despite investors' requirements for more independent research
around takeovers and IPOs. We are confident that we can prosper in
this environment because of our flexible cost model in which
remuneration is linked to net income.
Our execution business is primarily focused on client
facilitation. We believe that this offering continues to enhance
Cenkos' overall service offering to its expanding client base.
Costs
Costs of continuing operations rose by GBP0.1 million (1%) in
the period, reflecting a fall in operating costs and performance
related pay being offset by a GBP0.7m rise in staff bonuses
resulting from the Compensatory Award Phantom Dividend Plan 2009
("CAP"). Payments under this scheme are only triggered by the
payment of a dividend to ordinary shareholders. This amounted to a
4p final dividend for 2012 paid in H1 2013 (1p for 2011's final
dividend paid in H1 2012).
We set out below a schedule which re-analyses information
included in the statutory income statement. The Company uses
non-Generally Accepted Accounting Practice ("non-GAAP") financial
measures, "Underlying operating profit from continuing operations,
Underlying profit before tax from continuing operations and
Underlying profit after tax from continuing operations" in addition
to those reported under IFRS. This gives a clearer picture of the
underlying financial and operating performance of the Company,
since it adjusts for the impact of payments made under the
Compensatory Award Plan 2009 ("CAP"). The quantum of payment made
is determined by the last dividend declared on ordinary shares, and
is recorded in the period in which the dividend is declared. These
adjusting items amount to GBP1.0 million in the period to 30 June
2013 (H1 2012: GBP0.3 million).
As can be seen, administrative expenses before the staff bonuses
under the CAP, decreased by GBP0.6 million. This resulted in the
underlying profit before tax from continuing operations increasing
by 8% to GBP4.1 million (H1 2012: GBP3.8 million) and underlying
profit after tax on continuing operations increasing by 13% to
GBP3.1 million (H1 2012: GBP2.7 million)
Unaudited Unaudited Audited
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
----------------------------------------------- ----------- ----------- -------------
Continuing operations
Revenue 19,995 20,238 43,155
Administrative expenses (16,013) (16,625) (35,529)
Underlying operating profit 3,982 3,613 7,626
Investment income - interest
income 102 182 357
Gain on disposal of available-for-sale
financial asset - - 170
Interest expense - (9) (6)
Underlying profit before tax from continuing
operations 4,084 3,786 8,147
Tax on underlying profit (1,008) (1,062) (2,135)
Underlying profit after tax from continuing
operations 3,076 2,724 6,012
Staff bonus under CAP (956) (257) (1,141)
Tax impact of Staff bonus
under CAP 222 63 280
Profit after tax from continuing operations 2,342 2,530 5,151
Discontinued operations
We sold our controlling interest in our offshore fund and wealth
management business, Cenkos Channel Islands Limited (CCIL - now
renamed 'Ravenscroft'), in April 2012, reducing our stake from 50%
to 10%. This 10% residual stake was then sold in October 2012. As
noted in our 2012 Annual Report, we generated GBP3.3 million profit
after tax on discontinued operations in 2012.
As described in note 2 of these condensed consolidated financial
statements, subsequent to these disposals, the Company has changed
the way the business is assessed and performance reviewed and
consequently has consolidated its reportable segments into one.
This reflects the fact that Cenkos is managed as an integrated UK
institutional stockbroking business.
Statement of consolidated financial position and cash flow
At 30 June 2013, we held net assets of GBP21.7 million of which
GBP16.3 million (H1 2012: GBP22.9 million) was represented by cash.
During the six months to 30 June 2013 there has been a net decrease
in cash and cash equivalents of GBP5.9 million (H1 2012: net
increase of GBP8.9 million due in part to the cash generated by the
disposal of discontinued operations). This is largely due to the
payment of accrued bonuses in respect of 2012, the 2012 final
dividend of 4p per share and corporation tax payments more than
offsetting the cash inflow from the Company's profitable trading in
H1 2013 and the receipt of the unpaid premiums due on the remaining
2.1 million 'B' shares noted below.
Dividend and capital levels
The Company retains sufficient capital to satisfy the UK
Financial Conduct Authority's capital requirements. These
requirements vary from time to time depending on the business
conducted by the Company. As at 30 June 2013, the Company had a
solvency ratio based on capital resources against Pillar 1 capital
requirement of 205% (H1 2012: 220%) based on audited profits, and a
capital resources surplus of GBP6.4 million (H1 2012: GBP7.4
million) in excess of our Pillar 1 and 2 regulatory capital
requirements.
As we have consistently stated, we intend to retain sufficient
capital and reserves to meet the Company's regulatory capital and
cash requirements, after taking account of the likely future
working capital requirements of the Company. Since our flotation
onto AIM in October 2006, we have paid out 72.5p in dividends prior
to the 3.5p proposed interim dividend for 2013 and bought back 9.3
million shares at a cost of GBP6.5 million for cancellation. In
addition, 3.1 million shares have been purchased by the Cenkos
Securities Employee Benefit Trust ("EBT") at a cost of GBP3.2
million.
During the period, the Company bought back and cancelled 0.4
million shares at a cost of GBP0.3 million (H1 2012: nil), thereby
increasing the Company's earnings per share. Additionally, the
unpaid premium due on the remaining 2.1 million B shares was
received in the period. Whilst the B shares were not admitted to
trading on AIM, upon payment of the required premium the B shares
were converted into Ordinary shares and admitted to trading on AIM.
The Company confirms that all the outstanding amounts due in
respect of the B shares that had previously been issued have now
been fully paid.
The Board proposes an interim dividend of 3.5p per share, in
line with last year's interim dividend of 3.5p per share. The
dividend will be paid on 7 November 2013 to all shareholders on the
register at 11 October 2013. In line with existing shareholder
authorisation, the Board will continue to assess opportunities for
share buy backs and the funding of share purchases by the EBT where
this is beneficial to shareholders.
People
The continued professionalism of our employees has enabled us to
achieve the robust performance for the period. We continue to look
to recruit staff who are attracted by our culture and business
model. We endeavour to remunerate our staff to a level and in a
manner which not only retains but also motivates them to behave in
line with the longer-term growth objectives of the Company. I am
proud to lead a group of such dedicated and talented individuals.
Their skill, commitment and determination will continue to provide
us with a solid platform on which to continue to build our
franchise.
Principal risks and uncertainties
The principal risks and uncertainties that Cenkos currently
faces and how these are managed, have not materially changed from
those outlined in our 2012 Annual Report. Aside from the health of
UK equity markets, the other key changes that may impact Cenkos'
risk profile over the next six months, and how they are being
managed, relate to:
- The pace of change in the regulatory environment - Cenkos
continues to focus heavily on prudential risks to ensure the
appropriate systems and controls, reporting, capital and liquidity
requirements, resources and culture are all in place to meet the
ongoing obligations of an FCA regulated (BIPRU Investment) firm;
and
- Ensuring that we continue to retain and attract high quality
staff. We continue to pursue a policy of maintaining a low fixed
cost base including low basic salaries and rewarding net income
generation. Potential regulatory changes in 2014 to 'banker's
bonuses' arrangements may mean that we have to change the
remuneration arrangements of certain members of staff.
