TIDMCNKS
RNS Number : 8655R
Cenkos Securities PLC
17 September 2014
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTH PERIOD
ENDED 30 JUNE 2014
Cenkos Securities plc (the "Company" or "Cenkos") together with
its subsidiaries (the "Group") is an independent, specialist
institutional securities group, focused on UK small and mid-cap
companies and investment funds. The Company's principal activity is
institutional stockbroking.
Cenkos' shares are admitted to trading on AIM. The Company is
authorised and regulated by the Financial Conduct Authority ("FCA")
and is a member of the London Stock Exchange ("LSE").
Highlights
30 June 2014 30 June 2013
Revenue + 226% GBP65.2m GBP20.0m
Profit before tax + 653% GBP23.5m GBP3.1m
Basic earnings per share + 700% 31.2p 3.9p
Interim dividend per share declared + 100% 7.0p 3.5p
Cash + 164% GBP43.2m GBP16.3m
Nominated adviser or corporate broker / 127 companies 122 companies
financial adviser to
------------------------------------------ -------- --------------- ---------------
Commenting on the interim results, Chief Executive Officer Jim
Durkin noted:
"Our successful strategy of being a leading UK institutional
broker to listed growth companies has led to us being profitable in
every year since our formation in 2005. This approach continues to
bear fruit and I am pleased to report a very strong performance for
the first six months of 2014. Revenues, profits and earnings per
share all increased significantly. The first half results reflected
the completion of a particularly large transaction in addition to
the completion of a good number of regular transactions.
Given the overall result, the Board has declared an interim
dividend of 7p per share, up 100% on last year. The Board
anticipates paying a full year dividend that is higher than last
year and is additionally evaluating other means of delivering
returns to shareholders during the remainder of this year, in
particular share buy-backs, such that total distributions to
shareholders for the year are expected to be significantly higher
than last year.
We have made a good start to the second half of the year with an
encouraging pipeline of deals."
For further information contact:
Jim Durkin +44 20 7397 8900
Chief Executive Officer
Cenkos Securities plc
Dr Azhic Basirov / David Jones / Ben Jeynes +44 20 7131 4000
Nominated Adviser
Smith & Williamson Corporate Finance Limited
David Rydell / Duncan Mayall / James Newman +44 20 3772 2500
Bell Pottinger
Business Review
Strategy and business model
Our strategy
Our prime strategy is to become the principal UK institutional
broker to growth companies and investment funds who are admitted to
trading or listed on a UK market. We aim to achieve this
through:
- understanding the needs of our clients, enabling us to provide
successful fundraising and advice through an innovative and
entrepreneurial approach;
- delivering sustainable, diversified and growing income streams;
- adding high quality individuals to our teams; and
- managing costs and risks carefully
thereby providing shareholder value through earnings growth as
well as attractive cash returns to shareholders.
Our business model
We provide corporate finance, corporate broking and securities
services to small and mid-cap growth companies across a wide range
of industry sectors, including investment funds. We focus on
companies that seek admission of their shares to trading on AIM or
the LSE's main market, or companies that are already listed on
those markets. For growing companies that require access to capital
and international exposure, AIM's flexibility, with its Nominated
Adviser ("Nomad") arrangements, provides a firm foundation for
financing and corporate development. We offer our clientsadvice and
access to equity finance at all stages of their development.
Revenue streams
We earn fees from primary and secondary equity fundraising,
acting as a key intermediary between growth companies or investment
funds and institutional providers of capital. From when we were
founded in 2005 to the end of June 2014 we have raised almost GBP11
billion for our clients - mainly acting as sole broker.
We aim to provide equity financing and strong and supportive
shareholder lists for companies and healthy returns for
institutional investors. Corporate finance fees are earned from
providing strategic advice and regulatory guidance to clients, as
well as advice on all forms of corporate transactions including
fundraisings, mergers and acquisitions, disposals, restructurings
and tender offers. Fees are also generated from acting as Nomad,
broker and/or financial adviser to our corporate clients.
Commission is earned from execution and research services and
revenue is also generated from our market-making activities.
As corporate broker, our clients' boards engage us to:
- create and maintain supportive shareholder registers;
- provide an informed and effective interface with shareholders and potential investors;
- provide appropriate dealing liquidity in their company's shares; and
- advise on all pertinent market and regulatory issues.
Management systems and controls
We operate an efficient and flexible business model, well
adapted to a highly regulated environment. It is therefore
important that we continue to maintain an appropriate and
proportionate level of systems and controls, commensurate with our
size and complexity. We manage our cost base carefully. We offer
our client facing staff relatively low basic salaries but reward
their performance based on factors that include their net income
generation. This cost flexibility allows us to manage economic
downturns better than many of our competitors who have higher
levels of fixed or guaranteed pay. We selectively use outsourcing
partners to help us maintain this cost flexibility in areas where
volumes can be unpredictable. Our settlement, core trading systems
and associated support are outsourced.
Culture and people
Our success is based on maintaining experienced and stable
teams, whose members build professional relationships and achieve
results through a committed and entrepreneurial approach. We
endeavour to remunerate our staff to a level which not only retains
them but also motivates them to perform in line with the
longer-term growth objectives of the Company.
Our key objectives and key performance indicators ("KPIs")
Our key objectives are to:
- grow the business by both retaining existing corporate clients
and winning new ones, helping clients achieve their strategies
through the provision of advice and fundraising capabilities,
ensuring we have the right calibre and quantity of staff deployed
to support this; and
- reward our shareholders by remaining profitable and generating
a high return on equity (within acceptable risk limits), leading to
an attractive dividend yield and strong share price growth.
Our KPIs include, but are not limited to, measures such as:
- profit before tax and earnings per share;
- the size and quality of our corporate client base (Nomad / broker appointments); and
- various key risk indicators, including capital resources and cash.
Commentary on KPIs is included in the review of performance
noted below.
Review of performance
Overall performance
The Company is pleased to report that it had a very strong
performance for the six months ending 30 June 2014. As at 30 June
2014 we were nominated adviser, broker or financial adviser to 127
companies or trusts (30 June 2013: 122). Revenues grew on the back
of increased fundraising for our growing list of clients. Costs
rose primarily due to greater performance-related pay on the back
of increased profitability.
Profit before tax was GBP23.5m (H1 2013: GBP3.1m). As noted
below, this 653% increase reflected a very material rise in
revenues and the benefits of operational gearing in the business.
This has meant that basic earnings per share rose by 700% to 31.2p
(H1 2013: 3.9p) and diluted earnings per share rose by 662% to
29.7p (H1 2013: 3.9p).
Our business model is built around a low fixed cost base and a
remuneration structure which is highly geared to performance. We
maintain a positive operating cash cycle and a limited exposure to
credit and market risk. This, combined with the high quality,
dedication and experience of our employees, has enabled Cenkos to
produce this performance.
