Source - RNS
RNS Number : 3823K
Cenkos Securities PLC
21 September 2016
 

 Unaudited Interim Financial Results for the six month period ended 30 June 2016

 

Cenkos Securities plc (the "Company" or "Cenkos") together with its subsidiaries (the "Group") is an independent, specialist institutional securities group, focused on small and mid-cap companies and investment funds. The Company'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

 

30-Jun-16

30-Jun-15

Revenue

- 71%

£15.3 m

£53.1 m

Profit before tax

- 91%

£1.7 m

£18.6 m

Cash

- 58%

£20.1 m

£48.2 m

Basic earnings per share

- 95%

1.2 p

26.1 p

Interim dividend per share declared

- 86%

1.0 p

7.0 p

 

Commenting on the interim results, Chief Executive Officer Jim Durkin noted:

 

"Our successful strategy of being a leading UK institutional broker to growth companies and investment funds has led to us being profitable in every year since our formation in 2005 and this continued into the first half of 2016 in spite of very difficult market conditions which meant a number of significant fundraisings slipped into the second half of 2016. Since formation in 2005 we have raised in excess of £15 billion of equity capital for our clients.

 

"We believe that, as one of the leading brokers in London for growth companies, we are well-placed to benefit from improvements in market conditions and have made a good start to the second half of the year. There is institutional demand to fund high quality companies and ideas and since July we have been engaged in relation to a number of significant fundraisings and our current pipeline is encouraging."

 

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

 

Interim Management Report

Review of performance

 

Overall performance

I am pleased to report that despite a much reduced level of revenue, we remained profitable and delivered £1.7 million of pre-tax profits in the six months ending 30 June 2016. Against a tough market environment, we continue to demonstrate the strength of our equity placing capabilities and raised a total of £529m in aggregate for our clients in H1 2016. Indeed, we have now raised in excess of £15.1 billion of equity for clients - mainly acting as sole broker - over our 11 year history.

H1 2015's results benefited from £26.7m of revenue from one large fundraising transaction, which did not reoccur in H1 2016. Excluding this, H1 2016's revenues fell 42% on the back of lower fundraisings and a number of significant fundraisings slipping into H2 2016. This was also reflected in lower performance-related pay. Profit before tax was £1.7 million (H1 2015: £18.6 million) and basic earnings per share fell to 1.2p (H1 2015: 26.1p).

 

Revenues

Revenue for the period decreased by 71% to £15.3 million (H1 2015: £53.1 million). In H1 2016 we raised £529 million for our clients (H1 2015: £2,020 million - including £1,029 million for BCA Marketplace plc). Excluding the impact of this large deal in 2015, the 42% fall in revenues reflects quieter equity markets - including AIM - than those experienced in H1 2015. Against the backdrop of the Brexit vote and wider European macro-economic uncertainty, total funds raised by AIM companies fell by 30% to £1,931 million in H1 2016, when compared to H1 2015 (source: LSE AIM factsheet June 2016).

We remain ranked as one of the leading brokers in London for growth companies, as demonstrated by Adviser Rankings Limited's July 2016 'AIM Adviser Rankings Guide' where we were ranked number 2 Nominated Adviser by number of AIM clients and number 3 Nominated Adviser by client market capitalisation. We were also ranked top Nominated Adviser for 'Oil and Gas', top stockbroker (by client market capitalisation) for 'Industrials', joint top stockbroker for 'Consumer Services' (by number of clients) and number 3 Nominated Adviser for 'Technology' companies by number of AIM clients. The size of our corporate client base (where the Company is retained as Nominated Adviser / broker and / or financial adviser) fell slightly to 119 at 30 June 2016 (H1 2015: 125).

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 339 (H1 2015: 342) companies and investment funds. Importantly, we maintained a top three market share in 70% of our clients' shares and the top market share in 44%.

 

Costs

Costs fell 60% to £13.7 million in the period, primarily due to lower performance-related pay on the back of lower levels of revenue. Additionally, in August 2016 we were fined £530,500 by the FCA for regulatory breaches following an investigation into the Company's role as sponsor to Quindell plc ("Quindell") (now known as Watchstone Group plc) in relation to Quindell's planned move from AIM to the premium segment of the main market of the LSE in June 2014 and into the Company's systems and controls in relation to its sponsor services. We have accrued for this cost in these results, and incurred costs in H1 2016 (and in prior years) to address the issues raised by the FCA. The FCA's investigation of the Company was concluded in August 2016, with the FCA acknowledging the extensive remediation programme undertaken by the Company in order to enhance and improve its systems and controls in relation to its sponsor services. See note 16 to these results.

We also incurred an expense of £0.9 million (H1 2015: £2.1 million) due to staff costs resulting from the Compensatory Award Phantom Dividend Plan 2009 (the "CAP"). Payments under this scheme are triggered only by the payment of a dividend to ordinary shareholders. A CAP cost was incurred during the period as a result of the second interim and final dividend for 2015 totalling 7p paid in H1 2016. This compares to a H1 2015 CAP cost incurred in respect of a 10p 2014 final dividend.

We are pleased to report that we have now formally opened our Singapore office - the Monetary Authority of Singapore approved Cenkos Securities Asia Pte. Ltd's application for a Capital Markets Services Licence on 27 June 2016. Our Singapore office will help facilitate flows between Asia and the UK. In particular, we plan to use this office to assist our clients in capital raising in the region, to help Asian corporates raise capital and to help Asian corporates sell or list their UK assets.

 

Profit and earnings per share

Profit before tax decreased by 91% to £1.7 million (H1 2015: £18.6 million) and profit after tax decreased by 96% to £0.7 million (H1 2015: £14.6 million). Our basic earnings per share ("EPS") fell by 95% to 1.2p.