Outlook
I am pleased to report a solid, profitable performance for the
first six months of 2013. We have increased our earnings per share
on continuing operations and continue to raise funds for our
expanding client base.
Our successful strategy of being a leading UK institutional
broker to listed growth companies through understanding our
clients' needs, delivering sustainable, diversified and growing
income streams, adding high quality individuals to our teams and
managing our costs and risks carefully has led to us being
profitable in every year since our formation in 2005. This approach
continues to bear fruit and we have made an encouraging start to
the second half of 2013 with a healthy pipeline of deals.
Jim Durkin
Chief Executive Officer
16 September 2013
Responsibility statement
We confirm that to the best of our knowledge:
a) The condensed set of financial statements, prepared in
accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position
and profit of Cenkos Securities plc. and the undertakings included
in the consolidation taken as a whole as at 30 June 2013, and
b) The interim management report set out in the Business Review
includes a fair review of the development and performance of the
business and the position of Cenkos Securities plc. and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
Forward-looking statements
These financial statements contain forward-looking statements
with respect to the financial condition, results, operations and
businesses of Cenkos Securities plc. Although the Company believes
that the expectations reflected in these forward-looking statements
are reasonable, we can give no assurance that these expectations
will prove to have been correct. Such statements and forecasts
involve risk and uncertainty because they relate to events and
depend upon circumstances that will occur in the future. There are
a number of factors that could cause actual results or developments
to differ materially from those expressed or implied by
forward-looking statements and forecasts. Forward-looking
statements and forecasts are based on the Directors' current view
and information known to them at the date of this statement. The
Directors do not make any undertaking to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Condensed consolidated income statement for the six months ended 30 June
2013
Unaudited Unaudited Audited
Six months ended Year ended
Notes 30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
--------------------------------------------------------------- ------ ------------- --------------- ------------- ------------------------
Continuing operations
Revenue 2 19,995 20,238 43,155
Administrative expenses (16,969) (16,882) (36,670)
Operating profit 3,026 3,356 6,485
Investment income - interest income 102 182 357
Gain on disposal of available-for-sale
financial asset - - 170
Interest expense - (9) (6)
Profit before tax from continuing operations 3,128 3,529 7,006
Tax 3 (786) (999) (1,855)
Profit after tax from continuing operations 2,342 2,530 5,151
Discontinued operations
Profit after tax from discontinued operations 4 - 3,478 3,329
Profit 2,342 6,008 8,480
Attributable to:
Equity holders of the parent 2,342 5,920 8,392
Non-controlling interests - 88 88
2,342 6,008 8,480
Earnings per share - basic and diluted
From continuing operations 6 3.9 3.6 7.4
From continuing and discontinued operations 6 3.9 8.3 12.1
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2013
Unaudited Unaudited Audited
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
--------------------------------------------------------------- ------ ------------- --------------- ------------- ------------------------
Profit 2,342 6,008 8,480
Net other comprehensive income to be re-classified to profit or loss
in subsequent periods
Available-for-sale financial assets
Mark to market gain on valuation of available-for-sale
financial asset - 250 170
Gain on disposal of available-for-sale financial
asset transferred to income statement - - (170)
Other comprehensive income - 250 -
Total comprehensive income 2,342 6,258 8,480
Attributable to:
Equity holders of the parent 2,342 6,170 8,392
Non-controlling interests - 88 88
2,342 6,258 8,480
Condensed consolidated statement of financial position as at 30 June
2013
Unaudited Unaudited Audited
Notes 30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
--------------------------------------------------------------- ------ ------------- --------------- ------------- ------------------------
Non-current assets
Property, plant and equipment 7 499 699 550
Available-for-sale financial asset - 1,250 -
Deferred tax asset 330 164 272
Trade and other receivables - 3,751 -
829 5,864 822
Current assets
Trade and other receivables 30,857 24,375 15,534
Available-for-sale financial asset 1,000 - 1,000
Other current financial assets 10,144 7,354 9,786
Cash and cash equivalents 16,343 22,880 22,271
58,344 54,609 48,591
Total assets 59,173 60,473 49,413
Current liabilities
Trade and other payables (33,451) (28,623) (24,336)
Other current financial liabilities (4,029) (2,767) (2,848)
(37,480) (31,390) (27,184)
Net current assets 20,864 23,219 21,407
Total liabilities (37,480) (31,390) (27,184)
Net assets 21,693 29,083 22,229
Equity
Share capital 8 635 728 638
Own shares (3,180) (2,413) (2,945)
Available-for-sale reserve - 250 -
Retained earnings 24,238 30,518 24,536
Total equity 21,693 29,083 22,229
Condensed consolidated cash flow statement for the six months ended 30
June 2013
Unaudited Unaudited Audited
Six months ended Year ended
30 June 30 June 31 December
Notes 2013 2012 2012
GBP'000s GBP'000s GBP'000s
--------------------------------------------------------------- ------ ------------- --------------- ------------- ------------------------
Profit 2,342 6,008 8,480
Adjustments for:
Net finance income (102) (173) (351)
Tax expense 786 999 1,855
Depreciation of property, plant and equipment 159 153 331
Gain on disposal of available-for-sale
financial asset - - (170)
Gain on disposal of discontinued operation and
change in fair value of interest retained before
deduction of non-controlling interest - (1,734) (1,586)
Non-controlling interests in net assets
sold - (1,568) (1,567)
Shares in lieu of fees and options received
in kind (2,005) (1,089) (2,898)
Share-based payment expense 76 241 335
Operating cash flows before movements in working
capital 1,256 2,837 4,429
Adjustments for deconsolidation of subsidiaries - 197 184
Decrease in net trading investments 2,828 4,225 2,685
(Increase) / decrease in trade and other
receivables (15,255) (2,402) 10,152
Increase in trade and other payables 9,326 4,657 297
Cash flow (used in) / from operating
activities (1,845) 9,514 17,747
Interest paid - (9) (6)
Tax paid (1,055) (618) (1,509)
Net cash flow (used in) / from operating
activities (2,900) 8,887 16,232
Investing activities
Interest received 34 97 309
Net proceeds from the sale of available-for-sale
financial assets - - 1,170
Purchase of property, plant and equipment (108) (63) (92)
Cash flow from sale of discontinued operations,
net of cash disposed 4 - 881 848
Net cash flow (used in) / from investing
activities (74) 915 2,235
Financing activities
Dividends paid (2,430) (709) (3,165)
Acquisition of own shares by Cenkos Securities
Employee Benefit Trust (235) (223) (755)
Acquisition of own shares for cancellation (289) - (6,286)
Net cash used in financing activities (2,954) (932) (10,206)
Net (decrease) / increase in cash and cash equivalents (5,928) 8,870 8,261
Cash and cash equivalents at beginning
of period 22,271 14,010 14,010
Cash and cash equivalents at end of period 16,343 22,880 22,271
Condensed consolidated statement of changes in equity for the six months