Revenues
Revenue for the period increased by 226% to GBP65.2m (H1 2013:
GBP20.0m). The economic recovery the UK is experiencing has clearly
benefited equity markets with the total funds being raised by all
companies on AIM rising by 161% to GBP3,707m from H1 2013 to H1
2014 (source: LSE AIM factsheet June 2014). We have been well
positioned to benefit from this tailwind given our strong market
position and continued profitability. We remain ranked as one of
the leading brokers in London for growth companies, as demonstrated
by Adviser Rankings' July 2014 'AIM Adviser Rankings Guide' where
we were ranked second in terms of both 'Nomad' and 'Stockbroker'
for all AIM clients by number of clients, as well as being ranked
top 'Nomad' for Oil and Gas and Consumer Services, second for
Industrial clients and third for both Financials and Technology
companies by number of AIM clients.
During the period we completed eighteen transactions - including
six IPOs - and helped our clients raise a total of GBP2,209m,
including GBP1,385m on the IPO of the AA plc (H1 2013: GBP422m). In
the period we also completed four M&A corporate finance
transactions (H1 2013: two). Our corporate finance revenue
(including fees from placings) rose 315% to GBP54.2m in H1 2014 (H1
2013: GBP13.1m).
We make markets in the securities of all the companies where we
have a broking relationship to support the other services we
provide to our clients. We actively provide liquidity to the market
and facilitate institutional business in both small and large cap
equities. Our trading desks now make markets in the shares of 340
(H1 2013: 333) companies and investment trusts.
Our corporate broking, market-making, research and commission
revenues rose 59% to GBP11.0m in H1 2014 (H1 2013: GBP6.9m) on the
back of more favourable trading conditions. However, the pressure
on secondary commissions shows no sign of relenting, including the
potential impact of recent FCA initiatives in terms of payment for
equity research. We are confident that we can continue to prosper
in this environment because of our flexible cost model.
Our execution business is primarily focused on client
facilitation. We believe that this enhances Cenkos' overall service
offering to its expanding client base.
Costs
Costs rose by GBP24.8m (143%) in the period, primarily due to
higher performance-related pay on the back of increased
profitability. Additionally, we have grown our staff numbers by 10%
and incurred a GBP0.9m rise in costs due to staff bonuses resulting
from the Compensatory Award Phantom Dividend Plan 2009 ("CAP").
Payments under this scheme are only triggered by the payment of a
dividend to ordinary shareholders. This amounted to an 8.5p final
dividend for 2013 paid in H1 2014 (4p for 2012's final dividend
paid in H1 2013).
Profit before tax increased by 653% to GBP23.5m (H1 2013:
GBP3.1m) and profit after tax increased by 702% to GBP18.8m (H1
2013: GBP2.3m).
Statement of consolidated financial position and cash flow
At 30 June 2014, our net trading investments were GBP26.0m, and
cash held was GBP43.2m (H1 2013: GBP16.3m). During the six months
to 30 June 2014 there was a net increase in cash and cash
equivalents of GBP12.9m. This is largely due to the cash inflow
from the Company's profitable trading in H1 2014 offset partly by
the payment of accrued bonuses in respect of 2013, the 2013 final
dividend of 8.5p per share and corporation tax payments.
Dividend and capital levels
As we have consistently stated, we intend to retain sufficient
capital and reserves to meet the Company's regulatory capital and
cash requirements after taking account of the likely future working
capital needs and potential growth requirements of the Company.
Since our flotation onto AIM in October 2006, we have paid out
84.5p in dividends prior to the 7p proposed interim dividend for
2014 and bought back 9.3m shares at a cost of GBP6.5m for
cancellation, thereby increasing the Company's prospective earnings
per share. In addition, 3.1 m shares have been purchased by the
Cenkos Securities Employee Benefit Trust ("EBT") at a cost of
GBP3.2m.
The Board proposes an interim dividend of 7p per share, an
increase of 100% on last year's interim dividend of 3.5p per share.
The payment of this interim dividend will trigger payments to staff
under the CAP of GBP1.1m in the second half of 2014 (second half
2013: GBP0.8m). The dividend will be paid on 6 November 2014 to all
shareholders on the register at 10 October 2014. The Board
anticipates paying a full year (ie interim and final) dividend that
is higher than the 12p paid with respect to 2013. Given the strong
results in H1 2014, the Board is also evaluating other means of
delivering returns to shareholders during the remainder of the
year, in particular share buy-backs, such that total distributions
to shareholders for the year are expected to be significantly
higher than last year.
People
The continued professionalism of our employees has enabled us to
achieve the robust performance for the period. We continue to look
to recruit staff who are attracted by our culture and business
model, and a further nine staff joined us in H1 2014. We endeavour
to remunerate our staff to a level and in a manner which not only
retains but also motivates them to perform in line with the
longer-term growth objectives of the Company. Their skill,
commitment and determination will continue to provide us with a
solid platform on which to continue to build our franchise. In July
2014 we launched two HM Revenue and Customs approved all staff
share schemes - a Share Incentive Plan and Save As You Earn
Sharesave Scheme - both of which were well received by staff.
Principal risks and uncertainties
The principal risks and uncertainties that Cenkos currently
faces, and how these are managed, have not materially changed from
those outlined in the Strategic Report section of our 2013 Annual
Report, namely the health of UK equity markets as well as
reputational, operational, regulatory, conduct and market risk.
Aside from the health of UK equity markets, the key changes that
may impact Cenkos' risk profile over the next six months - and how
they are being managed - relate to:
- The pace of change in the regulatory environment - we continue
to focus heavily on our regulatory risks to ensure the appropriate
systems and controls, reporting, capital and liquidity
requirements, resources and culture are all in place to meet the
ongoing obligations of an FCA regulated (IFPRU Investment) firm;
and
- Ensuring that we continue to retain and attract high quality
staff. We continue to pursue a policy of maintaining a low fixed
cost base including low basic salaries and rewarding net income
generation.
Outlook
Our successful strategy of being a leading UK institutional
broker to listed growth companies has led to us being profitable in
every year since our formation in 2005. This approach continues to
bear fruit and, given our results for the first half of the year,
the Board has declared an interim dividend of 7p per share, up 100%
on last year. The Board anticipates paying a full year dividend
that is higher than last year. The Board is also evaluating other
means of delivering additional distributions to shareholders during
the remainder of this year, in particular share buy-backs, such
that total distributions for the year are expected to be
significantly higher than last year.
We have made a good start to the second half of 2014 with an
encouraging pipeline of deals.
Jim Durkin
Chief Executive Officer
16 September 2014
Responsibility statement
We confirm that to the best of our knowledge:
a) The condensed set of financial statements, prepared in
accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position
and profit of Cenkos Securities plc and the undertakings included
in the consolidation taken as a whole as at 30 June 2014, and
b) The interim management report set out in the Business Review
includes a fair review of the development and performance of the
business and the position of Cenkos Securities plc and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that the Company faces.