 

Statement of consolidated financial position and cash flow

At 30 June 2016, our net trading investments were £6.6 million (H1 2015: £6.5 million), and cash held was £20.1 million (H1 2015: £48.2 million). During the six months to 30 June 2016 there was a net decrease in cash and cash equivalents of £13.0 million. This is largely due to the payment of accrued bonuses in respect of 2015, the 2015 second interim and 2015 final dividend (totalling 7p per share) and corporation tax payments which were offset partly by operating cash flow in H1 2016.

 

Dividend and capital levels

We aim to retain sufficient capital and reserves to meet our regulatory capital and cash requirements after taking account of the likely future working capital needs and potential growth requirements.

Since our flotation on AIM in October 2006, we have paid out 115.5p in dividends (prior to the 1p proposed interim dividend for 2016) and bought back 19.5 million shares at a cost of £25.4 million for cancellation, thereby increasing the Group's prospective earnings per share. We have therefore returned £102.3 million of cash to shareholders, equivalent to 154.8p per share (before 2016's interim dividend) since our flotation in 2006.

The Board proposes an interim dividend of 1p per share reflecting the earnings per share of H1 2016. The payment of this interim dividend will trigger payments to staff under the CAP of £0.1 million in H2 2016 (H2 2015: £1.0 million). The dividend will be paid on 7 November 2016 to all shareholders on the register at 7 October 2016.

On 28 April 2016 Cenkos announced that the trustees of the Cenkos EBT had launched a share purchase plan to buy up to £50,000 of Cenkos shares a month. 102,000 shares were purchased in H1 2016 under this plan at a cost of £142,571. The increase in the size of the Company's EBT reflects, in part, the potential future demand for Cenkos' shares to satisfy share awards under the Company's 2015 deferred bonus scheme.

 

People

We continue to look to recruit staff who are attracted by our culture and business model, and are pleased that we now have five highly experienced staff in our newly licensed Singapore office. Since the beginning of the year up to the date of this report, we have also recruited in the UK a deputy head of sponsor services, as well as a number of analysts and sales executives.

 

Principal risks and uncertainties

Given the results of the Brexit referendum, there is increased uncertainty in equity markets and we continue to monitor the situation. Aside from this, 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 2015 Annual Report, namely the health of UK equity markets as well as reputational, operational, regulatory, conduct and market risk. Notwithstanding these, 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, conduct 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. 

 

Outlook

We have made a good start to the second half of the year. There is institutional demand to fund high quality companies and ideas. Since July we have been engaged in relation to a number of significant fundraisings and our pipeline for the rest of the year is encouraging.

 

Jim Durkin

Chief Executive Officer

21 September 2016

 

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 2016; and

b) The interim management report 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 Group 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 Group 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 2016

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

 

Notes

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

Continuing operations

 

 

 

 

 

 

Revenue

 

 

2

15,344

53,115

76,513

Administrative expenses

 

 

 

(13,726)

(34,607)

(56,751)

 

 

 

 

 

 

 

Operating profit

 

 

 

1,618

18,508

19,762

 

 

 

 

 

 

 

Investment income - interest income

 

 

 

32

65

138

Interest expense

 

 

 

-

(3)

(4)

 

 

 

 

 

 

 

Profit before tax from continuing operations 

 

 

1,650

18,570

19,896

Tax

 

 

3

(997)

(3,936)

(4,525)

 

 

 

 

 

 

 

Profit after tax

 

 

 

653

14,634

15,371

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

Equity holders of Cenkos Securities plc

 

653

14,634

15,371

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

5

1.2p

26.1p

27.2p

 

 

 

 

 

 

 

Diluted earnings per share

 

 

5

n/a

24.1p

26.8p

 

 

 

 

 

 

 

 

Condensed consolidated statement of comprehensive income

For the six months ended 30 June 2016

 

 

 

 

 

Unaudited

Unaudited

Audited

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit 

 

 

 

653

14,634

15,371

 

 

 

 

 

 

 

Amounts that will be recycled to income statement in future periods

 

 

 

Gain / (loss) on available-for-sale financial assets

 

 

38

(2)

(2)

Tax on available-for-sale financial assets

 

 

(7)

-

-

Exchange differences on translation of foreign operations

 

83

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

114

(2)

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

767

14,632

15,369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

Equity holders of Cenkos Securities plc

 

 

 

767

14,632

15,369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed consolidated statement of financial position

As at 30 June 2016

 

 

 

 

Unaudited

Unaudited

Audited

 

 

 

Notes

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

 

6

318

380

296

Deferred tax asset

 

 

11

383

2,151

1,330

 

 

 

 

 

 

 

 

 

 

 

701

2,531

1,626

Current assets

 

 

 

 

 

 

Trade and other receivables

 

 

7

26,810

37,103

18,354

Available-for-sale financial assets

 

 

 

447

559

559

Other current financial assets

 

 

8

8,316

10,844

12,706

Cash and cash equivalents

 

 

9

20,067

48,218

33,106

 

 

 

 

 

 

 

 

 

 

 

55,640

96,724

64,725

 

 

 

 

 

 

 

Total assets

 

 

 

56,341

99,255

66,351

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

 

 

10

(28,500)

(55,224)

(34,881)

Other current financial liabilities

 

 

8

(1,715)

(4,341)

(2,551)

 

 

 

 

 

 

 

 

 

 

 

(30,215)

(59,565)

(37,432)

 

 

 

 

 

 

 

Net current assets

 

 

 

25,425

37,159

27,293

 

 

 

 