ended 30 June 2013
Share Own Available-for-sale Retained Non-controlling
capital shares reserve earnings Total interests Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
----------------------- ---------------- ---------- ------------------------ --------------- -------------------- ------------------- -------------------
Attributable to
equity
holders of the
parent
at 1 January 2012 728 (2,190) - 25,142 23,680 1,405 25,085
Profit - - - 5,920 5,920 88 6,008
Revaluation of
available-for-sale
investment - - 250 - 250 - 250
----------------------- ---------------- ---------- ------------------------ --------------- -------------------- ------------------- -------------------
Total comprehensive
income - - 250 5,920 6,170 88 6,258
Own shares acquired
in
the period - (223) - - (223) - (223)
Share of profit from
discontinued
operations
attributable
to non-controlling
interest - - - - - (1,568) (1,568)
Credit to equity for
equity
settled share-based
payments - - - 137 137 103 240
Other reserve
movements - - - 28 28 (28) -
Dividends paid - - - (709) (709) - (709)
----------------------- ---------------- ---------- ------------------------ --------------- -------------------- ------------------- -------------------
Attributable to
equity
holders of the
parent
at 30 June 2012 728 (2,413) 250 30,518 29,083 - 29,083
Profit - - - 2,472 2,472 - 2,472
Mark to market
movement
on valuation of
available-for-sale
financial assets - - (80) - (80) - (80)
Gain on disposal of
available-for-sale
financial assets
transferred
to income statement - - (170) - (170) - (170)
----------------------- ---------------- ---------- ------------------------ --------------- -------------------- ------------------- -------------------
Total comprehensive
income - - (250) 2,472 2,222 - 2,222
Own shares acquired
in
the period - (532) - - (532) - (532)
Own shares acquired
for
cancellation in the
period (90) - - (6,196) (6,286) - (6,286)
Adjustment for
capital
contribution
previously
made from sale of
discontinued
operations - - - 103 102 - 102
Credit to equity for
equity-settled
share-based payments - - - 95 95 - 95
Dividends paid - - - (2,456) (2,456) - (2,456)
----------------------- ---------------- ---------- ------------------------ --------------- -------------------- ------------------- -------------------
Attributable to
equity
holders of the
parent
at 31 December 2012 638 (2,945) - 24,536 22,229 - 22,229
Retained profit - - - 2,342 2,342 - 2,342
----------------------- ---------------- ---------- ------------------------ --------------- -------------------- ------------------- -------------------
Total comprehensive
income - - - 2,342 2,342 - 2,342
Own shares acquired
in
the period - (235) - - (235) - (235)
Own shares acquired
for
cancellation in the
period (3) - - (286) (289) - (289)
Credit to equity for
equity
settled share-based
payments - - - 76 76 - 76
Dividends paid - - - (2,430) (2,430) - (2,430)
----------------------- ---------------- ---------- ------------------------ --------------- -------------------- ------------------- -------------------
At 30 June 2013 635 (3,180) - 24,238 21,693 - 21,693
Notes to the condensed consolidated financial statements
1. Accounting policies
General information
The interim condensed consolidated financial statements of Cenkos Securities
plc. ("Cenkos" or the "Company" together with its subsidiaries) for the six
months ended 30 June 2013 are unaudited and were approved by the Board of
Directors for issue on 16 September 2013.
Cenkos Securities plc. (The "Company") is a company incorporated in United
Kingdom under the Companies Act 2006 (Company Registration No. 05210733),
whose shares are publicly traded. The Company's principal activity is as
an institutional broker to growth companies in the UK and abroad. These financial
statements are presented in pounds sterling because that is the currency
of the primary economic environment in which the Company operates.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Although these estimates are based on management's
best knowledge of the amount, event or actions, actual results ultimately
may differ from those of estimates.
These financial statements have been prepared on the historical cost basis,
except for the revaluation of certain financial instruments.
Basis of accounting
The interim condensed consolidated financial statements for the six months
ended 30 June 2013 have been prepared in accordance with International Accounting
Standard ("IAS") 34 Interim Financial Reporting. The interim condensed consolidated
financial statements do not include all the information and disclosures required
in the annual financial statements, and should be read in conjunction with
the Company's annual financial statements for the year ended 31 December
2012.
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Company's annual financial statements for the year ended
31 December 2012, which are prepared in accordance with IFRSs as adopted
by the European Union.
The financial information contained in these interim condensed consolidated
financial statements does not constitute the Company's statutory accounts
within the meaning of section 434 of the Companies Act 2006. The comparative
information contained in this report for the year ended 31 December 2012
does not constitute the statutory accounts for that financial period. Those
accounts have been reported on by the Company's auditors Ernst & Young LLP,
and delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
Going concern
The Company's business activities, together with the factors likely to affect
its future development and performance, the Company's principal risks and
uncertainties and the financial position of the Company, are set out in the
Company's Annual Report for the year ended 31 December 2012.
The Directors are satisfied that the Company has sufficient resources to
continue in operation for the foreseeable future, a period of not less than
12 months from the date of this report. Accordingly, the Directors continue
to adopt a going concern basis in preparing the interim financial statements.
Adoption of new and revised standards
During the period, a number of amendments to International Financial Reporting
Standards ("IFRS") became effective and were adopted by the Company, none
of which had a material impact on the Company's net cash flows, financial
position, consolidated statement of comprehensive income or earnings per
share, except for the adoption of new standards and interpretations as of
1 January 2013, noted below:
IFRS 13 Fair value measurement
IFRS 13 establishes a single source of guidance under IFRS for all fair value
measurements. IFRS 13 does not change when an entity is required to use fair
value, but rather provides guidance on how to measure fair value under IFRS
when fair value is required or permitted. The application of IFRS 13 has
not materially impacted the fair value measurements carried out by the Company.
IFRS 13 also requires specific disclosures on fair values, some of which
replace existing disclosure requirements in other standards, including IFRS
7 Financial Instruments: Disclosures. Some of these disclosures are specifically
required for financial instruments by IAS 34.16A (j), thereby affecting the
interim condensed consolidated financial statements period. The Company provides
these disclosures in note 10 of these condensed consolidated financial statements.
2. Business and geographical segments
Following the disposal in its entire holding in CFM and CCIL, as disclosed
in the Company's 2012 Annual Report, the Company has changed the way the
business is assessed and performance reviewed; as such, Cenkos has consolidated
its reportable segments into one.
