TIDMCNKS
RNS Number : 6829I
Cenkos Securities PLC
23 March 2018
23 March 2018
Cenkos Securities plc
Annual Results for the year ended 31 December 2017
Cenkos Securities plc (the "Company" or "Cenkos") and together
with its subsidiaries (the "Group" or the "Firm"), today announces
its results for the year ended 31 December 2017. Cenkos is an
independent, specialist institutional securities group, focused on
small and mid-cap companies and investment funds. The Group's
principal activity is institutional stockbroking.
Cenkos' shares are admitted to trading on the AIM Market of the
London Stock Exchange ("LSE"). The Company is authorised and
regulated by the Financial Conduct Authority ("FCA") and is a
member of the LSE.
Highlights 31-Dec-17 31-Dec-16
--------------------------------------------------- ------- ---------- ----------
GBP59.5 GBP43.7
Revenue + 36% m m
GBP10.0
Profit before tax on continuing operations + 97% m GBP5.1 m
Profit after tax on continuing operations + 155% GBP8.2 m GBP3.2 m
Profit after tax on continuing and discontinued
operations + 183% GBP7.2 m GBP2.5 m
GBP36.8 GBP23.8
Cash + 55% m m
Net assets + 9% GBP29.7m GBP27.2m
Basic earnings per share on continuing operations + 154% 15.0 p 5.9 p
Basic earnings per share on continuing and
discontinued operations + 181% 13.2 p 4.7 p
Full year dividend per share paid and proposed
(1) + 50% 9.0 p 6.0 p
(1) Includes a proposed final dividend of 4.5p (2016: 5p)
Since being admitted to trading on AIM in 2006, the Company has
returned GBP108.0 million of cash to shareholders, equivalent to
165.3p per share, before the payment of the proposed final dividend
of 4.5p per share.
Commenting the Company's Chief Executive Officer, Anthony Hotson
said:
"We live in an uncertain geopolitical environment where market
volatility has a significant impact upon investor sentiment. With a
resilient business model and being ranked as one of the leading
brokers in London for Growth companies and investment trusts, we
look forward to the future with cautious optimism."
For further information contact:
Cenkos Securities plc
Anthony Hotson - Chief Executive Officer +44 20 7397 8900
Smith & Williamson Corporate Finance Limited
Dr Azhic Basirov / David Jones / Ben Jeynes +44 20 7131 4000
Nominated Adviser
Whitman Howard
Nick Lovering +44 20 7659 1224
Joint Broker
Buchanan Communications
David Rydell +44 20 7466 5066
Chief Executive's Statement
"Building long-term relationships, borne out of good client
outcomes, lies at the heart of the Firm's ethos."
Anthony Hotson Chief Executive Officer
The 2017 Annual Report is my first as Chief Executive following
my appointment in August 2017, having served as a Non-executive
Director of the Company since 2012. I look forward to building on
Cenkos' strengths and delivering further growth for all our
stakeholders.
Dividend
We are proposing a final dividend of 4.5p per share (2016: 5.0p
per share) which brings the total dividend for the year to 9.0p per
share (2016: 6.0p per share). Since we have been admitted to
trading on AIM in 2006 we have returned GBP108.0 million of cash to
shareholders, equivalent to 165.3p per share, before the payment of
the proposed 2017 final dividend of 4.5p per share.
Performance
Cenkos has had a good year delivering revenues, profit and
dividends well ahead of 2016. Corporate finance and placing fees
generated across the Firm underpinned by several large deals
demonstrate our capability in this area. We helped our clients
raise GBP2.5bn (2016: GBP1.3bn) of equity finance. Our corporate
client base remains solid reflecting our ethos of building and
maintaining long-term relationships. Delivering good client
outcomes lies at the heart of the Firm's ethos.
Brexit, the economy and regulatory environment
The UK's decision to leave the European Union creates
uncertainty for both the UK's financial industry and the wider
markets. Macro-economic factors including inflationary pressures
and the possibility of further interest rate rises, compounded by
geopolitical events further afield, create a higher risk of
disruption in 2018. These ever-present risks are at the forefront
of the Board's thinking and have been reflected in the Firm's
principal risks in the 2017 Annual Report.