 

 

 

Non-current  liabilities

 

 

 

 

 

 

Trade and other payables

 

 

10

(521)

-

(351)

 

 

 

 

 

 

 

Total liabilities

 

 

 

(30,736)

(59,565)

(37,783)

 

 

 

 

 

 

 

Net assets

 

 

 

25,605

39,690

28,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Share capital

 

 

12

567

599

567

Share premium

 

 

 

3,334

2,061

3,321

Capital redemption reserve

 

 

 

195

150

195

Own shares

 

 

13

(3,280)

(3,203)

(3,193)

Available-for-sale reserve

 

 

 

133

102

102

Foreign currency translation reserve

 

 

 

83

-

-

Retained earnings

 

 

 

24,573

39,981

27,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

 

 

25,605

39,690

28,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed consolidated cash flow statement

For the six months ended 30 June 2016

 

 

 

 

Unaudited

Unaudited

Audited

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

 

Notes

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

Profit after tax

 

 

 

653

14,634

15,371

Adjustments for:

 

 

 

 

 

 

Net finance income

 

 

 

(32)

(61)

(134)

Tax expense

 

 

 

997

3,936

4,525

Depreciation of property, plant and equipment

 

 

84

104

241

Gain / (loss) on available-for-sale financial assets

 

 

31

(2)

(2)

Exchange differences on translation of foreign operations

 

80

-

-

Shares and options received in lieu of fees

 

 

-

(1,232)

(4,967)

Transfer of shares from SIP to employees

 

 

18

-

-

Share-based payment expense

 

 

 

316

339

502

 

 

 

 

 

 

 

Operating cash flows before movements in working capital

2,147

17,718

15,536

 

 

 

 

 

 

 

Decrease in net trading investments

 

 

3,666

2,204

2,285

(Increase) / decrease in trade and other receivables

 

 

(8,459)

(17,377)

1,367

(Decrease) / increase in trade and other payables

 

 

(4,475)

30,849

12,538

 

 

 

 

 

 

 

Net cash flow from operating activities before interest and tax paid

(7,121)

33,394

31,726

 

 

 

 

 

 

 

Interest paid

 

 

 

-

(3)

(4)

Tax paid

 

 

 

(1,939)

(2,837)

(5,049)

 

 

 

 

 

 

 

Net cash flow from operating activities

(9,060)

30,554

26,673

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

Interest received

 

 

 

35

56

133

Purchase of property, plant and equipment

 

6

(103)

(65)

(174)

Reclassification of stamp duty

 

 

 

-

-

58

 

 

 

 

 

 

 

Net cash (outflow) / inflow from investing activities

 

 

(68)

(9)

17

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

Dividends paid

 

 

 

(3,819)

(5,656)

(9,740)

Proceeds from issue of own shares

 

 

 

-

1,847

3,099

Proceeds from sale of own shares to employee share plans

 

51

15

47

Acquisition of own shares by EBT

 

 

 

(143)

-

-

Acquisition of own shares for cancellation

 

 

-

(10,767)

(18,777)

Acquisition of CAP options cancelled as part of tender offer buy-back

 

-

(698)

(1,145)

 

 

 

 

 

 

 

Net cash used in financing activities

 

(3,911)

(15,259)

(26,516)

 

 

 

 

 

 

 

Net (decrease) / increase in cash and cash equivalents

(13,039)

15,286

174

Cash and cash equivalents at beginning of period

33,106

32,932

32,932

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

9

20,067

48,218

33,106

 

 

 

 

 

 

 

 

Condensed consolidated statement of changes in equity

For the six months ended 30 June 2016

 

Share capital

Share premium

Capital redemption reserve

Own shares

Available-for-sale reserve

Foreign currency translation reserve

Retained earnings

Total

 

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

 

 

Balance at 1 January 2015

637

232

93

(3,218)

104

-

41,713

39,561

Profit

-

-

-

-

-

-

14,634

14,634

Loss on available-for-sale financial assets net of tax

-

-

-

-

(2)

-

-

(2)

Total comprehensive income

-

-

-

-

(2)

-

14,634

14,632

 

 

 

 

 

 

 

 

 

Shares issued in the period

19

1,829

-

-

-

-

-

1,848

Transfer of shares to employee share plans

-

-

-

15

-

-

-

15

Acquisition of own shares for cancellation

(57)

-

57

-

-

-

(10,767)

(10,767)

Charge to equity for cancelled CAP options

-

-

-

-

-

-

(698)

(698)

Credit to equity for equity-settled share-based payments

-

-

-

-

-

-

339

339

Deferred tax on share-based payments

-

-

-

-

-

-

39

39

Current tax on share-based payments

-

-

-

-

-

-

377

377

Dividends paid

-

-

-

-

-

-

(5,656)

(5,656)

 

 

 

 

 

 

 

 

 

Balance at 30 June 2015

599

2,061

150

(3,203)

102

-

39,981

39,690

 

 

 

 

 

 

 

 

 

Profit

-

-

-

-

-

-

737

737

Total comprehensive income

-

-

-

-

-

-

737

737

 

 

 

 

 

 

 

 

 

Shares issued in the period

13

1,238

-

-

-

-

-

1,251

Transfer of shares to employee share plans

-

22

-

10

-

-

-

32

Acquisition of own shares for cancellation

(45)

-

45

-

-

-

(8,010)

(8,010)

Charge to equity for cancelled CAP options

-

-

-

-

-

-

(447)

(447)

Credit to equity for equity-settled share-based payments

-

-

 

-

-

-

163

163

Deferred tax on share-based payments

-

-

-

-

-

-

(942)

(942)