Forward-looking statements
These financial statements contain forward-looking statements
with respect to the financial condition, results, operations and
businesses of Cenkos Securities plc. Although the Company believes
that the expectations reflected in these forward-looking statements
are reasonable, we can give no assurance that these expectations
will prove to have been correct. Such statements and forecasts
involve risk and uncertainty because they relate to events and
depend upon circumstances that will occur in the future. There are
a number of factors that could cause actual results or developments
to differ materially from those expressed or implied by
forward-looking statements and forecasts. Forward-looking
statements and forecasts are based on the Directors' current view
and information known to them at the date of this statement. The
Directors do not make any undertaking to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Condensed consolidated income statement for the six months ended
30 June 2014
Unaudited Unaudited Audited
Six months Six months
ended ended Year ended
Notes 30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
--------------------------------------- -------- ------------ ------------ -------------
Continuing operations
Revenue 2 65,225 19,995 51,433
Administrative expenses (41,757) (16,969) (40,856)
Operating profit 23,468 3,026 10,577
Investment income - interest income 77 102 135
Interest expense (1) - (1)
Profit before tax from continuing operations 23,544 3,128 10,711
Tax 3 (4,751) (786) (2,122)
Profit after tax 18,793 2,342 8,589
Attributable to:
Equity holders of the parent 18,793 2,342 8,589
Basic earnings per share 5 31.2p 3.9p 14.2p
Diluted earnings per share 5 29.7p 3.9p 14.2p
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2014
Unaudited Unaudited Audited
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
--------------------------------------- -------- ------------ ------------ -------------
Profit 18,793 2,342 8,589
Total comprehensive income 18,793 2,342 8,589
Attributable to:
Equity holders of the parent 18,793 2,342 8,589
Condensed consolidated statement of financial position as at
30 June 2014
Unaudited Unaudited Audited
Notes 30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
-------------------------------------- ------- ----------- ----------- -------------
Non-current assets
Property, plant and equipment 6 480 499 387
Deferred tax asset 11 2,794 330 1,024
3,274 829 1,411
Current assets
Trade and other receivables 7 47,777 30,857 19,349
Available-for-sale financial
asset 1,000 1,000 1,080
Other current financial assets 8 29,876 10,144 13,706
Cash and cash equivalents 9 43,156 16,343 30,343
121,809 58,344 64,478
Total assets 125,083 59,173 65,889
Current liabilities
Trade and other payables 10 (79,929) (33,451) (35,508)
Other current financial liabilities 8 (3,915) (4,029) (4,289)
(83,844) (37,480) (39,797)
Net current assets 37,965 20,864 24,681
Total liabilities (83,844) (37,480) (39,797)
Net assets 41,239 21,693 26,092
Equity
Share capital 12 635 635 635
Share premium 9 - -
Capital redemption reserve 93 93 93
Own shares 13 (3,228) (3,180) (3,228)
Retained earnings 43,730 24,145 28,592
Total equity 41,239 21,693 26,092
The figures as at 30 June 2013 have been restated to reflect the transfer
of the nominal value of the shares purchased and cancelled by the Company
to capital redemption reserve.
Condensed consolidated cash flow statement for the six months
ended 30 June 2014
Unaudited Unaudited Audited
Six months Six months
ended ended Year ended
30 June 30 June 31 December
Notes 2014 2013 2013
GBP 000's GBP 000's GBP 000's
-------------------------------------------------- ------- ------------ ------------ -------------
Profit 18,793 2,342 8,589
Adjustments for:
Net finance income (76) (102) (134)
Tax expense 4,751 786 2,122
Depreciation of property, plant and equipment 185 159 311
Shares in lieu of fees and options received in
kind (11,961) (2,005) (1,335)
Share-based payment expense 57 76 138
Operating cash flows before movements in working
capital 11,749 1,256 9,691
(Increase) / decrease in net trading
investments (4,503) 2,828 (1,212)
Increase in trade and other receivables (28,436) (15,255) (3,742)
Increase in trade and other payables 41,131 9,326 10,406
Cash flow from / (used in) operating activities 19,941 (1,845) 15,143
Interest paid (1) - (1)
Tax paid (1,816) (1,055) (1,871)
Net cash flow from / (used in) operating activities 18,124 (2,900) 13,271
Investing activities
Interest received 85 34 62
Purchase of property, plant and equipment 6 (277) (108) (148)
Net cash flow (used in) investing
activities (192) (74) (86)
Financing activities
Dividends paid (5,128) (2,430) (4,541)
Proceeds from issue of own shares 9 - -
Acquisition of own shares by the EBT - (235) (283)
Acquisition of own shares for cancellation - (289) (289)
Net cash (used in) financing activities (5,119) (2,954) (5,113)
Net increase / (decrease) in cash and cash equivalents 12,813 (5,928) 8,072
Cash and cash equivalents at beginning of period 30,343 22,271 22,271
Cash and cash equivalents at end of period 9 43,156 16,343 30,343
The figures for the six months ended 30 June 2013 have been restated to
reflect the transfer of the nominal value of the shares purchased and cancelled
by the Company to capital redemption reserve.
Condensed consolidated statement of changes in equity for the six months
ended 30 June 2014
Capital
Share Share redemption Retained
capital premium reserve Own shares earnings Total
GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's
------------------------------------- ----------- ----------- ------------- ------------ ----------- -----------
Attributable to equity holders
of the parent at 1 January
2013 638 - 90 (2,945) 24,446 22,229
Profit - - - - 2,342 2,342
------------------------------------- ----------- ----------- ------------- ------------ ----------- -----------
Total comprehensive income - - - - 2,342 2,342
Own shares acquired in the
period - - - (235) - (235)
Own shares acquired for
cancellation
in the period (3) - 3 - (289) (289)
Credit to equity for equity-settled
share-based payments - - - - 76 76
Dividends paid - - - - (2,430) (2,430)
Attributable to equity holders
of the parent at 30 June
2013 635 - 93 (3,180) 24,145 21,693
Profit - - - - 6,247 6,247
------------------------------------- ----------- ----------- ------------- ------------ ----------- -----------
Total comprehensive income - - - - 6,247 6,247
Own shares acquired in the
period - - - (48) - (48)
Credit to equity for equity-settled
share-based payments - - - 62 62
Credit to equity for day
1 valuation of acquired share
options - - - - 12 12
Deferred tax on share-based
payments - - - - 237 237
Dividends paid - - - - (2,111) (2,111)
Attributable to equity holders
of the parent at 31 December
2013 635 - 93 (3,228) 28,592 26,092
Retained profit - - - - 18,793 18,793
------------------------------------- ----------- ----------- ------------- ------------ ----------- -----------
Total comprehensive income - - 18,793 18,793
Shares issued in the period - 9 - - - 9
Credit to equity for equity-settled
share-based payments - - - - 57 57
Deferred tax on share-based
payments - - - - 1,416 1,416
Dividends paid - - - - (5,128) (5,128)
At 30 June 2014 635 9 93 (3,228) 43,730 41,239
The figures as at 1 January 2013 and for six months ended 30 June 2013
have been restated to reflect the transfer of the nominal value of the
shares purchased and cancelled by the Company to capital redemption reserve.