Along with other firms, Regulatory obligations within the
financial services sector are significant and the pace of change is
set to increase in 2018. We continue to invest in people as well as
systems and controls to meet the requirements of new regulation and
legislation.
In 2017, the implementation of MiFID II was a key focus. I am
pleased to note that, whilst early days, the implementation has
gone well.
In our 2016 Annual Report we reported that, following an
investigation by the FCA into our role as sponsor to Quindell plc,
we undertook an extensive remediation program. We have worked
through 2017 to embed the recommendations and will continue to do
so in 2018.
To provide further regulatory support we are introducing a new
operating model for the compliance team. This was initiated in the
latter part of 2017 and will be completed in 2018.
We believe that all regulation must be accompanied by a strong
internal culture underpinned by the highest ethical and
professional standards. An overarching governance framework is
critical with the highest standards being set by the Board as a
role model. Details of our governance framework will be set out in
full in the 2017 Annual Report.
The Board
Several important changes were made to the Board in 2017. On 31
July 2017 Jim Durkin retired as Chief Executive Officer after 7
years in the position, having been with the Firm since its
formation in 2004. I was named as his successor and I would like to
reiterate the Board's thanks to Jim Durkin for his contribution to
Cenkos.
Four further changes took place in the year. Nick Wells
(Executive Director) stepped down from the Board with effect 17 May
2017 to focus on leading the Corporate Finance team and Mike
Chilton (Finance Director) resigned with effect from 4 August 2017.
Mike Chilton left the Company on 30 September 2017 after more than
6 years of service. On 17 November 2017 Andrew Boorman was
appointed as a Non-executive Director of the Company. Philip
Anderson was appointed as Finance Director and Head of Compliance
on 31 January 2018 following regulatory approval being
received.
The Board has gone through a number of changes over the past
twelve months and having reviewed its composition and structure, we
are satisfied with the balance between Executive and Non-executive
members and that no individual or group of individuals dominate.
This is explained in more detail in the Corporate Governance Report
in the 2017 Annual Report.
People
The reputation of our business is reliant on the quality,
expertise and conduct of every person at Cenkos. Our teams always
set out to deliver outstanding client outcomes. The Board is fully
committed to our people and is focused on developing and retaining
a pool of diversified talent with a shared set of values and
strategic goals.
On behalf of the Board, I would like to thank our people and the
management team for their contribution in 2017.
Outlook
We live in an uncertain geopolitical environment that makes it
very difficult to predict either the direction of the markets or
health of investor sentiment. There has been significant market
volatility leading to a correction in all main global indices.
This market volatility does appear to have had an impact on
investor sentiment with a pause in the momentum the Firm
experienced in the second half of 2017. Despite this, we remain
ranked as one of the leading brokers in London for growth
companies, institutional investor appetite to fund high quality
companies is likely to return and our business model is resilient.
Consequently, we look forward to the future with cautious
optimism.
Review of performance
Revenues increased by 36% to GBP59.5m and profit before tax on
continuing operations rose by 97% to GBP10.0m.
Revenue
We are pleased to report that Cenkos has produced revenues
significantly ahead of last year. All of our core business
activities have contributed to this despite some pressure falling
on our research and commission revenue due to uncertainties
associated with and the impact of MiFiD II.
Market conditions have provided a positive backdrop for trading
in UK equities and investor confidence generally in the UK.
Steadily rising equity indices coupled with sterling placed at
competitive values through the year had resulted in favourable
conditions for placing equity stock. This has compared markedly
from conditions in 2016 where, against the backdrop of Brexit and
wider macro-economic uncertainty, markets and investor confidence
were benign. This year total funds raised by AIM companies rose by
33% to GBP6.4bn (2016: GBP4.8bn) - (Source: LSE AIM factsheet
December 2017), with Cenkos responsible for raising GBP1,346m,
equivalent to 21% (2016: GBP641m equivalent to 13%) of all funds
raised on AIM.