Current tax on share-based payments

-

-

-

-

-

-

178

178

Dividends paid

-

-

-

-

-

-

(4,084)

(4,084)

 

 

 

 

 

 

 

 

 

Balance at 31 December 2015

567

3,321

195

(3,193)

102

-

27,576

28,568

 

 

 

 

 

 

 

 

 

 

Share capital

Share premium

Capital redemption reserve

Own shares

Available-for-sale reserve

Foreign Currency Translation Reserve

Retained earnings

Total

 

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

 

 

Balance at 1 January 2016

567

3,321

195

(3,193)

102

-

27,576

28,568

Retained profit

-

-

-

-

-

-

653

653

Gain on available-for-sale financial assets net of tax

-

-

-

-

31

-

-

31

Exchange differences on translation of foreign operations

-

-

-

-

-

83

-

83

Total comprehensive income

-

-

-

-

31

83

653

767

 

 

 

 

 

 

 

 

 

Transfer of shares to employee share plans

-

13

-

38

-

-

-

51

Transfer of shares to employees

-

-

-

18

-

-

(18)

-

Acquisition of own shares

-

-

-

(143)

-

-

-

(143)

Credit to equity for equity-settled share-based payments

-

-

-

-

-

-

334

334

Deferred tax on share-based payments

-

-

-

-

-

-

(153)

(153)

Dividends paid

-

-

-

-

-

-

(3,819)

(3,819)

 

 

 

 

 

 

 

 

 

Balance at 30 June 2016

567

3,334

195

(3,280)

133

83

24,573

25,605

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

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 2016 are unaudited and were approved by the Board of Directors for issue on 21 September 2016.

The Company is incorporated in the United Kingdom under the Companies Act 2006 (company registration No. 05210733), and its 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 international financial reporting standards 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.

Where appropriate prior year figures have been restated to conform to the current year presentation.

 

Basis of accounting

The interim condensed consolidated financial statements for the six months ended 30 June 2016 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 Group's annual financial statements for the year ended 31 December 2015.
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2015, 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 Group'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 2015 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 Group's business activities, together with the factors likely to affect its future development and performance, its principal risks and uncertainties, the financial position of the Group, its cash flows and liquidity position are set out in the Strategic Report in the Group's Annual Report for the year ended 31 December 2015.

The Directors are satisfied that the Group 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 became effective and were adopted by the Group, none of which had a material impact on the Group'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 2016, one of Cenkos' clients contributed more than 10% of Cenkos' total revenue. The amount was £2.69 million (six months ended 30 June 2015: £26.75 million; year ended 31 December 2015: £26.75 million).

Revenue streams

 

 

 

Six months ended

Six months ended

Year ended

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Corporate finance and placing fees

 

 

 

9,675

43,075

60,069

Corporate broking, market-making, research and commission revenue

 

5,669

10,040

16,444

 

 

 

 

 

 

 

 

 

 

 

15,344

53,115

76,513

 

 

 

 

 

 

 

 

3. Tax

The tax charge comprises:

 

 

 

Six months ended

Six months ended

Year ended

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Current tax

 

 

 

 

 

 

United Kingdom corporation tax at 20% (2015: 20.25%) based on the profit for the period

203

4,006

4,639

 

 

 

 

 

 

 

Adjustment in respect of prior period

 

 

 

 

 

 

United Kingdom corporation tax at 20% (2015: 20.25%)

 

 

-

-

76

 

 

 

 

 

 

 

Total current tax

 

 

 

203

4,006

4,715

 

 

 

 

 

 

 

Deferred tax

 

 

 

 

 

 

Charge / (credit) on account of temporary differences

 

 

794

(70)

(112)

Deferred tax prior period adjustment

 

 

 

-

-

(78)

 

 

 

 

 

 

 

Total deferred tax (refer to note 11)

 

 

 

794

(70)

(190)

 

 

 

 

 

 

 

Total tax on profit on ordinary activities from continuing operations

 

997

3,936

4,525

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The tax charge for the period differs from that resulting from applying the standard rate of UK corporation tax of 20% (2015: 20.25%) to the profit before tax for the reasons set out in the following reconciliation:

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Profit before tax from continuing operations

 

 

1,650

18,570

19,896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax on profit on ordinary activities at the UK corporation tax rate of 20% (2015: 20.25%)

330

3,760

4,029

Tax effect of:

 

 

 

 

 

 

Non-deductible expenses for tax purposes

 

 

152

78

139

Current year losses of overseas subsidiary for which no deferred tax asset has been recognised

54

27

73

Share-based payments

 

 

 

503

70

166

Deferred tax rate change adjustment

 

 

 

(42)

1

120

Adjustment in respect of prior period deferred tax

 

 

-

-

(78)

Adjustment in respect of prior period current tax

 

 

-

-

76

 

 

 

 

 

 

 

Tax expense for the period

 

 

 

997

3,936

4,525

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In addition to the tax expense presented in the income statement, the following amounts have been recognised directly in equity:

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Other Comprehensive Income (OCI)

 

 

 

 

 

 

Current tax expense arising on available-for-sale financial asset

 

7

-

-

 

 

 

 

 

 

 

Statement of Changes in Equity (SOCIE)

 

 

 

 

 

 

Current tax credit arising on share-based payments

 

 

-

(377)

(555)

Deferred tax charge / (credit) arising on share-based payments

 

153

(39)

903

 

 

 

 

 

 

 

Total income tax recognised directly in equity

 

 

160

(416)

348

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4. Dividends

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

Amounts recognised as distributions to equity holders in the period:

 

 

 

 

Second interim dividend for the year ended 31 December 2015 of 6.0p (2014: nil) per share

3,269

-

-

Final dividend for the year ended 31 December 2015 of 1.0p (2014: 10p) per share

550

5,656

5,656

Interim dividend for the period to 30 June 2015 of 7.0p (June 2014: 7.0p) per share

-

-

4,084

 

 

 

 

 

 

 

 

 

 

 

3,819

5,656

9,740

 

 

 

 

 

 

 

 

The proposed interim dividend for 30 June 2016 of 1.0p (30 June 2015: 7.0p) per share was approved by the Board on 21 September 2016 and has not been included as a liability as at 30 June 2016. The dividend will be payable on 7 November 2016 to all shareholders on the register at 7 October 2016.