This reflects the fact that Cenkos is managed as an integrated UK institutional
stockbroking business and although it has different revenue streams, the
nature of its activities are considered to be subject to similar economic
characteristics. The internal reports used by the Chief Executive Officer
for the purpose of monitoring performance and allocating resources reflect
that Cenkos is managed as a single business unit.
An analysis of the Company's revenue and result by geographical location
is as follows:
Geographical information
United Channel
Kingdom Islands Total
Six months ended 30 June 2013 GBP'000s GBP'000s GBP'000s
----------------------------------------- ---------------------------- ----------------------- -------------------- ------------------------ --------------
Revenue from continuing operations 19,995 - 19,995
Non-current assets 829 - 829
United Channel
Kingdom Islands Total
Six months ended 30 June 2012 GBP'000s GBP'000s GBP'000s
----------------------------------------------------------------------- ----------------------- -------------------- ------------------------ --------------
Revenue from continuing operations 20,238 - 20,238
Revenue from discontinued operations 67 1,453 1,520
Revenue from continuing and discontinued operations
(a) 20,305 1,453 21,758
Non-current assets 5,864 - 5,864
United Channel
Kingdom Islands Total
Year ended 31 December 2012 GBP'000s GBP'000s GBP'000s
----------------------------------------------------------------------- ----------------------- -------------------- ------------------------ --------------
Revenue from continuing operations 43,155 - 43,155
Revenue from discontinued operations 67 1,453 1,520
Revenue from continuing and discontinued operations
(a) 43,222 1,453 44,675
Non-current assets 822 - 822
(a) Revenues are attributed on the basis of the location of each entity.
Discontinued operations were located in the United Kingdom and Channel Islands
and comprised the revenues and results of CFM and CCIL which were disposed
of by the Company in 2012.
Major clients
In the six months ended 30 June 2013, no one particular client's revenues
accounted for more than 10% of the Company's total revenue (Six months ended
30 June 2012: One client contributed GBP2.99 million of revenue; year ended
31 December 2012: None).
3. Tax
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
----------------------- ---------------- ---------------------------- ----------------------- -------------------- ------------------------ --------------
The tax charge comprises:
Current tax
United Kingdom corporation tax at 23.25% (2012:
24.5%) based on the profit for the period 843 974 1,943
Adjustment in respect of prior period
United Kingdom corporation tax - 92 87
Total current tax 843 1,066 2,030
Deferred tax
Credit on account of temporary differences (57) (79) (175)
Charge on account of temporary differences - 12 -
Total deferred tax (57) (67) (175)
Total tax on profit on ordinary activities from
continuing activities 786 999 1,855
The tax expense in the income statement is disclosed
as follows:
Income tax expense on continuing operations 786 999 1,855
Income tax expense on discontinued operations - 5 5
786 1,004 1,860
The tax charge for the period differs from that resulting from applying the
standard rate of UK corporation tax of 23.25% (2012: 24.5%) to the profit
before tax for the reasons set out in the following reconciliation:
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
----------------------- ---------------- ---------------------------- ----------------------- -------------------- ------------------------ --------------
Profit before tax from continuing operations 3,128 3,529 7,006
Profit before tax from discontinued operations - 3,483 3,334
Profit before tax from continuing and discontinued
operations 3,128 7,012 10,340
Tax on profit on ordinary activities at the UK
corporation tax rate of 23.25% (2012: 24.5%) 727 1,718 2,533
Tax effect of:
Expenses that are not deductible in determining
taxable profits 64 68 211
Non-taxable gain on disposal of discontinued operations - (848) (853)
Income not subject to corporation tax (15) (33) (55)
Adjustment for loss relief not claimed 10 7 12
Adjustment in respect of prior period - 92 12
Tax expense for the period 786 1,004 1,860
4. Discontinued operations
As disclosed and accounted for in the Company's 2012 audited accounts, on
1 February 2012 Cenkos disposed of its entire holding in CFM, which carried
out all of the Cenkos' onshore fund management activity. Following a strategic
review, Cenkos decided that CCIL was not core to Cenkos' business strategy
and operations. On 2 April 2012 the Company completed the disposal of 80%
of its 50% holding in CCIL, which carried out all of Cenkos' offshore wealth
management and offshore stock broking activity, for a consideration of GBP4
million. This operation is based in the Channel Islands. The remaining 10%
interest in the shares of CCIL was classified in the balance sheet as an
available-for-sale financial asset. Thereafter, it was marked to market as
the shares are quoted on the Channel Islands Stock Exchange. On 31 October
2012, Cenkos sold this remaining 10% interest in the shares of CCIL for GBP1.17
million.
For details of the results of the discontinued operations see note 9 of the
Company's 2012 Annual Report.
5. Dividends
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Amounts recognised as distributions to equity
holders in the period:
Final dividend for the year ended 31 December
2012 of 4p (2011: 1p) per share 2,430 709 709
Interim dividend for the period to 30 June 2012
of 3.5p (June 2011: 4p) per share - - 2,456
2,430 709 3,165
The proposed interim dividend for 30 June 2013 of 3.5p (30 June 2012: 3.5p)
per share was approved by the Board on 16 September 2013 and has not been
included as a liability as at 30 June 2013. The dividend will be payable
on 7 November 2013 to all shareholders on the register at 11 October 2013.
6. Earnings per share
The calculation of the basic and diluted earnings per share is based on
the following data:
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Basic and diluted
Earnings from continuing operations 3.9p 3.6p 7.4p
Earnings from continuing and discontinued operations 3.9p 8.3p 12.1p
Earnings from continuing and discontinued operations
The calculation of the basic and diluted earnings per share
is based on the following data:
Earnings
Earnings for the purpose of basic and diluted
earnings per share being net profit attributable
to equity holders of the parent 2,342 5,920 8,392
No. No. No.
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Number of shares
Weighted average number of ordinary shares for
the purpose of basic and diluted earnings per
share 60,725,002 70,963,336 69,341,308
The calculation of the weighted average number of shares also includes the
total number of B shares, even though they were partly paid shares, as these
shares were entitled to a full dividend pay-out.
The Board has agreed to continue to fund the Company's Employee Benefit
Trust ("EBT") so that it can make market purchases in Cenkos Securities
plc. shares as and when market conditions allow. During the period, 263,503
ordinary shares were purchased for an aggregate consideration of GBP234,696.
As at 30 June 2013 the EBT held a total of 3,107,227 ordinary shares at
an aggregate consideration of GBP3.18 million, as shown in note 9. These
shares are held by the trust in treasury and have been excluded from the
weighted average number of shares calculation.