A summary of the revenues from the core business activities is
set out in the table below:
Revenue streams 2017 2016
GBP 000's GBP 000's
------------------- ---------- ----------
Corporate finance 44,030 29,720
Nomad and broking 5,273 5,481
Research 2,949 5,033
Execution 7,252 3,509
59,504 43,743
------------------- ---------- ----------
The uplift across the Firm's core activities reflects the hard
work and diligence of all the client facing teams, helped along by
good market conditions.
Business activities
Corporate finance
It is part of our culture to build strong, long-term
relationships with our corporate and investment trust clients
providing bespoke solutions to their needs. During 2017 we
completed 41 transactions (2016: 36) of which 6 were IPOs (2016: 4)
and 4 (2016: 10) were M&A advisory roles. We raised GBP2.5bn
(2016: GBP1.3bn) for our clients of which GBP1.3bn (2016: GBP0.6bn)
was raised on AIM.
Notable deals completed during the year include the IPO of Eddie
Stobart Logistics plc raising GBP393m, the secondary raisings of
GBP302m for Civitas Social Housing plc, GBP408m for Hurricane
Energy plc and GBP150m for Smart Metering Systems plc.
Nomad and Broking
Our client base is made up of 117 companies and investment funds
(2016: 116), of which 77 are AIM clients (2016: 72). We pride
ourselves in the service we provide those clients, which is
underpinned by our own requirements to comply with AIM rules. Our
corporate advisory capabilities are borne out of an experienced and
long-standing corporate finance team.
Research
High quality research and sales are at the heart of our research
business. This creates relationships of trust with our
institutional clients and is at the core of our distribution
capability. Covering over 170 companies (2016: 195) and 8 sectors
(2016: 12) our relatively small team of analysts is well placed to
continue to provide consistent high research levels in an area
where there is some uncertainty following the roll out of
MiFiDII.
Execution services
We make markets in over 300 stocks of which 151 are listed on
the Main Market of LSE. During the year we maintained a top three
market share in 83% (2016: 73%) of our clients' stock and number
one market share in 55% of our clients' stock (2016: 48%). With
access to multiple trading venues and liquidity providers, we are
able to deliver strong execution capability to our clients.
Our market makers provide skill and human effort that cannot be
found in dark pools or standalone electronic trading venues. During
2017, in addition to market making gains, Execution services
included GBP2.47 million of realised gains (2016: GBP0.83 million
losses) on the sale of shares received in lieu of fees.
Administrative expenses
Administrative expenses on continuing operations for the year
increased by GBP10.7m to GBP49.5m (2016: GBP38.8m) mainly
reflecting increased bonus payments to front line staff. In 2017
there has also been a number of reorganisation costs associated
with Board changes, investment in the compliance operating model
and regulatory projects. These are set out in the table below:
2017 2016
Administrative expenses GBP 000's GBP 000's
------------------------------- ---------- ----------
Other administrative expenses 47,719 38,064
Reorganisation costs 715 30
Regulatory projects 1,094 669
49,528 38,763
------------------------------- ---------- ----------
Average headcount increased to 123 (2016: 119) although we ended
the year with a headcount of 115 (2016: 121) following
rationalisation of some areas including closure of our Singapore
office and a reduction in the Edinburgh office. Headcount is
expected to rise in 2018 as we roll out the new compliance
operating model, invest in our surveillance and monitoring systems
and grow, selectively, all existing strategic business units.
Discontinued operations
Following a review of the long term prospects of Cenkos
Securities Asia Pte Limited by the Board, the business was closed
in November 2017. This change in strategy has reduced the conduct
risk profile of the Group. The losses for the period have been
disclosed as "discontinued operations" in the Consolidated Income
Statement.