Under the Compensatory Award Plan ("CAP"), as described in the 2015 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 £0.12 million in the second half of 2016 (7.0p 2015 interim dividend increased staff costs by £0.99 million in the second half of 2015).

 

5. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

 

 

 

 

Six months ended

Six months ended

Year ended

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

 

1.2p

26.1p

27.2p

 

 

 

 

 

 

 

Diluted earnings per share

 

 

 

n/a

24.1p

26.8p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the period ended 30 June 2016, the share options were antidilutive due to the interaction of the dividends paid in the period and the share price.

 

 

 

 

 

 

 

Earnings

 

 

 

 

£ 000's

£ 000's

£ 000's

Earnings for the purpose of basic earnings per share being net profit attributable to equity holders of the parent

653

14,634

15,371

Effect of dilutive potential ordinary shares:

 

 

 

 

 

   Share options

 

 

 

111

496

498

 

 

 

 

 

 

 

Earnings for the purpose of diluted earnings per share

 

 

764

15,130

15,869

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No.

No.

No.

Number of shares

 

 

 

 

 

 

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

54,421,225

56,046,643

56,512,222

Effect of dilutive potential ordinary shares:

 

 

 

 

 

   Share options

 

 

 

1,538,733

4,750,534

2,804,098

 

 

 

 

 

 

 

Weighted average number of ordinary shares for the purpose of diluted earnings per share

55,959,958

60,797,177

59,316,320

 

 

 

 

 

 

 

 

 

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, 102,000 shares were purchased at an aggregate consideration of £0.14 million (2015: no further shares were purchased). In addition, 608,430 shares (30 June 2015: 14,323 shares, 31 December 2015: 25,400 shares) were transferred out of the EBT at average cost to the Cenkos Securities plc Share Incentive Plan Trust to satisfy awards under that scheme and dividends earned which were reinvested by employees in further shares. As at 30 June 2016 the EBT held a total of 2,279,200 (30 June 2015: 2,796,707, 31 December 2015: 2,785,630) ordinary shares at an aggregate consideration of £2.37 million (30 June 2015: £2.86 million, 31 December 2015: £2.85 million). These shares held by the EBT have been excluded from the weighted average number of shares calculation up to this date.
As at 30 June 2016 the Cenkos Securities plc Share Incentive Plan Trust held a total of 892,166 (30 June 2015: 338,174, 31 December 2015: 338,174) Free and Matching ordinary shares at an aggregate consideration of £0.91 million (30 June 2015: £0.35 million, 31 December 2015: £0.35 million).
As at 30 June 2016, in total these trusts held 3,171,366 (30 June 2015: 3,134,881 shares, 31 December 2015: 3,123,804 shares) at an aggregate consideration of £3.28 million (30 June 2015: £3.20 million, 31 December 2015: £3.20 million) as shown in note 13.

 

6. Property, plant and equipment

During the period, the Group spent approximately £102,864 (30 June 2015: £64,581, 31 December 2015: £174,249) on property, plant and equipment. This mostly related to the purchase of IT equipment.

 

 

 

 

 

 

 

 

7. Trade and other receivables

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

Current assets

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

Market and client receivables

 

 

 

23,833

34,794

15,458

Loans due from staff

 

 

 

50

8

6

Accrued income

 

 

 

1,093

889

1,435

Other receivables

 

 

 

816

487

707

 

 

 

 

 

 

 

 

 

 

 

25,792

36,178

17,606

Non-financial assets

 

 

 

 

 

 

Prepayments

 

 

 

1,018

925

748

 

 

 

 

 

 

 

 

 

 

 

26,810

37,103

18,354

 

 

 

 

 

 

 

 

As at 30 June 2016 the ageing analysis of trade and other receivables is as follows:

 

 

 

 

 

Neither

Past due but not impaired

 

Total

past due nor impaired

< 30 days

30-60 days

61-90 days

> 91 days

 

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

30 June 2016

26,810

24,971

1,199

388

88

164

30 June 2015

37,103

31,215

4,062

1,384

216

225

31 December 2015

18,354

15,627

2,657

61

6

3

 

8. Other current financial assets and liabilities

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

Financial assets at FVTPL

 

 

 

 

 

 

Trading investments carried at fair value

8,223

10,769

12,604

Derivative financial assets - share options and warrants

 

93

75

102

 

 

 

 

 

 

 

 

 

 

 

8,316

10,844

12,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities at FVTPL

 

 

 

 

 

 

Contractual obligation to acquire securities

 

 

(1,715)

(4,341)

(2,551)

 

 

 

 

 

 

 

Gains / losses from financial assets and liabilities at FVTPL are included within 'Revenue' in the Condensed Consolidated Income Statement.