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Earnings from continuing operations
Earnings for the purpose of basic earnings per
share being net profit attributable to equity
holders of the parent 2,342 5,920 8,392
Profit after tax from discontinued operations
for the year - (3,478) (3,329)
Profit attributable to non-controlling interests
up to the point of disposal - 88 88
Earnings from continuing operations for the purpose
of basic and diluted earnings per share excluding
discontinued operations 2,342 2,530 5,151
The denominators used are the same as those detailed above for both basic
and diluted earnings per share from continuing and discontinued operations.
7. Property, plant & equipment
During the period, the Company spent approximately GBP107,965 (30 June 2012:
GBP75,694, 31 December 2012: GBP92,656) on property, plant and equipment.
This mostly related to the cost of IT equipment.
8. Share capital
The issued share capital as at 30 June 2013 amounted to GBP634,821 (30 June
2012: GBP727,711, 31 December 2012: GBP638,380).
1 January 2012 to 31 December 2012
On 13 January 2012, 179,852 B shares of 1p each were converted into 179,852
ordinary shares of 1p each.
On 1 November 2012, 700,000 B shares of 1p each were converted into 700,000
ordinary shares of 1p each.
On 18 December 2012, 608,523 B shares of 1p each were converted into 608,523
ordinary shares of 1p each.
On 2 November 2012, the Company purchased in the market 6,800,000 ordinary
shares of 1p at 70p each. These shares were cancelled by the Company.
On 12 December 2012, the Company purchased in the market 2,133,211 ordinary
shares of 1p at 70p each. These shares were cancelled by the Company.
1 January 2013 to 30 June 2013
On 29 January 2013, 50,000 B shares of 1p each were converted into 50,000
ordinary shares of 1p each.
On 14 May 2013, 20,338 B shares of 1p each were converted into 20,338 ordinary
shares of 1p each.
On 21 May 2013, 91,183 B shares of 1p each were converted into 91,183 ordinary
shares of 1p each.
On 24 May 2013, 257,357 B shares of 1p each were converted into 257,357
ordinary shares of 1p each.
On 28 May 2013, 525,368 B shares of 1p each were converted into 525,368
ordinary shares of 1p each.
On 17 June 2013, 1,200,000 B shares of 1p each were converted into 1,200,000
ordinary shares of 1p each.
On 19 June 2013, 540,000 B shares of 1p each were converted into 540,000
ordinary shares of 1p each.
On 29 January 2013, the Company purchased in the market 215,837 ordinary
shares of 1p at 75p each. These shares were cancelled by the Company.
On 24 May 2013, the Company purchased in the market 140,000 ordinary shares
of 1p at 90p each. These shares were cancelled by the Company.
The ordinary shares are admitted to trading on AIM. The B shares were not
admitted to trading on AIM. The B shares were issued on a partly-paid basis
to certain employees prior to the Company's admission and trading on AIM
in October 2006. Holders of the B shares were required to pay a further
amount (the "required premium") which was specified at the time of allotment
of the B shares. Upon payment of the required premium the B shares were
converted automatically into ordinary shares and were admitted to trading
on AIM. All shares have equal voting rights. As at 30 June 2013, the "required
premium" had been fully paid up and all B shares were converted to ordinary
shares and admitted to trading on AIM.
9. Own shares
The purpose of the Company's EBT is to assist and encourage the holding
of shares in the Company by employees for their benefit with a view to facilitating
the recruitment, retention and motivation of employees of the Company. During
the period 263,503 ordinary shares were purchased for an aggregate consideration
of GBP234,696. As at 30 June 2013 the EBT held a total of 3,107,227 ordinary
shares at an aggregate consideration of GBP3.18 million, as shown in the
table below.
Six months ended Six months ended Year ended
30 June 2013 30 June 2012 31 December 2012
Number Number Number
of shares GBP'000s of shares GBP'000s of shares GBP'000s
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
At 1 January 2,843,724 2,945 1,583,750 2,190 1,583,750 2,190
Acquired during the
period 263,503 235 349,750 227 1,259,974 755
At the period ended 3,107,227 3,180 1,933,500 2,417 2,843,724 2,945
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
10. Financial instruments
Capital risk management
The Company manages capital to ensure that the Company and its subsidiaries
will be able to continue as a going concern while aiming to maximise the
return to stakeholders. The capital structure of the Company consists of
equity attributable to equity holders of the parent, comprising issued capital,
reserves and retained earnings as disclosed in the condensed consolidated
statement of changes in equity. At present the Company has no gearing and
it is the responsibility of the Board to review the Company's gearing levels
on an on-going basis. As at 30 June 2013, Cenkos Securities plc. had a solvency
ratio of 205% (30 June 2012: 220%, 31 December 2012: 198%).
Externally imposed capital requirement
The Company has to retain sufficient capital to satisfy the UK Financial
Conduct Authority's ("FCA", formerly the Financial Services Authority) capital
requirements. These requirements vary from time to time depending on the
business conducted by the Company. The Company always retains a buffer above
the FCA minimum requirement and has complied with these requirements during
the period under review.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including
the criteria for recognition, the basis of measurement and the basis on
which income and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument are disclosed in note 1
of the Company's financial statements for the year ended 31 December 2012.
Categories of financial instruments Carrying value
30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Available-for-sale investments 1,000 1,250 1,000
Financial assets at fair value through profit
and loss (FVTPL)
Trading investments carried at fair value 9,522 6,980 9,060
Derivative financial assets 622 231 726
Financial liabilities at fair value through profit
and loss (FVTPL)
Trading investments carried at fair value 4,029 2,767 2,848
Financial liabilities held at amortised
cost
Amortised cost 33,451 28,623 24,336
Financial risk management objectives
The Chief Executive Officer monitors and manages the financial risks relating
to the operations of the Company through internal risk reports which analyse
exposures by degree and magnitude of risks. These risks include market risk
(including price risk), credit risk and liquidity risk. Summaries of these
reports are reviewed by the Board.
Compliance with policies and exposure limits is reviewed by the Chief Executive
Officer and senior management on a continuous basis. The Company does not
enter into or trade financial instruments, including derivative financial
instruments, for speculative purposes.
Interest rate risk management
The Company is exposed to interest rate risk because the Company has financial
instruments on its statement of financial position which are at both fixed
and floating interest rates. The risk is managed by the Company by maintaining
an appropriate mix between fixed and floating rate instruments.
The Company's exposures to interest rates on financial assets and financial
liabilities are detailed in the liquidity and interest rate risk table section
of this note.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure
to interest rates for both derivatives and non-derivative instruments at
the balance sheet date. For floating rate assets, the analysis is prepared
based on the average rate due on the asset or liability through the period.
A 10 basis points increase or decrease is used when reporting interest rate
risk internally to senior management and represents management's assessment
of a reasonably possible change in interest rates.