Notes to the condensed consolidated financial statements
1. Accounting policies
General information
The interim condensed consolidated financial statements of Cenkos Securities
plc. ("Cenkos" or the "Company" together with its subsidiaries) for the
six months ended 30 June 2014 are unaudited and were approved by the Board
of Directors for issue on 16 September 2014.
The Company is incorporated in the United Kingdom under the Companies
Act 2006 (company registration No. 05210733), whose shares are publicly
traded. The Company's principal activity is as an institutional stockbroker
to UK small and mid-cap companies and investment funds. These financial
statements are presented in pounds sterling because that is the currency
of the primary economic environment in which the Company operates.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Although these estimates are based on management's
best knowledge of the amount, event or actions, actual results ultimately
may differ from those of estimates.
These financial statements have been prepared on the historical cost basis,
except for the revaluation of certain financial instruments.
Prior year comparatives have been amended to reflect the transfer of the
nominal value of the shares purchased and cancelled by the Company from
retained earnings to the capital redemption reserve. The impact of this
is solely within total equity.
Basis of accounting
The interim condensed consolidated financial statements for the six months
ended 30 June 2014 have been prepared in accordance with International
Accounting Standard ("IAS") 34 Interim Financial Reporting. The interim
condensed consolidated financial statements do not include all the information
and disclosures required in the annual financial statements, and should
be read in conjunction with the Company's annual financial statements
for the year ended 31 December 2013.
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in
the preparation of the Company's annual financial statements for the year
ended 31 December 2013, which are prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European Union.
The financial information contained in these interim condensed consolidated
financial statements does not constitute the Company's statutory accounts
within the meaning of section 434 of the Companies Act 2006. The comparative
information contained in this report for the year ended 31 December 2013
does not constitute the statutory accounts for that financial period.
Those accounts have been reported on by the Company's auditors Ernst &
Young LLP, and delivered to the Registrar of Companies. The report of
the auditors was unqualified and did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
Going concern
The Company's business activities, together with the factors likely to
affect its future development and performance, its principal risks and
uncertainties and the financial position of the Company, are set out in
the Company's Annual Report for the year ended 31 December 2013.
The Directors are satisfied that the Company has sufficient resources
to continue in operation for the foreseeable future, a period of not less
than 12 months from the date of this report. Accordingly, the Directors
continue to adopt a going concern basis in preparing the interim financial
statements.
Adoption of new and revised standards
During the period, a number of amendments to IFRS's became effective and
were adopted by the Company, none of which had a material impact on the
Company's net cash flows, financial position, statement of comprehensive
income or earnings per share.
2. Business and geographical
segments
Cenkos is managed as an integrated UK institutional stockbroking business
and although it has different revenue streams, the nature of its activities
is considered to be subject to similar economic characteristics. The internal
reports used by the Chief Executive Officer for the purpose of monitoring
performance and allocating resources reflect that Cenkos is managed as
a single business unit.
Revenue is wholly attributable to the principal activity of the Company
and arises solely within the UK.
Major clients
In the six months ended 30 June 2014, one of Cenkos' clients contributed
more than 10% of Cenkos' total revenue. The amount was GBP31.50 million
(six months ended 30 June 2013: nil; year ended 31 December 2013: GBP6.43
million).
Six months Six months
3. Tax ended ended Year ended
30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
-------------------------------------------------- ------------ ------------ -------------
The tax charge comprises:
Current tax
United Kingdom corporation tax at 21.50% (2013:
23.25%) based on the profit for the period 5,105 843 2,612
Adjustment in respect of prior
period
United Kingdom corporation tax at 23.25% (2012:
24.5%) - - 25
Total current tax 5,105 843 2,637
Deferred tax
Credit on account of temporary differences (354) (57) (495)
Deferred tax prior year - - (20)
Total deferred tax (354) (57) (515)
Total tax on profit on ordinary activities 4,751 786 2,122
The tax charge for the period differs from that resulting from applying
the standard rate of UK corporation tax of 21.50% (2013: 23.25%) to the
profit before tax for the reasons set out in the following reconciliation:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
------------------------------------------------------ ------------ ------------ -------------
Profit before tax 23,544 3,128 10,711
Tax on profit on ordinary activities at the
UK corporation tax rate of 21.50% (2013: 23.25%) 5,062 727 2,491
Tax effect of:
Expenses that are not deductible in determining
taxable profits 43 64 104
Income not subject to corporation
tax - (15) (15)
Recognition of deferred tax on share-based payments
previously unrecognised (390) - (621)
Deferred tax rate change adjustment 36 148
Adjustment for loss relief not
claimed - 10 10
Adjustment in respect of prior period
deferred tax - - (20)
Adjustment in respect of prior period
current tax - - 25
Tax expense for the period 4,751 786 2,122
In addition to the amount credited to the income statement, deferred tax
relating to share-based payments amounting to GBP1,416,548 has been charged
directly to equity (six months ended 30 June 2013: GBP nil, year ended
31 December 2013: GBP236,520).
4. Dividends
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
-------------------------------------------------- ------------ ------------ -------------
Amounts recognised as distributions to equity
holders in the period:
Final dividend for the year ended 31 December
2013 of 8.5p (2012: 4.0p) per share 5,128 2,430 2,430
Interim dividend for the period to 30 June 2013
of 3.5p (June 2012: 3.5p) per share - - 2,111
5,128 2,430 4,541
The proposed interim dividend for 30 June 2014 of 7p (30 June 2013: 3.5p)
per share was approved by the Board on 16 September 2014 and has not been
included as a liability as at 30 June 2014. The dividend will be payable
on 6 November 2014 to all shareholders on the register at 10 October 2014.
Under the Compensatory Award Plan ("CAP"), as described in the 2013 Annual
Report, the payment of a dividend to ordinary shareholders will trigger
a cash payment to holders of options under the CAP. The payment of this
interim dividend will increase staff costs by GBP1.11 million in H2 2014
(3.5p 2013 interim dividend increased staff costs by GBP0.77 million in
H2 2013).
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on
the following data:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2014 2013 2013
---------------------------------------------------- ------------ ------------ -------------
Basic earnings per share 31.2p 3.9p 14.2p
Diluted earnings per share 29.7p 3.9p 14.2p
Earnings for the purpose of basic and diluted
earnings per share
The calculation of the basic and diluted earnings per
share is based on the following data:
GBP 000's GBP 000's GBP 000's
Earnings for the purpose of basic and diluted
earnings per share being net profit attributable
to equity holders of the parent 18,793 2,342 8,589
Number of shares No. No. No.