 

9. Cash and cash equivalents

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

20,067

48,218

33,106

 

 

 

 

 

 

 

 

10. Trade and other payables

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

Current liabilities

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

Trade creditors

 

 

 

19,317

24,337

9,727

Other creditors

 

 

 

335

630

867

 

 

 

 

 

 

 

 

 

 

 

19,652

24,967

10,594

Non-financial liabilities

 

 

 

 

 

 

Accruals and deferred income

 

 

 

8,642

26,634

22,345

Corporation tax payable

 

 

 

206

3,623

1,942

 

 

 

 

 

 

 

 

 

 

 

8,848

30,257

24,287

 

 

 

 

 

 

 

 

 

 

 

28,500

55,224

34,881

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Non-financial liabilities

 

 

 

 

 

 

Cash-settled deferred bonus scheme

 

 

 

521

-

351

 

 

 

 

 

 

 

 

11. Deferred tax

Deferred tax arises on all taxable and deductible temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The following are the deferred tax assets and liabilities recognised by the Group and the Company and the movement thereon during the current and prior reporting periods.

 

 

 

 

 

 

 

 

 

 

Group and Company

 

 

 

temporary differences

 

 

Bonus payments

Property, plant

Share-based

 

 

 

 

deferred

and equipment

payments

Total

 

 

 

£ 000's

£ 000's

£ 000's

£ 000's

At 31 December 2014

 

 

242

6

1,794

2,042

Reversal and origination of temporary differences credit / (expense)

143

(11)

(62)

70

Deferred tax credit to equity

 

 

-

-

39

39

 

 

 

 

 

 

 

At 30 June 2015

 

 

385

(5)

1,771

2,151

Reversal and origination of temporary differences credit / (expense)

198

13

(168)

43

Deferred tax prior year adjustment credit

78

-

-

78

Deferred tax charge to equity

 

 

-

-

(942)

(942)

 

 

 

 

 

 

 

At 31 December 2015

 

 

661

8

661

1,330

Origination of temporary differences expense

(198)

(13)

(584)

(795)

Deferred tax charge to equity

 

 

1

-

(153)

(152)

 

 

 

 

 

 

 

At 30 June 2016

 

 

464

(5)

(76)

383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A 21% corporate tax rate came into effect from 1 April 2014 and fell to 20% with effect from 1 April 2015. In the Summer Budget 2015 the Government announced a further reduction in the main rate of corporation tax to 19% from 1 April 2017 and 18% from 1 April 2020. These changes were substantially enacted on 18 November 2015. 
This will reduce the Company's future current tax charge accordingly.
The deferred tax balances at 30 June 2016 have been stated at 19% as this is the expected 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. The unrecognised deferred tax asset in respect of capital losses carried forward is gross £302,261 (net £57,430 at 19%). 
In addition, during the period, Cenkos Securities Asia Pte. Ltd. incurred costs of £276,308 but has only just started to trade. A deferred tax asset has not been recognised as future utilisation of the losses is dependent on future taxable profits which are uncertain. The unrecognised deferred tax asset in respect of the overseas subsidiary's trading losses carried forward is gross £851,875 (net £144,819 at 17%).

 

12. Share capital

The issued share capital as at 30 June 2016 amounted to £566,948 (30 June 2015: £598,767, 31 December 2015: £566,948).

 

 

 

 

 

 

 

1 January 2015 to 31 December 2015

Date

Ordinary shares of 1p each

Event

09 January 2015

5,727,340 were cancelled

tender offer to buy back shares

16 April 2015

 35,000 were issued

exercise of 35,000 LTIP options

21 April 2015

 200,000 were issued

exercise of 200,000 LTIP options

22 April 2015

 750,000 were issued

exercise of 750,000 LTIP options

24 April 2015

 190,000 were issued

exercise of 190,000 LTIP options

27 April 2015

 100,000 were issued

exercise of 100,000 LTIP options

28 April 2015

 100,000 were issued

exercise of 100,000 LTIP options

29 April 2015

 10,000 were issued

exercise of 10,000 LTIP options

11 May 2015

 150,000 were issued

exercise of 150,000 LTIP options

27 May 2015

 85,000 were issued

exercise of 85,000 LTIP options

01 June 2015

 10,000 were issued

exercise of 10,000 LTIP options

08 June 2015

 25,000 were issued

exercise of 25,000 LTIP options

11 June 2015

 140,000 were issued

exercise of 140,000 LTIP options

16 June 2015

 97,000 were issued

exercise of 97,000 LTIP options

 

02 July 2015

95,000 were issued

exercise of 95,000 LTIP options

 

16 July 2015

25,000 were issued

exercise of 25,000 LTIP options

 

17 August 2015

25,000 were issued

exercise of 25,000 LTIP options

 

21 September 2015

100,000 were issued

exercise of 100,000 LTIP options

 

22 September 2015

515,000 were issued

exercise of 515,000 LTIP options

 

24 September 2015

25,000 were issued

exercise of 25,000 LTIP options

 

29 September 2015

450,000 were issued

exercise of 450,000 LTIP options

 

30 September 2015

33,000 were issued

exercise of 33,000 LTIP options

 

29 November 2015

4,450,000 were cancelled

tender offer to buy back the shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 January 2016 to 30 June 2016

 

 

 

 

 

 

There were no shares issued or cancelled during the period.

 

 

 

 

 

13. Own shares

Own shares represent the cost of shares purchased by the Company's Employee Benefit Trust ("EBT") and those transferred to the Cenkos Securities plc Share Incentive Plan ("SIP").