If interest rates had been 10 basis points higher/lower and all other variables
were held constant, the Company's:
-- profit for the period ended 30 June 2013 would increase/decrease by
GBP0.01 million (30 June 2012: increase/decrease by GBP0.01 million, 31
December 2012: increase/decrease by GBP0.01 million). This is mainly attributable
to the Company's exposure to interest rates on its variable rate instruments;
and
-- other comprehensive income would increase/decrease by GBP0.01 million
(30 June 2012: increase/decrease by GBP0.01 million, 31 December 2012: increase/decrease
by GBP0.01 million)
Equity price risks
The Company is exposed to equity price risks arising from equity investments.
The financial instruments represent investments in listed equity securities
that present the Company with opportunity for return through dividend income
and trading gains. There are limits set for each financial instrument to
limit the concentration of risks.
Equity price sensitivity analysis
The sensitivity analysis below has been determined based on the exposure
to equity price risks at the reporting date and, in the opinion of senior
management, a material movement in equity prices. This is based on the largest
fall in the All Share AIM index in one day and over a two week period. These
parameters are also considered in the Company's Individual Liquidity Adequacy
Assessment (ILAA).
If equity prices had been 10% higher/lower:
-- Net profit for the 6 months ended 30 June 2013 would have been GBP0.55
million higher/lower (30 June 2012: GBP0.46 million higher/lower, 31 December
2012: GBP0.69 million higher/lower) due to change in the value of FVTPL
held-for-trading investments.
The Company's exposure to equity price risk is closely managed. The Company
has built a framework of overall and individual stock limits and these are
actively monitored by the Chief Executive Officer and senior management
on a daily basis. This framework also limits the concentration of risks.
The Company's overall exposure to equity price risk is set by the Board.
Foreign currency risk
The Company does not have any material dealings in foreign currency, as
the majority of transactions are in UK based equities and hence denominated
in sterling.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual
obligations resulting in financial loss to the Company. These parties may
default on their obligations due to the bankruptcy, lack of liquidity, operational
failure and other reasons. The exposure of the Company to its counterparties
is closely monitored and the limits set to minimise the concentration of
risks, ensuring this does not exceed 25% of the Company's regulatory capital.
The vast majority of the Company's credit risk arises from the settlement
of security transactions. However, the settlement model primarily used by
the Company does not expose the Company to a risk as a principal to a trade.
Rather, the Company's exposure lies solely with Pershing Securities Limited
("Pershing"), a wholly owned subsidiary of the Bank of New York Mellon Corporation,
a AA- (30 June 2012: AA-, 31 December 2012: AA-) rated bank. In addition,
in circumstances in which the Company does act as principal when acting
as a market maker, the counterparty will normally be an FCA regulated market
counterparty rather than a corporate or individual trader. The Company does
not have any significant credit risk exposure to any single counterparty
with the exception of Pershing.
Cash resources also give rise to potential credit risk. The Company's cash
balances are held with HSBC Bank plc. ("HSBC", an AA- rated bank), Royal
Bank of Scotland plc. (an A rated bank) and Barclays Bank plc. (an A rated
bank). The banks with which the Company deposits money are reviewed at least
annually by the Board and are required to have at least an investment grade
credit rating. To limit the concentration risk in relation to cash deposits,
the maximum amount which may be deposited with any one financial institution
is set at no more than 100% of the Company's regulatory capital.
Trade receivables not related to the settlement of market transactions consist
of outstanding corporate finance fees and retainers and are spread across
a wide range of industries. All new corporate finance clients are subject
to a review by the New Business Committee. This committee considers, amongst
other issues, the financial soundness of any client taken on.
In 2006 the Company issued various tranches of partly paid B shares to a
number of employees serving with the Company at that time. The carrying
value of the unpaid portion was included in financial assets and was due
to be repaid on 1 July 2013. By 30 June 2013 all outstanding amounts in
respect of the B shares had been received.
The carrying amount of financial assets recorded in the financial statements,
which is net of impairment losses, represents the Company's maximum exposure
to credit risk without taking account of the value of any collateral obtained.
The credit risk on liquid funds is limited because the counterparties are
banks with high credit ratings assigned by international credit rating agencies.
The table below summarises the Company's exposure to credit risk by asset
class according to whether the exposure is collateralised.
Exposure to Credit Risk 30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Derivative financial assets Uncollateralised 622 231 726
Market and client receivables Uncollateralised 28,188 22,030 10,787
Unpaid share capital and loans
due from staff Collateralised 4 1,612 1,919
Unpaid share capital and loans
due from staff Uncollateralised - 2,139 698
Prepayments and accrued income Uncollateralised 1,897 1,555 1,360
Other receivables Uncollateralised 768 791 770
Cash and cash equivalents Uncollateralised 16,343 22,880 22,271
----------------------------------------- ------------------------------------------------- ------------------------ ------------------------ --------------
47,822 51,238 38,531
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
The table below summarises the Companies exposure to credit risk by asset
class according to the credit rating of the counterparty, where appropriate.
Exposure to Credit Risk 30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Derivative financial assets Unrated 622 231 726
Market and client receivables Unrated 18,672 9,615 6,097
Market and client receivables AA- 9,516 12,415 3,769
Market and client receivables A - - 328
Market and client receivables BBB - - 593
Unpaid share capital and loans
due from staff Unrated 4 3,751 2,617
Prepayments and accrued income Unrated 1,897 1,555 1,360
Other receivables Unrated 768 791 770
Cash and cash equivalents AA- 9,810 14,880 15,162
Cash and cash equivalents A 6,533 8,000 7,109
----------------------------------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
47,822 51,238 38,531
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board.
It has, however, delegated day-to-day management to the Chief Executive
Officer. The Company has in place an appropriate liquidity risk management
framework for the management of the Company's short, medium and long-term
funding and liquidity management requirements. The Company manages liquidity
risk by maintaining adequate reserves, banking facilities, by continuously
monitoring forecast and actual cash flows and matching the maturity profiles
of financial assets and liabilities. Given the nature of the Company's business,
the Company does not run any material liquidity mismatches, financial liabilities
are on the whole short-term and the Company has sufficient liquid assets
to cover all of these liabilities.
Liquidity and interest risk tables
The following tables detail the Company's remaining contractual maturity
for its non-derivative financial assets and liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Company is required to pay. The
table includes both interest and principal cash flows. The tables also detail
the Company's expected maturity for its non-derivative financial assets.
The tables below have been drawn up based on the undiscounted contractual
maturities of the financial assets including interest that will be earned
on those assets.