---------------------------------------------------- ------------ ------------ -------------
Weighted average number of ordinary shares for
the purpose of basic earnings per share 60,327,458 60,725,002 60,525,904
Effect of dilutive potential ordinary shares:
Share options 2,857,571 - -
Weighted average number of ordinary shares for
the purpose of diluted earnings per share 63,185,029 60,725,002 60,525,904
----------------------------------------------------
The loans associated with the B shares were fully paid up by 30 June 2013
and the B shares converted to Ordinary shares. The calculation of the
weighted average number of shares in prior periods included the total
number of B shares, even though they were partly paid, as these shares
were entitled to a full dividend payout.
The Board has agreed to continue to fund the Company's Employee Benefit
Trust ("EBT") so that it can make market purchases in Cenkos Securities
plc shares as and when market conditions allow. During the period, however,
no further shares were purchased. As at 30 June 2014 the EBT held a total
of 3,158,477 ordinary shares at an aggregate consideration of GBP3.23
million, as shown in note 13. These shares are held by the trust in treasury
and have been excluded from the weighted average number of shares calculation.
6. Property, plant & equipment
During the period, the Company spent approximately GBP276,565 (30 June
2013: GBP107,965, 31 December 2013: GBP147,953) on property, plant and
equipment. This mostly related to the purchase of IT equipment and leasehold
improvements.
7. Trade and other receivables 30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
------------------------------------------ ----------- ----------- -------------
Current assets
Market and client receivables 45,606 28,188 17,396
Unpaid share capital and loans due from
staff - - 2
Prepayments and accrued income 1,573 1,898 1,244
Other receivables 598 771 707
47,777 30,857 19,349
8. Financial assets and liabilities 30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
----------------------------------------------- ----------- ----------- -------------
Financial assets at FVTPL
Trading investments carried at fair value 29,380 9,522 12,567
Derivative financial assets 496 622 1,139
29,876 10,144 13,706
Financial liabilities at
FVTPL
Contractual obligation to acquire securities (3,915) (4,029) (4,289)
9. Cash and cash equivalents
30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
----------------------------------------------- ----------- ----------- -------------
Cash and cash equivalents 43,156 16,343 30,343
10. Trade and other payables
30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
----------------------------------------------- ----------- ----------- -------------
Trade creditors 40,822 22,102 14,401
Corporation tax payable 5,105 838 1,816
Accruals and deferred income 33,508 9,730 18,724
Other creditors 494 781 567
79,929 33,451 35,508
11. Deferred tax asset
Deferred tax arises on all taxable and deductible temporary differences
at the balance sheet date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes. In the table
below, the Company has recognised deferred tax assets on temporary differences
relating to bonus payments, fixed assets and share options.
Bonus Fixed Share
payments assets options Total
GBP 000's GBP 000's GBP 000's GBP 000's
------------------------------------------------ ----------- ----------- ----------- -----------
At 31 December 2012 243 29 - 272
Increase on account of temporary differences
- current year 38 - - 38
Increase on account of temporary differences
- prior year 20 - - 20
At 30 June 2013 301 29 - 330
(Decrease) / increase on account of temporary
differences - current year (71) (2) 530 457
Charge to equity - - 237 237
At 31 December 2013 230 27 767 1,024
(Decrease) / increase on account of temporary
differences - current year (36) (1) 391 354
Charge to equity - - 1,416 1,416
At 30 June 2014 194 26 2,574 2,794
The GBP2,573,846 deferred tax asset arising from share options reflects
the increase in the Company's share price, with the share price at 30 June
2014 being above the options' exercise price.
The Finance Bill 2013 was substantively enacted on 2 July 2013. The reduction
to the standard rate of corporation tax from 21% to 20% will be effective
from 1 April 2015. Accordingly, the deferred tax balances at 30 June 2014
have been stated at 20% as this is expected the prevailing rate when the
individual temporary differences are expected to reverse.
The Group has unutilised capital losses on which a deferred tax asset has
not been recognised as future utilisation of the losses is dependent on
future chargeable gains which are uncertain. The unrecognised deferred tax
asset in respect of capital losses carried forward is gross GBP302,261 (net
GBP60,452 at 20%).
12. Share capital
The issued share capital as at 30 June 2014 amounted to GBP634,921 (30 June
2013: GBP634,821, 31 December 2013: GBP634,821).
1 January 2013 to 31 December 2013
On 29 January 2013, 50,000 B shares of 1p each were converted into 50,000
ordinary shares of 1p each.
On 14 May 2013, 20,338 B shares of 1p each were converted into 20,338 ordinary
shares of 1p each.
On 21 May 2013, 91,183 B shares of 1p each were converted into 91,183 ordinary
shares of 1p each.
On 24 May 2013, 257,357 B shares of 1p each were converted into 257,357
ordinary shares of 1p each.
On 28 May 2013, 525,368 B shares of 1p each were converted into 525,368
ordinary shares of 1p each.
On 17 June 2013, 1,200,000 B shares of 1p each were converted
into 1,200,000 ordinary shares of 1p each.
On 19 June 2013, 540,000 B shares of 1p each were converted into
540,000 ordinary shares of 1p each.
On 29 January 2013, the Company purchased in the market 215,837 ordinary
shares of 1p at 75p each. These shares were cancelled by the Company and
an amount equivalent to the nominal value of the shares was transferred
to the capital redemption reserve.
On 24 May 2013, the Company purchased in the market 140,000 ordinary shares
of 1p at 90p each. These shares were cancelled by the Company and an amount
equivalent to the nominal value of the shares was transferred to the capital
redemption reserve.
The ordinary shares are admitted to trading on AIM. The B shares were not
admitted to trading on AIM. The B shares were issued on a partly-paid basis
to certain employees prior to the Company's admission and trading on AIM
in October 2006. Holders of the B shares were required to pay the required
premium which was specified at the time of allotment of the B shares. Upon
payment of the required premium the B shares convert automatically into
ordinary shares and are admitted to trading on AIM. All shares have equal
voting rights. The required premium was paid up in full by 30 June 2013
and all B shares were converted into ordinary shares and admitted to trading
on AIM.
1 January 2014 to 30 June 2014
On 23rd April 2014, 10,000 ordinary shares of 1p each were issued following
the exercise of 10,000 options in accordance with the Company's Long Term
Incentive Plan.
13. Own shares
The purpose of the Company's EBT is to assist and encourage the holding
of shares in the Company by employees for their benefit with a view to facilitating
their recruitment, retention and motivation. During the period no further
shares were purchased. As at 30 June 2014 the EBT held a total of 3,158,477
ordinary shares at an aggregate consideration of GBP3.23 million, as shown
in the table below.