The EBT was established by the Company in 2009. It is funded by the Company and has the authority to acquire Cenkos Securities plc shares. During the period, 102,000 shares were purchased at an aggregate consideration of £0.14 million (2015: no further shares were purchased). In addition, 608,430 shares (30 June 2015: 14,323 shares, 31 December 2015: 25,400 shares) were transferred out of the EBT at average cost to the Cenkos Securities plc Share Incentive Plan Trust to satisfy awards under that scheme and dividends earned which were reinvested by employees in further shares. As at 30 June 2016 the EBT held a total of 2,279,200 (30 June 2015: 2,796,707, 31 December 2015: 2,785,630) ordinary shares at an aggregate consideration of £2.37 million (30 June 2015: £2.86 million, 31 December 2015: £2.85 million). These shares held by the EBT have been excluded from the weighted average number of shares calculation up to this date.

As at 30 June 2016 the Cenkos Securities plc Share Incentive Plan Trust held a total of 892,166 (30 June 2015: 338,174, 31 December 2015: 338,174) Free and Matching ordinary shares at an aggregate consideration of £0.91 million (30 June 2015: £0.35 million, 31 December 2015: £0.35 million).

As at 30 June 2016, in total these trusts held 3,171,366 (30 June 2015: 3,134,881 shares, 31 December 2015: 3,123,804 shares) at an aggregate consideration of £3.28 million (30 June 2015: £3.20 million, 31 December 2015: £3.20 million).

 

 

 

 

 

 

 

 

Six months ended

Six months ended

Year ended

 

30 June 2016

30 June 2015

31 December 2015

Shares held by EBT

Number

 

Number

 

Number

 

 

of shares

£ 000's

of shares

£ 000's

of shares

£ 000's

At 1 January

2,785,630

2,847

2,811,030

2,872

2,811,030

2,872

Acquired during the period

102,000

143

-

-

-

-

Transferred to Cenkos Securities plc Share Incentive Plan

 

 

 

 

     Free shares

(292,160)

(298)

-

-

-

-

     Matching shares

(279,590)

(285)

-

-

-

-

     Dividend reinvestment

(36,680)

(38)

(14,323)

(15)

(25,400)

(25)

 

 

 

 

 

 

 

At the period ended

2,279,200

2,369

2,796,707

2,857

2,785,630

2,847

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free and Matching shares held by

Number

 

Number

 

Number

 

Cenkos Securities plc Share Incentive Plan

of shares

£ 000's

of shares

£ 000's

of shares

£ 000's

At 1 January

338,174

346

338,174

346

338,174

346

Transferred from the EBT

 

 

 

 

 

 

     Free shares

292,160

298

-

-

-

-

     Matching shares

279,590

285

-

-

-

-

Shares transferred to employees

(17,758)

(18)

-

-

-

-

 

 

 

 

 

 

 

At the period ended

892,166

911

338,174

346

338,174

346

 

 

 

 

 

 

 

Own shares held at the period ended

3,171,366

3,280

3,134,881

3,203

3,123,804

3,193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14. Financial instruments

Risk management objectives

For further information relating to the principal risks faced by the Group and how it mitigates and manages this exposure please refer to the Strategic Report in the 2015 Annual Report.

 

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 requirements and has complied with these requirements during and subsequent to the period under review.

As at 30 June 2016, Cenkos Securities plc had a solvency ratio of 172% (30 June 2015: 170%, 31 December 2015: 208%).

 

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 Group's financial statements for the year ended 31 December 2015.

The carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values. For further information concerning the Group's financial assets and liabilities please refer to notes 7, 8 and 10.

 

 

 

 

 

 

 

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)
The Group held the following financial instruments measured at fair value:

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

As at 30 June 2016

 

 

£ 000's

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Available-for-sale financial assets

 

 

-

-

447

447

Financial assets at FVTPL

 

 

 

 

 

 

Derivative financial assets

 

 

-

-

93

93

Trading investments carried at fair value

 

8,223

-

-

8,223

 

 

 

8,223

-

93

8,316

 

 

 

 

 

 

 

 

 

 

8,223

-

540

8,763

 

 

 

 

 

 

 

Financial liabilities at FVTPL

 

 

 

 

 

 

Contractual obligation to acquire securities

 

1,715

-

-

1,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There were no transfers between Level 1, 2 and 3 during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

As at 30 June 2015

 

 

£ 000's

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Available-for-sale financial assets

 

 

-

-

559

559

Financial assets at FVTPL

 

 

 

 

 

 

Derivative financial assets

 

 

-

-

75

75

Trading investments carried at fair value

 

10,769

-

-

10,769

 

 

 

10,769

-

75

10,844

 

 

 

 

 

 

 

 

 

 

10,769

-

634

11,403

 

 

 

 

 

 

 

Financial liabilities at FVTPL

 

 

 

 

 

 

Contractual obligation to acquire securities

 

4,341

-

-

4,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There were no transfers between Level 1, 2 and 3 during the period.

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

As at 31 December 2015

 

 

£ 000's

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Available-for-sale financial assets

 

 

-

-

559

559

Financial assets at FVTPL

 

 

 

 

 

 

Derivative financial assets

 

 

-

-

102

102

Trading investments carried at fair value

 

12,604

-

-

12,604

 

 

 

12,604

-

102

12,706

 

 

 

 

 

 

 

 

 

 

12,604

-

661

13,265

 

 

 

 

 

 

 

Financial liabilities at FVTPL

 

 

 

 

 

 

Contractual obligation to acquire securities

 

2,551

-

-

2,551

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group 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.

There were no transfers between Level 1, 2 and 3 during the period.