Liquidity and interest rate table
Weighted No
average maturity Less than More than
effective date 1 month 1 month Total
interest
As at 30 June 2013 rates GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Available-for-sale
financial Non-interest
assets bearing 1,000 - - 1,000
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Financial assets at Non-interest
FVTPL bearing 9,522 440 182 10,144
Trade and other Non-interest
receivables bearing - 30,857 - 30,857
Financial liabilities Non-interest
at FVTPL bearing - (4,029) - (4,029)
Trade and other Non-interest
payables bearing - (33,451) - (33,451)
Variable
interest
Cash and cash rate
equivalents instruments 1.00% - 2,750 - 2,750
Variable
interest
Cash and cash rate
equivalents instruments 0.30% - 3,750 - 3,750
Variable
interest
Cash and cash rate
equivalents instruments 0.25% - 9,843 - 9,843
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
9,522 10,160 182 19,864
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Liquidity and interest risk tables continued
Weighted No
average maturity Less than More than
effective date 1 month 1 month Total
interest
As at 30 June 2012 rates GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Available-for-sale
financial Non-interest
assets bearing 1,250 - - 1,250
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Financial assets at Non-interest
FVTPL bearing 7,123 231 - 7,354
Fixed
interest
Trade and other rate
receivables instruments 5.00% - - 3,751 3,751
Trade and other Non-interest
receivables bearing - 24,375 - 24,375
Financial liabilities Non-interest
at FVTPL bearing - (2,767) - (2,767)
Trade and other Non-interest
payables bearing - (28,623) - (28,623)
Fixed
interest
Cash and cash rate
equivalents instruments 2.40% - 4,000 - 4,000
Variable
interest
Cash and cash rate
equivalents instruments 0.30% - 4,000 - 4,000
Variable
interest
Cash and cash rate
equivalents instruments 0.25% - 14,880 - 14,880
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
7,123 16,096 3,751 26,970
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Weighted No
average maturity Less than More than
effective date 1 month 1 month Total
interest
As at 31 December 2012 rates GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Available-for-sale
financial Non-interest
assets bearing 1,000 - - 1,000
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Financial assets at Non-interest
FVTPL bearing 9,060 368 358 9,786
Fixed
interest
Trade and other rate
receivables instruments 5.00% - - 2,617 2,617
Trade and other Non-interest
receivables bearing - 12,917 - 12,917
Financial liabilities Non-interest
at FVTPL bearing - (2,848) - (2,848)
Trade and other Non-interest
payables bearing - (24,336) - (24,336)
Variable
interest
Cash and cash rate
equivalents instruments 1.00% - 2,600 - 2,600
Variable
interest
Cash and cash rate
equivalents instruments 0.30% - 4,500 - 4,500
Variable
interest
Cash and cash rate
equivalents instruments 0.25% - 15,171 - 15,171
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
9,060 8,372 2,975 20,407
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Except as detailed below, the carrying amounts of financial assets recorded
at amortised cost in the financial statements approximate their fair values.
Carrying value Fair value
30 June 30 June 31 December 30 June 30 June 31 December
2013 2012 2012 2013 2012 2012
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Non-current assets:
Loans and receivables - 3,751 - - 3,938 -
Available-for-sale
investments - 1,250 - - 1,250 -
Other non-current
assets 829 863 822 829 863 822
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
829 5,864 822 829 6,051 822
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Available-for-sale
investments 1,000 - 1,000 1,000 - 1,000
Financial assets at
FVTPL 10,144 7,211 9,786 10,144 7,211 9,786
Held to maturity
investments - 143 - - 143 -
Loans and receivables - - 2,617 - - 2,643
Trade and other
receivables 30,857 24,375 12,917 30,857 24,375 12,917
Cash and cash
equivalents 16,343 22,880 22,271 16,343 22,880 22,271
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
58,344 54,609 48,591 58,344 54,609 48,617
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Financial liabilities
at FVTPL (4,029) (2,767) (2,848) (4,029) (2,767) (2,848)
Trade and other
payables (33,451) (28,623) (24,336) (33,451) (28,623) (24,336)
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
(37,480) (31,390) (27,184) (37,480) (31,390) (27,184)
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Fair value hierarchy
All financial instruments carried at fair value are categorised in three
categories, defined as follows:
Level 1 - Quoted market prices
Level 2 - Valuation techniques (market observable)
Level 3 - Valuation techniques (non-marked observable)
As at 30 June 2013, the Company held the following financial instruments
measured at fair value:
Level
1 Level 2 Level 3 Total
As at 30 June 2013 GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Available-for-sale financial assets - - 1,000 1,000
--------------------------------------------------------------- --------------------------- ------------------------ ------------------------ --------------
Financial assets at FVTPL
Derivative financial assets - - 622 622
Non-derivative financial assets held
for trading 9,522 - - 9,522
--------------------------------------------------------------- --------------------------- ------------------------ ------------------------ --------------
9,522 - 622 10,144
9,522 - 1,622 11,144
Financial liabilities at FVTPL
Non-derivative financial liabilities
held for trading 4,029 - - 4,029
There were no transfers between Level 1, 2 and
3 during the period.
Level
1 Level 2 Level 3 Total
As at 30 June 2012 GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------------------------------------- --------------------------- ------------------------ ------------------------ --------------
Available-for-sale financial assets 1,250 - - 1,250
--------------------------------------------------------------- --------------------------- ------------------------ ------------------------ --------------
Financial assets at FVTPL
Derivative financial assets - - 231 231
Non-derivative financial assets held
for trading 6,980 - - 6,980
--------------------------------------------------------------- --------------------------- ------------------------ ------------------------ --------------
6,980 - 231 7,211
Held to maturity investments 143 - - 143
--------------------------------------------------------------- --------------------------- ------------------------ ------------------------ --------------
7,123 - 231 7,354
Financial liabilities at FVTPL
Non-derivative financial liabilities
held for trading 2,767 - - 2,767
Level
1 Level 2 Level 3 Total
As at 31 December 2012 GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------------------------------------- --------------------------- ------------------------ ------------------------ --------------
Available-for-sale financial assets - - 1,000 1,000
--------------------------------------------------------------- --------------------------- ------------------------ ------------------------ --------------
Financial assets at FVTPL
Derivative financial assets - - 726 726
Non-derivative financial assets held
for trading 9,060 - - 9,060
--------------------------------------------------------------- --------------------------- ------------------------ ------------------------ --------------
9,060 - 726 9,786
9,060 - 1,726 10,786
Financial liabilities at FVTPL
Non-derivative financial liabilities
held for trading 2,848 - - 2,848
There were no transfers between Level 1, 2 and
3 during the period.
Reconciliation of recurring fair value measurements categorised within Level
3 of the fair value hierarchy
Unlisted Share options
securities and warrants Total
GBP'000s GBP'000s GBP'000s
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Opening balance 1 January 2013 1,000 726 1,726
Share options and warrants granted - - -
Net unrealised loss recognised in income statement - (104) (104)
Closing balance 30 June 2013 1,000 622 1,622
Level 3 financial instruments consist of derivative financial assets and
unlisted shares received in lieu of fees.