Six months ended Six months ended Year ended
30 June 2014 30 June 2013 31 December 2013
Number Number Number
of shares GBP 000's of shares GBP 000's of shares GBP 000's
----------------------------- ----------- ----------- ----------- ----------- ----------- -----------
At 1 January 3,158,477 3,228 2,843,724 2,945 2,843,724 2,945
Acquired during the period - - 263,503 235 314,753 283
At the period ended 3,158,477 3,228 3,107,227 3,180 3,158,477 3,228
----------------------------- ----------- ----------- ----------- ----------- ----------- -----------
14. Financial instruments
Capital risk management
The Company manages capital to ensure that the Company and its subsidiaries
will be able to continue as a going concern while aiming to maximise the
return to shareholders. The capital structure of the Company consists of
equity attributable to equity holders of the parent comprising issued capital,
reserves and retained earnings as disclosed in the condensed consolidated
statement of changes in equity. At present the Company has no gearing and
it is the responsibility of the Board to review the Company's gearing levels
on an ongoing basis. As at 30 June 2014, Cenkos Securities plc had a solvency
ratio of 145% (30 June 2013: 205%, 31 December 2013: 196%).
Externally imposed capital requirement
The Company has to retain sufficient capital to satisfy the UK Financial
Conduct Authority's ("FCA") capital requirements. These requirements vary
from time to time depending on the business conducted by the Company. The
Company always retains a buffer above the FCA minimum requirement and has
complied with these requirements during the period under review.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including
the criteria for recognition, the basis of measurement and the basis on
which income and expenses are recognised in respect of each class of financial
asset, financial liability and equity instrument are disclosed in note 1
of the Company's financial statements for the year ended 31 December 2013.
Categories of financial instruments Carrying value
30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
----------------------------------------------------- ----------- ----------- -------------
Available-for-sale investments 1,000 1,000 1,080
Financial assets at fair value through profit
and loss (FVTPL)
Trading investments carried at fair value 29,380 9,522 12,567
Derivative financial assets 496 622 1,139
Financial liabilities at fair value through profit
and loss (FVTPL)
Trading investments carried at fair value 3,915 4,029 4,289
Financial liabilities held at amortised cost
Amortised cost 79,929 33,451 35,508
Financial risk management objectives
The Chief Executive Officer monitors and manages the financial risks relating
to the operations of the Company through internal risk reports which analyse
exposures by degree and magnitude of risks. These risks include market risk
(including price risk), credit risk and liquidity risk. Summaries of these
reports are reviewed by the Board.
Compliance with policies and exposure limits is reviewed by the Chief Executive
Officer and senior management on a continuous basis. The Company does not
enter into or trade financial instruments, including derivative financial
instruments, for speculative purposes.
Interest rate risk management
The Company is exposed to interest rate risk because it has financial instruments
on its statement of financial position which are at both fixed and floating
interest rates. The risk is managed by the Company by maintaining an appropriate
mix between fixed and floating rate instruments.
The Company's exposures to interest rates on financial assets and financial
liabilities are detailed in the liquidity and interest rate risk table section
of this note.
Interest rate sensitivity
analysis
The sensitivity analysis below has been determined based on the exposure
to interest rates for both derivatives and non-derivative instruments at
the balance sheet date. For floating rate assets, the analysis is prepared
based on the average rate due on the asset or liability through the period.
A 25 basis points increase or decrease is used when reporting interest rate
risk internally to senior management and represents management's assessment
of a reasonably possible change in interest rates.
If interest rates had been 25 basis points higher / lower and all other
variables were held constant, the Company's:
-- profit for the period ended 30 June 2014 would increase / decrease by
GBP0.04 million (30 June 2013: increase / decrease by GBP0.03 million, 31
December 2013: increase / decrease by GBP0.03 million). This is mainly attributable
to the Company's exposure to interest rates on its variable rate instruments;
and
-- other comprehensive income for the period ended 30 June 2014 would increase
/ decrease by GBP0.04 million (30 June 2013: increase/decrease by GBP0.03
million, 31 December 2013: increase / decrease by GBP0.03 million).
Equity price risks
The Company is exposed to equity price risks arising from equity investments.
The financial instruments represent investments in listed equity securities
that present the Company with opportunity for return through dividend income
and trading gains. There are limits set for each financial instrument to
limit the concentration of risks.
Equity price sensitivity
analysis
The sensitivity analysis below has been determined based on the exposure
to equity price risks at the reporting date and, in the opinion of senior
management, a material movement in equity prices. This is based on the largest
fall in the All Share AIM index in one day and over a two week period. These
parameters are also considered in the Company's Individual Liquidity Adequacy
Assessment (ILAA).
If equity prices had been 10% higher/lower:
-- Net profit for the 6 months ended 30 June 2014 would have been GBP2.55
million higher / lower (30 June 2013: GBP0.55 million higher / lower, 31
December 2013: GBP1.05 million higher / lower) due to a change in the value
of FVTPL held-for-trading investments.
The Company's exposure to equity price risk is closely managed. The Company
has built a framework of overall and individual stock limits and these are
actively monitored by the Chief Executive Officer and senior management
on a daily basis. This framework also limits the concentration of risks.
The Company's overall appetite for exposure to equity price risk is set
by the Board.
Foreign currency risk
The Company does not have any material dealings in foreign currency, as
the majority of transactions are in UK based equities and hence denominated
in sterling.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual
obligations resulting in financial loss to the Company. These parties may
default on their obligations due to bankruptcy, lack of liquidity, operational
failure and other reasons. The exposure of the Company to its counterparties
is closely monitored and limits are set to minimise the concentration of
risks.
The vast majority of the Company's credit risk arises from the settlement
of security transactions. However, the settlement model primarily used by
the Company does not expose the Company to counterparty risk as a principal
to a trade. Rather, the Company's exposure lies solely with Pershing Securities
Limited ("Pershing"), a wholly owned subsidiary of the Bank of New York
Mellon Corporation, a AA- (2013: AA-) rated bank. In addition, in circumstances
in which the Company does act as principal when acting as a market maker,
the counterparty will normally be an FCA regulated market counterparty rather
than a corporate or individual trader. The Company does not have any significant
credit risk exposure to any single counterparty with the exception of Pershing.
Cash resources also give rise to potential credit risk. The Company's cash
balances are held with HSBC Bank plc (an AA- rated bank), Royal Bank of
Scotland plc (an A rated bank), Barclays Bank plc (an A rated bank) and
Pershing. The banks with which the Company deposits money are reviewed at
least annually by the Board and are required to have at least an investment
grade credit rating. To limit the concentration risk in relation to cash
deposits, the maximum amount which may be deposited with any one financial
institution is set at no more than 100% of the Company's regulatory capital.
Trade receivables not related to the settlement of market transactions consist
almost entirely of outstanding corporate finance fees and retainers and
are spread across a wide range of industries. All new corporate finance
clients are subject to a review by the New Business Committee. This committee
considers, amongst other issues, the financial soundness of any client taken
on.
The carrying amount of financial assets recorded in the financial statements,
which is net of impairment losses, represents the Company's maximum exposure
to credit risk without taking account of the value of any collateral obtained.