 

 

 

 

 

 

 

Reconciliation of recurring fair value measurements categorised within Level 3 of the fair value hierarchy

 

 

 

 

 

Unlisted securities

Share options and warrants

Total

 

 

 

 

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Opening balance 1 January 2016

 

 

 

559

102

661

 

 

 

 

 

 

 

Share options and warrants exercised

-

 

-

Impairment recognised in income statement

(150)

(9)

(159)

Net unrealised gain recognised in statement of comprehensive income

38

-

38

 

 

 

 

 

 

 

Closing balance 30 June 2016

 

 

 

447

93

540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 these shareholdings in accordance with the International Private Equity and Venture Capital ("IPEV") valuation guidelines. The carrying values have been adjusted to values within these ranges. There have been no other factors brought to the Board's attention which would suggest that there has been a further impairment.
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 / decrease of £0.01 million respectively of the profit shown in the income statement.

A sensitivity analysis based on a 10% increase / decrease in the share prices used as an input in the valuation of the unlisted securities shows the impact of such a movement would be an increase / decrease of £0.04 million respectively of the statement of comprehensive income.

 

 

 

 

 

 

 

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 ongoing 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 (historical data may, for example, be used). Furthermore, the assessment of hierarchy level is based on the lowest level of input that is significant to the fair value of the financial instrument.
The valuation models used where quoted market prices are not available incorporate certain assumptions that the Group anticipates would be used by a third party market participant to establish fair value.

 

 

 

 

 

 

 

 

Fair value at 30 June 2016

Valuation technique

Unobservable input

Range

 

£ 000's

 

 

 

 

 

Share options and warrants

93

Monte Carlo simulation

Volatility

54-151%

Unlisted securities

447

IPEV valuation guidelines

Price of recent transactions

*

 

 

 

 

 

 

540

 

 

 

 

 

* A meaningful range cannot be provided as there are a number of unlisted securities included within available-for-sale financial instruments.

 

 

 

 

 

 

 

 

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

 

 

 

 

2016

2015

2015

Amounts owed by related parties

 

 

 

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Cenkos Securities Employee Benefit Trust ("CSEBT")

 

 

3,279

3,203

3,192

Cenkos Securities Asia Pte. Ltd.

 

 

 

958

140

395

Cenkos Nominee UK Limited

 

 

 

275

184

242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The compensation of the key management personnel of the Group (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

 

 

 

 

2016

2015

2015

 

 

 

 

£ 000's

£ 000's

£ 000's

 

 

 

 

 

 

 

Aggregate emoluments

 

 

 

543

3,764

6,931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During 2014, in order to comply with the Pensions Act, Cenkos was required to enrol all qualifying employees in a pension scheme. Under the scheme, qualifying employees are required to contribute a percentage of their relevant earnings. The Company also contributes 1% of relevant earnings. During the period to 30 June 2016, Cenkos made payments totalling £91 (30 June 2015: £182, 31 December 2015: £366) in respect of one Director who is a member of this scheme.

 

 

 

 

 

 

 

Related party interests in ordinary shares of Cenkos Securities plc

 

 

 

 

 

 

 

 

30 June

30 June

31 December

 

 

 

 

2016

2015

2015

Number of shares

 

 

 

14,865,194

13,351,413

14,669,737

Percentage interest

 

 

 

26%

22%

26%

 

 

 

 

 

 

 

The related party interests in ordinary shares of Cenkos Securities plc include the following interest held in the SIP scheme:

 

Number of shares held subject to forfeiture conditions

Number of shares held

 

30 June

30 June

31 December

30 June

30 June

31 December

 

2016

2015

2015

2016

2015

2015

 

No.

No.

No.

No.

No.

No.

Related party interest in SIP

50,688

19,440

19,440

68,875

26,286

27,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related party interests in share options

 

Earliest

Latest

30 June

30 June

31 December

 

Grant

exercise

exercise

2016

2015

2015

 

date

date

date

No.

No.

No.

LTIP (Exercise price - £1.00)

02/04/2012

02/04/2015

02/10/2015

-

1,000,000

-

CAP (Exercise price - £1.69)

01/10/2009

01/10/2009

30/09/2019

178,710

178,710

178,710

SAYE Scheme (Exercise price - £1.73)

15/07/2014

01/08/2017

28/02/2018

52,080

52,080

52,080

 

16. Events after the reporting period

On 9 August 2016 the Company announced that it had entered into a full and final settlement with the FCA, which included a financial penalty of £530,500.  This was the result of an FCA investigation into the Company's role as sponsor to Quindell plc ("Quindell") (now known as Watchstone Group plc) in relation to Quindell's planned move from AIM to the premium segment of the main market of the LSE in June 2014 and into the Company's systems and controls in relation to its provision of sponsor services. This fine has been accrued for in full prior to the period end date. There has also been a significant amount of associated remediation and investigation costs which have been expensed as incurred in current and prior years. These costs have been included within 'administrative expenses' in our Condensed Consolidated Income Statement. Since 2014, the Company has developed and implemented an extensive remediation programme to enhance and improve its systems and controls in relation to its sponsor services, including steps taken in consultation with the UK Listing Authority (UKLA). The FCA has acknowledged the extensive remediation programme which the Company has undertaken in order to enhance and improve its systems and controls in relation to its sponsor services. This continued investment in the business has ensured we now have more robust systems and controls in this and related areas.  Whilst the Company remains in active dialogue with its insurers over the issue, as the Company has yet to receive any insurance recoveries associated with the costs of the investigation, no recoveries have been accrued at this stage pending confirmation from the insurers of the final amounts due.

Aside from this, there were no material events to report on that occurred between 30 June 2016 and the date at which the Directors signed this Interim Report.

17. Contingent liabilities

From time to time the Group may become subject to various litigation, regulatory or employment related claims. The Directors have considered any current matters pending against the Group and, based on the evidence, concluded that the outcome of these will be resolved with no material impact on the Group's financial position or results of operations.

 

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed 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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