The unlisted equity shares are carried as available-for-sale financial
assets classified as Level 3 within the fair value hierarchy. They are valued
based on the prices paid by other participants to the transaction when the
shares were acquired. Since then, the unlisted company's management accounts
have shown its performance to be broadly in line with expectations and there
have been no other factors brought to the Board's attention, which would
suggest that there has been any impairment to this valuation in the intervening
period.
The derivative financial assets are carried as financial assets at FVTPL
classified as Level 3 within the fair value hierarchy and comprise equity
options and warrants over listed securities.
Impact of reasonably possible alternative assumptions
A sensitivity analysis based on a 10% increase/decrease in the volatility
measure used as an input in the valuation of the share options and warrants
shows the impact of such a movement would be an increase of GBP64,853 /
decrease of GBP77,324 respectively in the profit shown in the income statement.
Fair value is the amount for which an asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm's length transaction.
Financial instruments measured at fair value on an on-going basis include
trading assets and liabilities and financial investments classified as available-for-sale.
Determination of fair value
Fair values are determined according to the following hierarchy:
(a) Quoted market price
Financial instruments with quoted prices for identical instruments in active
markets.
(b) Valuation technique using observable inputs
Financial instruments with quoted prices for similar instruments in active
markets or quoted prices for identical or similar instruments in inactive
markets and financial instruments valued using models where all significant
inputs are observable.
(c) Valuation technique with significant non-observable inputs
Financial instruments valued using models where one or more significant
inputs are not observable. The best evidence of fair value is a quoted price
in an actively traded market. In the event that the market for a financial
instrument is not active, a valuation technique is used. The majority of
valuation techniques employ only observable market data and so the reliability
of the fair value measurement is high. However, certain financial instruments
are valued on the basis of valuation techniques that feature one or more
significant market inputs that are not observable. For these instruments,
the fair value derived is more judgemental. 'Not observable' in this context
means that there are few or no current market data available from which
to determine the level at which an arm's length transaction would be likely
to occur. It generally does not mean that there is absolutely no market
data available upon which to base a determination of fair value (historical
data may, for example, be used). Furthermore, the assessment of hierarchy
level is based on the lowest level of input that is significant to the fair
value of the financial instrument.
The valuation models used where quoted market prices are not available
incorporate certain assumptions that the Company anticipates would be used
by a third party market participant to establish fair value.
11. Related party transactions.
Transactions with related parties are made at arm's length. Transactions
or balances between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and, in accordance with IAS
24, are not disclosed in this note. The Board includes all employees considered
to be key management personnel.
The compensation of the key management personnel of the Company (including
the Directors) and their interests in the shares and options over the shares
of Cenkos Securities plc. was as follows:
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
GBP'000s GBP'000s GBP'000s
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Aggregate emoluments 1,616 924 3,379
There were no Directors who were members of any Company pension scheme as
at the period end (2012: none).
Related party interests in ordinary and B shares of Cenkos
Securities plc.
30 June 30 June 31 December
2013 2012 2012
No. No. No.
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Number of shares 14,487,294 14,526,430 14,466,430
Percentage interest 23% 20% 23%
Related party
interests
in share options Six months ended Six months ended Year ended
30 June 2013 30 June 2012 31 December 2012
Number Weighted Number Weighted Number Weighted
average average average
exercise exercise exercise
price price price
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Outstanding at
beginning
of the period 1,178,710 1.11 2,793,828 1.18 2,793,828 1.18
Adjustment arising
from
the reclassification
of related parties - - (2,615,118) 1.15 (2,615,118) 1.15
Issued during the
period - - 1,000,000 1.00 1,000,000 1.00
----------------------- ---------------- -------------------- --------------------------- ------------------------ ------------------------ --------------
Outstanding at the
end
of the period 1,178,710 1.11 1,178,710 1.11 1,178,710 1.11
Among the Company's transactions with key management personnel was a loan
to Jeremy Warner Allen, a Director of Cenkos Securities plc. This loan was
repaid in full during the six months ended 30 June 2013 (30 June 2012: GBP507,600,
31 December 2012: GBP227,780) and related to the premium due on B shares
in the Company. The loan was made in accordance with the terms and conditions
of the issue of the B shares, which were allotted to a number of senior
employees in 2006 and only the nominal value was paid on the allotment of
these shares. The Company was treated as having made a loan to Jeremy Warner
Allen of an amount equal to the outstanding premium to be paid (the "notional
loan"). As the notional loan to Jeremy Warner Allen was free of interest,
it is considered to be a taxable benefit in kind. There were no other outstanding
balances or bad debt provisions for any related party balances as at 30
June 2012, and no related party transactions have been written off during
the period (2012: nil).
12. Events after the reporting period
There were no material events to report on that occurred between 30 June
2013 and the date at which the Directors signed this Interim Report.
Independent review report to Cenkos Securities
plc.
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2013 which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the condensed consolidated
statement of financial position, the condensed consolidated cash flow statement,
the condensed consolidated statement of changes in equity and the related
notes to the condensed consolidated financial statements 1 to 12. We have
read the other information contained in the half yearly financial report
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained
in International Standard on Review Engagements 2410 (UK and Ireland) "Review
of Interim Financial Information Performed by the Independent Auditor of
the Entity" issued by the Auditing Practices Board. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the Company, for our work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with International Accounting Standards 34,
"Interim Financial Reporting," as adopted by the European Union.
As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with IFRS as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial report
have been prepared in accordance with International Accounting Standards
34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on
our review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2013 is not prepared, in
all material respects, in accordance with International Accounting Standard
34 as adopted by the European Union.
Ernst & Young LLP
Registered Auditors
London, United Kingdom
16 September 2013
Information for shareholders
Directors
Gerry Aherne (non-executive chairman)
Jeff Hewitt (non-executive director)
Anthony Hotson (non-executive director)
Mike Chilton (finance director)
Jim Durkin (chief executive officer)
Paul Hodges (executive director)
Joe Nally (executive director)
Jeremy Warner Allen (executive director)
Company Secretary Stephen Doherty
Financial Calendar
Year end results announced
March / April Annual General Meeting and final
April /May dividend paid
September Half year results announced
November Interim dividend paid
Company Registration Number and
Country of Incorporation
05210733, England & Wales
Registered Office
6.7.8 Tokenhouse Yard Auditors
London Ernst & Young LLP
EC2R 7AS 1 More London Place
London
Bankers SE1 2AF
HSBC
West End Corporate Banking Centre Registrars
70 Pall Mall Capita Registrars
London The Registry
SW1Y 5EZ 34 Beckenham Road
Beckenham Road
Solicitors Kent
Travers Smith LLP BR3 4TU
10 Snow Hill
London Nominated Adviser and Broker
EC1A 2AL HSBC
8 Canada Square
Ashurst LLP London
Broadwalk House E14 5HQ
5 Appold Street
London Website
EC2A 2HA www.cenkos.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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