The credit risk on liquid funds is limited because the counterparties are
banks with high credit ratings assigned by international credit rating agencies.
The table below summarises the Company's exposure to credit risk by asset
class according to whether the exposure is collateralised.
Exposure to Credit Risk 30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
--------------------------------- ------------------- ----------- ----------- -------------
Derivative financial assets Uncollateralised 496 622 1,139
Market and client receivables Uncollateralised 45,607 28,188 17,396
Unpaid share capital and loans
due from staff Collateralised - 4 -
Unpaid share capital and loans
due from staff Uncollateralised 2 - 2
Prepayments and accrued
income Uncollateralised 1,573 1,897 1,244
Other receivables Uncollateralised 595 768 707
Cash and cash equivalents Uncollateralised 43,156 16,343 30,343
--------------------------------- ------------------- ----------- ----------- -------------
91,429 47,822 50,831
----------------------------------------------------- ----------- ----------- -------------
The table below summarises the Company's exposure to credit risk by asset
class according to credit rating.
Exposure to Credit
Risk 30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Derivative financial
assets Unrated 496 622 1,139
Market and client
receivables Unrated 24,413 18,672 11,404
Market and client
receivables AA- 14,915 9,516 5,102
Market and client
receivables A 4,089 - 556
Market and client
receivables A- 2,190 - -
Market and client
receivables BBB - - 334
Unpaid share capital and loans
due from staff Unrated 2 4 2
Prepayments and
accrued
income Unrated 1,573 1,897 1,244
Other receivables Unrated 595 768 707
Cash and cash
equivalents AA- 37,739 9,810 15,290
Cash and cash
equivalents A 5,417 6,533 15,053
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
91,429 47,822 50,831
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Liquidity risk
management
Ultimate responsibility for liquidity risk management rests with the Board.
It has, however, delegated day-to-day management to the Chief Executive
Officer. The Company has in place an appropriate liquidity risk management
framework for its management of its short, medium and long-term funding
and liquidity management requirements. The Company manages liquidity risk
by maintaining adequate reserves, banking facilities, by continuously monitoring
forecast and actual cash flows and matching the maturity profiles of financial
assets and liabilities. Given the nature of the Company's business, the
Company does not run any material liquidity mismatches, financial liabilities
are on the whole short-term and the Company has sufficient liquid assets
to cover all of these liabilities.
Liquidity and
interest risk
tables
The following tables detail the Company's remaining contractual maturity
for its non-derivative financial assets and liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Company is required to pay. The
table includes both interest and principal cash flows. The tables also detail
the Company's expected maturity for its non-derivative financial assets.
The tables below have been drawn up based on the undiscounted contractual
maturities of the financial assets including interest that will be earned
on those assets.
Liquidity and
interest rate
table
Weighted No More
average maturity Less than than
effective date 1 month 1 month Total
interest
As at 30 June 2014 rates GBP 000's GBP 000's GBP 000's GBP 000's
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Available-for-sale
financial Non-interest
assets bearing 1,000 - - 1,000
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Financial assets at Non-interest
FVTPL bearing 29,380 - 496 29,876
Trade and other Non-interest
receivables bearing - 47,777 - 47,777
Financial
liabilities at Non-interest
FVTPL bearing - (3,915) - (3,915)
Trade and other Non-interest
payables bearing - (79,929) - (79,929)
Variable
Cash and cash interest
equivalents rate instruments 0.60% - 5,330 - 5,331
Variable
Cash and cash interest
equivalents rate instruments 0.30% - 87 - 87
Variable
Cash and cash interest
equivalents rate instruments 0.25% - 37,739 - 37,738
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
29,380 7,089 496 36,965
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Liquidity and
interest risk
tables
Weighted No More
average maturity Less than than
effective date 1 month 1 month Total
interest
As at 30 June 2013 rates GBP 000's GBP 000's GBP 000's GBP 000's
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
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 at Non-interest
FVTPL bearing - (4,029) - (4,029)
Trade and other Non-interest
payables bearing - (33,451) - (33,451)
Fixed
Cash and cash interest
equivalents rate instruments 1.00% - 2,750 - 2,750
Variable
Cash and cash interest
equivalents rate instruments 0.30% - 3,750 - 3,750
Variable
Cash and cash interest
equivalents rate instruments 0.25% - 9,843 - 9,843
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
9,522 10,160 182 19,864
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Weighted No More
average maturity Less than than
effective date 1 month 1 month Total
As at 31 December interest
2013 rates GBP 000's GBP 000's GBP 000's GBP 000's
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Available-for-sale
financial Non-interest
assets bearing 1,080 - - 1,080
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Financial assets at Non-interest
FVTPL bearing 12,567 - 1,139 13,706
Trade and other Non-interest
receivables bearing - 19,349 - 19,349
Financial
liabilities at Non-interest
FVTPL bearing - (4,289) - (4,289)
Trade and other Non-interest
payables bearing - (35,508) - (35,508)
Variable
Cash and cash interest
equivalents rate instruments 1.00% - 3,284 - 3,284
Variable
Cash and cash interest
equivalents rate instruments 0.30% - 11,768 - 11,768
Variable
Cash and cash interest
equivalents rate instruments 0.25% - 15,290 - 15,290
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
12,567 9,894 1,139 23,600
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
The carrying amounts of financial assets recorded at amortised cost in the
financial statements approximate their fair values.
Fair value hierarchy
All financial instruments carried at fair value are categorised in three
categories, defined as follows:
Level 1 - Quoted market prices
Level 2 - Valuation techniques (market observable)
Level 3 - Valuation techniques (non-market observable)
As at 30 June 2014, the Company held the following financial instruments
measured at fair value:
Level Level Level
1 2 3 Total
As at 30 June 2014 GBP 000's GBP 000's GBP 000's GBP 000's
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Available-for-sale
financial
assets - - 1,000 1,000
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Financial assets at
FVTPL
Derivative financial
assets - - 496 496
Non-derivative financial assets
held for trading 29,380 - - 29,380
------------------------------------------- ------------ ------------ ------------- --------------- -------------
29,380 - 496 29,876
29,380 - 1,496 30,876
Financial
liabilities at
FVTPL
Non-derivative financial liabilities held
for trading 3,915 - - 3,915
There were no transfers between Level 1, 2 and
3 during the period.
Level Level Level
1 2 3 Total
As at 30 June 2013 GBP 000's GBP 000's GBP 000's GBP 000's
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Available-for-sale
financial
assets - - 1,000 1,000
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Financial assets at
FVTPL
Derivative financial
assets - - 622 622
Non-derivative financial assets
held for trading 9,522 - - 9,522
------------------------------------------- ------------ ------------ ------------- --------------- -------------
9,522 - 622 10,144
9,522 - 1,622 11,144
Financial
liabilities at
FVTPL
Non-derivative financial liabilities held
for trading 4,029 - - 4,029
There were no transfers between Level 1, 2 and
3 during the period.