Profit and earnings per share
Profit before tax on continuing operations increased by 97% to
GBP10.0m (2016: GBP5.1m). The tax charge for the year of GBP1.8m
(2016: GBP1.9m) equates to an effective tax rate of 20.1% (2016:
42.2%) on continuing and discontinued operations. This reflects the
non-allowable loss in relation to the closure of Cenkos Securities
Asia Pte Limited offset by movements in current and deferred tax
relating to share-based payments. Profit after tax increased by
183% to GBP7.2m (2016: GBP2.5m). Basic earnings per share from
continuing operations increased by 154% to 15.0p (2016: 5.9p).
Financial position
Our Consolidated statement of financial position strengthened
further during the year with net assets increasing to GBP29.7m
(2016: GBP27.2m). The increase in net asset position was
underpinned by an increase in cash and cash equivalents to GBP36.8m
(2016: GBP23.8m) due primarily to the improvement in business
performance. This was partially offset by an increase in trade and
other payables to GBP36.3m (2016: GBP32.6m) mainly due to an
increase in the accrual for performance related pay, a fall in the
resources tied up in net trading investments to GBP7.5m (2016:
GBP11.7m) and a fall in trade and other receivables to GBP20.8m
(2016: GBP24.5m). The fall in trade and other receivables was
mainly due to the inclusion within accrued income in 2016 of an
amount receivable from the Company's insurers in full and final
settlement for the insurable costs arising from the FCA's
investigation.
As at 31 December 2017, Cenkos had a capital resources surplus
of GBP9.6m (2016: GBP9.8m) in excess of the Pillar 1 regulatory
capital requirements. The Board continues to review the amount of
capital we hold over and above our minimum regulatory requirement
as part of the ICAAP and the cash balances required to meet the
working capital needs of the business as part of the ILAA
process,.
The Board's intention is to use earnings and cash flow to
underpin shareholder returns through a combination of dividend
payments and share buy backs into treasury. Our goal is to pay a
stable ordinary dividend, reinvest into our Firm and return excess
cash to shareholders subject to capital and liquidity requirements
and the prevailing market conditions and outlook. In view of this,
the Board is recommending a final dividend of 4.5p per share (2016:
5.0p per share) which results in a total dividend for the year of
9.0p per share (2016: 6p per share).
From time to time, we intend to repurchase shares to match
unvested share awards and manage our issued share capital.
Consolidated income statement
For the year ended 31 December 2017
Restated
2017 2016
GBP 000's GBP 000's
---------------------------------------------- ---------- ----------
Continuing operations
Revenue 59,504 43,743
Administrative expenses (49,528) (38,763)
Operating profit 9,976 4,980
Investment income - interest
receivable 23 83
Profit before tax from continuing operations
for the year 9,999 5,063
Tax (1,815) (1,858)
Profit after tax from continuing operations
for the year 8,184 3,205
Discontinued operations
Loss after tax from discontinued operations
for the year (973) (661)
Profit for the year 7,211 2,544
Attributable to:
Equity holders of Cenkos Securities
plc 7,211 2,544
From continuing operations
Basic earnings per share 15.0p 5.9p
Diluted earnings per share 15.0p n/a
From continuing and discontinued operations
Basic earnings per share 13.2p 4.7p
Diluted earnings per share 13.2p n/a
-------------------------------------------------- ---------- ----------
Consolidated statement of comprehensive income
For the year ended 31 December 2017
2017 2016
GBP 000's GBP 000's
------------------------------------------------------- ---------- ----------
Profit for the year 7,211 2,544
Amounts that will be recycled to the income statement
in future periods
(Loss) / gain on available-for-sale
financial assets (133) 79
Tax on available-for-sale
financial assets 26 (16)
Exchange differences on translation of
foreign operations (105) 105
Other comprehensive (expense) /
income for the year (212) 168
Total comprehensive income for
the year 6,999 2,712
Attributable to:
Equity holders of Cenkos
Securities plc 6,999 2,712
Consolidated statement of financial position
As at 31 December 2017
2017 2016
GBP 000's GBP 000's
------------------------------- ---------- ----------
Non-current assets
Property, plant and equipment 525 389
Deferred tax asset 738 236
1,263 625
Current assets
Trade and other receivables 20,798 24,526
Available-for-sale financial
assets 250 560
Other current financial
assets 10,615 13,811
Cash and cash equivalents 36,829 23,795
68,492 62,692
Total assets 69,755 63,317
Current liabilities
Trade and other payables (36,300) (32,560)
Other current financial
liabilities (3,341) (2,694)
(39,641) (35,254)
Net current assets 28,851 27,438
Non-current liabilities
Trade and other payables (366) (880)
Total liabilities (40,007) (36,134)
Net assets 29,748 27,183
Equity
Share capital 567 567
Share premium 3,331 3,331
Capital redemption reserve 195 195
Own shares (3,845) (3,556)
Available-for-sale reserve 58 165
Foreign currency translation
reserve - 105
Retained earnings 29,442 26,376
Total equity 29,748 27,183
Consolidated cash flow statement
For the year ended 31 December 2017
2017 2016
GBP 000's GBP 000's
------------------------------------------------------------ ---------- ----------
Profit for the year 7,211 2,544
Adjustments for:
Net finance income (23) (82)
Tax expense 1,815 1,858
Depreciation of property, plant
and equipment 242 182
Shares and options received
in lieu of fees (3,888) (5,770)
Share-based payment expense 1,560 803
Operating cash flows before movements in working capital 6,917 (465)
Decrease in net trading investments and available-for-sale
financial assets 7,908 4,886
(Increase) / decrease in trade
and other receivables 3,623 (6,055)
(Decrease) / increase in trade
and other payables 1,959 (218)
Net cash flow from operating activities before interest
and tax paid 20,407 (1,852)
Tax paid (1,334) (2,533)
Net cash flow from operating activities 19,073 (4,385)
Investing activities
Interest received 23 93
Purchase of property, plant and
equipment (378) (272)
Net cash inflow / (outflow) from investing activities (355) (179)
Financing activities
Dividends paid (5,201) (4,367)
Proceeds from sale of own shares to employee
share plans 66 58
Acquisition of own shares by EBT (549) (438)
Net cash used in financing activities (5,684) (4,747)
Net increase in cash and cash equivalents 13,034 (9,311)
Cash and cash equivalents at beginning of year 23,795 33,106
Cash and cash equivalents
at end of year 36,829 23,795
Consolidated statement of changes in equity
For the year ended 31 December 2017
Equity attributable to equity holders of the
parent
-------------------- ----------------------------------------------------------------------------- --------- --------
Foreign
Capital currency
Share Share redemption Own Available-for-sale translation Retained
capital premium reserve Shares reserve reserve earnings Total
GBP GBP GBP GBP GBP
000's 000's GBP 000's 000's GBP 000's GBP 000's 000's 000's
At 1 January 2016 567 3,321 195 (3,193) 102 - 27,576 28,568
-------------------- -------- -------- ----------- -------- ------------------- ------------- --------- --------
Profit for the year - - - - - - 2,544 2,544
Gain on
available-for-sale
financial assets
net of tax - - - - 63 - - 63
Exchange
differences on
translation of
foreign
operations - - - - - 105 - 105
-------------------- -------- -------- ----------- -------- ------------------- ------------- --------- --------
Total comprehensive
income for the
year - - - - 63 105 2,544 2,712
Transfer of shares
to employee share
plans - 10 - 48 - - 58
Transfer of shares
from share plans
to employees - - - 27 - - (27) -
Acquisition of own
shares by EBT - - - (438) - - - (438)
Credit to equity
for equity-settled
share-based
payments - - - - - - 803 803
Deferred tax on
share-based
payments - - - - - - (153) (153)
Dividends paid - - - - - - (4,367) (4,367)
At 31 December 2016 567 3,331 195 (3,556) 165 105 26,376 27,183
-------------------- -------- -------- ----------- -------- ------------------- ------------- --------- --------
Profit for the year - - - - - - 7,211 7,211
Gain on
available-for-sale
financial assets
net of tax - - - - (107) - - (107)
Exchange
differences on
translation of
foreign
operations - - - - - (105) - (105)
-------------------- -------- -------- ----------- -------- ------------------- ------------- --------- --------
Total comprehensive
income for the
year - - - - (107) (105) 7,211 6,999
Transfer of shares
to employee share
plans - - - 66 - - - 66
Transfer of shares
from share plans
to employees - - - 194 - - (194) -
Acquisition of own
shares by EBT - - - (549) - - - (549)
Credit to equity
for equity-settled
share-based
payments - - - - - - 1,250 1,250
Dividends paid - - - - - - (5,201) (5,201)