Level Level Level
1 2 3 Total
As at 31 December
2013 GBP 000's GBP 000's GBP 000's GBP 000's
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Available-for-sale
financial
assets - - 1,080 1,080
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Financial assets at
FVTPL
Derivative financial
assets - - 1,139 1,139
Non-derivative financial assets
held for trading 12,567 - - 12,567
------------------------------------------- ------------ ------------ ------------- --------------- -------------
12,567 - 1,139 13,706
12,567 - 2,219 14,786
Financial
liabilities at
FVTPL
Non-derivative financial liabilities held
for trading 4,289 - - 4,289
There were no transfers between Level 1, 2 and 3 during the year.
For assets and liabilities that are recognised in the financial statements
on a recurring basis, the Company determines whether transfers have occurred
between levels in the hierarchy by re-assessing categorisation (based on
the lower level input that is significant to the fair value measurement
as a whole) at the end of the reporting period.
Reconciliation of recurring fair value measurements categorised within Level
3 of the fair value hierarchy
Share
Unlisted options
securities and warrants Total
GBP 000's GBP 000's GBP 000's
---------------------- ------------------- ------------ ------------ ------------- --------------- -------------
Opening balance 1
January
2014 1,080 1,139 2,219
Share options and warrants exercised - (521) (521)
Share options and warrants granted - 10 10
Net unrealised loss recognised in income statement
relating to assets held at the end of the period - (132) (132)
Unlisted securities redeemed (80) - (80)
Closing balance 30
June
2014 1,000 496 1,496
Level 3 financial instruments consist of derivative financial assets and
unlisted shares received in lieu of fees.
The unlisted equity shares are carried as available-for-sale financial
assets, classified as Level 3 within the fair value hierarchy. A number
of valuation techniques have been used to provide a range of possible values
for this shareholding in accordance with the International Private Equity
and Venture Capital ("IPEV") valuation guidelines. As the carrying value
is within this range - and there have been no other factors brought to the
Board's attention which would suggest that there has been an impairment
- the carrying value has been maintained at GBP1 million.
The derivative financial assets are carried as financial assets at FVTPL
classified as Level 3 within the fair value hierarchy and comprise equity
options and warrants over listed securities.
Impact of reasonably possible alternative assumptions
The significant unobservable input used in the fair value measurement of
Cenkos holdings of share options and warrants is the volatility measure.
Significant increases (decreases) in the volatility measure would result
in a significantly higher (lower) fair value measurement.
A sensitivity analysis based on a 10% increase / decrease in the volatility
measure used as an input in the valuation of the share options and warrants
shows the impact of such a movement would be an increase of GBP55,679 /
decrease of GBP53,211 respectively the profit in the income statement.
Determination of
fair value
Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants
at the measurement date.
Financial instruments measured at fair value on an on-going basis include
trading assets and liabilities and financial investments classified as available-for-sale.
Fair values are determined according to the following hierarchy:
(a) Level 1 - Quoted market price
Financial instruments with quoted prices for identical instruments in active
markets.
(b) Level 2 - Valuation technique using observable inputs
Financial instruments with quoted prices for similar instruments in active
markets or quoted prices for identical or similar instruments in inactive
markets and financial instruments valued using models where all significant
inputs are observable.
(c) Level 3 - Valuation technique with significant non-observable inputs
Financial instruments valued using models where one or more significant
inputs are not observable. The best evidence of fair value is a quoted price
in an actively traded market. In the event that the market for a financial
instrument is not active, a valuation technique is used. The majority of
valuation techniques employ only observable market data and so the reliability
of the fair value measurement is high. However, certain financial instruments
are valued on the basis of valuation techniques that feature one or more
significant market inputs that are not observable. For these instruments,
the fair value derived is more judgemental. 'Not observable' in this context
means that there are few or no current market data available from which
to determine the level at which an arm's length transaction would be likely
to occur. It generally does not mean that there is absolutely no market
data available upon which to base a determination of fair value (for example,
historical data may be used). Furthermore, the assessment of hierarchy level
is based on the lowest level of input that is significant to the fair value
of the financial instrument.
The valuation models used where quoted market prices are not available
incorporate certain assumptions that the Company anticipates would be used
by a third party market participant to establish fair value.
Fair value Unobservable
at 30/06/14 Valuation Technique input Range
GBP 000's
Share options and
warrants 496 Monte Carlo simulation Volatility 38-66%
IPEV valuation
Unlisted securities 1,000 guidelines n/a n/a
-------------------
1,496
-------------------
15. Related party transactions
Transactions with related parties are made at arm's length. Transactions
or balances between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and, in accordance with IAS
24, are not disclosed in this note. The Board includes all employees considered
to be key management personnel.
30 June 30 June 31 December
2014 2013 2013
Amounts owed by related parties GBP 000's GBP 000's GBP 000's
----------------------------------------- -------------- ------------- ---------------
Cenkos Nominees Limited 242 317 119
The compensation of the key management personnel of the Company (including
the Directors) and their interests in the shares and options over the shares
of Cenkos Securities plc were as follows:
Six months ended Year ended
30 June 30 June 31 December
2014 2013 2013
GBP 000's GBP 000's GBP 000's
----------------------- ----------- ----------- -------------
Aggregate emoluments 6,575 1,616 5,296
There were no Directors who were members of any Company pension scheme as
at the period end (2013: none).
The Board (excluding the Chairman) have reviewed the Chairman's remuneration
arrangements to ensure that they reflect his contribution to the Company.
The executive Directors have proposed - and the Remuneration Committee (excluding
the Chairman) has agreed - that a further GBP125,000 is to be paid in respect
of the additional work he undertook in 2013.
Related party interests in ordinary shares of Cenkos Securities
plc
30 June 30 June 31 December
2014 2013 2013
No. No. No.
------------------------------ ----------- ---------- ----------- ------------ ------------ -------------
Number of shares 14,487,294 14,487,294 14,487,294
Percentage interest 23% 23% 23%
Related party interests
in share options Six months ended Six months ended Year ended
30 June 2014 30 June 2013 31 December 2013
Number Weighted Number Weighted Number Weighted
average average average
exercise exercise exercise
price price price
------------------------------ ----------- ---------- ----------- ------------ ------------ -------------
Outstanding at beginning
of the period 1,178,710 1.11 1,178,710 1.11 1,178,710 1.11
Lapsed during the period - - - - - -
Exercised during the period
Issued during the period - - - - - -
------------------------------ ----------- ---------- ----------- ------------ ------------ -------------
Outstanding at the end of
the period 1,178,710 1.11 1,178,710 1.11 1,178,710 1.11
16. Events after the reporting period
There were no material events to report on that occurred between 30 June
2014 and the date at which the Directors signed this Interim Report.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KQLFFZKFXBBD
Cenkos Securities (LSE:CNKS)
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Cenkos Securities (LSE:CNKS)
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부터 7월(7) 2023 으로 7월(7) 2024