-------------------- -------- -------- ----------- -------- ------------------- ------------- --------- --------
At 31 December 2017 567 3,331 195 (3,845) 58 - 29,442 29,748
-------------------- -------- -------- ----------- -------- ------------------- ------------- --------- --------
Notes to the condensed consolidated financial statements
1. Accounting policies
General information
The consolidated financial information contained within this
announcement does not constitute statutory accounts for the year
ended 31 December 2017 within the meaning of Section 434 of the
Companies Act 2006, but is derived from those audited accounts. The
auditors reported on those accounts and their report was
unqualified and did not contain any statement under section 498(2)
or section 498(3) of the Companies Act 2006. The statutory accounts
for the year ended 31 December 2017 will be delivered to the
Registrar of Companies in due course. The annual report and
statutory accounts will be sent to shareholders and will be made
available to the public on the Company's website: www.cenkos.com
or, upon request, copies may be obtained from the Company Secretary
at the registered office of Cenkos Securities plc, 6.7.8.
Tokenhouse Yard, London, EC2R 7AS. The Company's Annual General
Meeting will be held on 15 May 2018.
The consolidated financial information contained within these
financial statements has been prepared on the historical cost
basis, except for the revaluation of certain financial
instruments.
Going concern
The Group's business activities, together with the factors
likely to affect its future development and performance, the
financial position of the Group, its cash flows and liquidity
position are set out in the Strategic Report. The financial
statements of the Group have been prepared on a going concern basis
as the Directors have satisfied themselves that, at the time of
approving the financial statements and having taken into
consideration the strength of the Group's statement of financial
position and cash balances, the Group has adequate resources to
continue in operational existence for at least the next 12 months
from the signing of these financial statements.
Basis of accounting
The consolidated financial information contained within these
financial statements has been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU) and in accordance with International
Financial Reporting Interpretations Committee (IFRIC)
interpretations and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS, and are in accordance
with the accounting policies that were applied in the Group's
statutory accounts for the year ended 31 December 2017.
2. Dividends
2017 2016
Amounts recognised as distributions to equity holders
in the year: GBP 000's GBP 000's
------------------------------------------------------------- ---------------- ----------
Amounts recognised as distributions to equity holders
in the year:
Second interim dividend for the year ended 31 December
2015 of 6p per share - 3,269
Final dividend for the year ended 31 December 2016 of
5.0p (2015: 1p) per share 2,743 550
Interim dividend for the period to 30 June 2017 of 4.5p
(June 2016: 1.0p) per share 2,458 548
5,201 4,367
A final dividend of 4.5p per share has been proposed for the year ended
31 December 2017 (2016: 5.0p). The proposed final dividend is subject
to approval at the Annual General Meeting and is not recognised as a
liability as at 31 December 2017.Subject to this final dividend being
approved by Shareholders at the Annual General Meeting on 15 May 2018,
the final dividend will be paid on 31 May 2018 to all shareholders on
the register at 4 May 2018. Under the CAP, the payment of a dividend
to ordinary shareholders will trigger a cash payment to holders of options
under the CAP. The payment of the final dividend will increase staff
costs by GBP0.52 million in the first half of 2018 (2016 final dividend
of 5p increased staff costs by GBP0.58 million in the first half of
2017). See note 22 for details of the CAP scheme.
3. Events after the reporting period
There were no material events to report on that occurred between
31 December 2017 and the date at which the Directors signed the
Annual Report.
4. Market abuse regulation (MAR) disclosure
Certain information contained in this announcement would have
been deemed to be inside information for the purposes of article 7
of Regulation (EU) No 596/2014 until the release of this
announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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