Annual Results for the year ended 31 December 2021

RNS Number : 2081F

Cenkos Securities PLC

18 March 2022

 

18  March 2022

Cenkos Securities plc

Annual Results for the year ended 31 December 2021

Cenkos Securities plc (the "Company" or "Cenkos" or the "Firm"), the independent institutional stockbroking firm, today announces its results for the year ended 31 December 2021.

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-21	31-Dec-20	change
Revenue	£37.2 m	£31.7 m	+ 18%
Underlying profit (1)	£5.9 m	£4.0 m	+ 47%
Profit before tax	£4.0 m	£2.3 m	+ 75%
Profit after tax	£3.4m	£1.8m	+ 88%
Cash	£33.5 m	£32.7 m	+ £0.7m
Net assets	£27.0m	£25.6m	+ £1.4m
Basic earnings per share	7.1p	3.7p	+ 91%
Full year dividend per share paid and proposed (2)	4.25p	3.5p	+ 21%

(1)  Underlying profit is profit before restructuring costs and charges related to the Cenkos Incentive Plan and tax.

(2)  Includes a proposed final dividend of 3.0p (2020: 2.5p)

Outlook:

The broadly positive conditions from 2021 are not taken for granted as we turn our attention to 2022.  The war in Ukraine with its horrendous personal cost to those involved is having a significant effect on global economies and markets.  The lingering effects of COVID-19 on the labour market and supply chains could also impact growth and market recovery.

Despite the macro environment, we remain confident in our business model and our track record of successful fundraising at every stage of the market cycle.  Indeed, we have started the year well having already completed  three IPOs, four placings and two M&A transactions in the first 10 weeks of 2022.

Julian Morse, Chief Executive Officer, commented: "2021 demonstrated the strength of Cenkos' business model with revenues up 18% to £37.2m (from £31.7m), underlying profit up 47% to £5.9m (from £4.0m) profit before tax rising 74% to £4.0m (from £2.3m) and EPS up 92% to 7.1p (from 3.7p). This performance was driven by an increase in transactions, with our teams completing 34 in the period, raising over £1.2bn for clients.  During the year, we have added 17 new companies to our client list.  Our investment company and trading company client base is well spread across multiple sectors and UK and other geographies.  During 2021 we supported a diverse range of companies raising money on the equity markets, from builders' merchants and music royalty businesses to smart fabrics and oncology diagnostics.  With a broad pool of knowledgeable, committed investors, we partner with our clients to articulate investment cases and reduce risk in the fundraising process."

This announcement contains certain inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

Enquiries:
Cenkos Securities plc
Julian Morse - Chief Executive Officer		[phone]
Nominated Adviser Spark Advisory Partners Limited
Matthew Davis		[phone]
Public Relations The Nisse Consultancy
Jason Nisse		[phone]
Andrew Garfield		[phone]

Chairman's statement

2021 was another strong year for Cenkos, as set out in more detail in the Chief Executive Officer's statement.  The year also marked the handover of the Chief Executive Officer's role from Jim Durkin to Julian Morse, previously Head of Growth Companies.  Jim retired in May 2021, having successfully led the Company for many years, over two stints as Chief Executive Officer, and I would like to thank him on behalf of the Firm and our shareholders for his dedication and commitment to ensuring Cenkos was transferred to the current leadership team on a firm footing.

I am pleased to report that Julian Morse, Chief Executive Officer and Jeremy Osler, Executive Director and Co-Head of Corporate Finance, were both appointed to the Board in the first half of the year, following FCA approval. Both Julian and Jeremy are already making an important difference to the culture, governance and performance of the Firm.

During the year, the Board made excellent progress in implementing its strategic plan to build a strong, market leading institutional stockbroking firm, with a focus on client service.  The merit of this strategy has already become evident in the 2021 results, which saw strong growth in revenue and profitability.  Importantly, we have also been able to attract bright talent to the Firm, with 18 new hires made during the year, including from the large investment banks and professional services firms. This has enhanced our growing reputation for quality service and the ability to execute successfully on behalf of our clients.  A firm of our size depends entirely on reputation, and we are focussed on building and sustaining our standing as the first-choice partner for growth to ambitious companies seeking equity capital.

At the heart of this strategy is a 'team of teams' operating structure which leverages our dual strengths in Corporate Finance and Broking, together with driving increased collaboration across our sector specialisms. This 'team of teams' approach is reflected in the senior management leadership, which has been drawn from both sides of the business, to increase synergies and build on our core strengths across the whole Firm. This synergistic approach has been reflected in a reformed Executive Committee (Exco) focussed on firm-wide business development as well as governance. Our streamlined growth strategy has also resulted in the appointment of  a Head of Business Development and the implementation and the deployment of a new CRM system, designed to deliver increased performance and service levels across the firm.

I wrote last year about the importance of culture and employee engagement, and I was highly encouraged to see very positive feedback in our 2021 employee survey.  Our Firm is only as good as our people and, therefore, we are committed to engaging openly and working with our colleagues to continue to drive Cenkos forward. Therefore, we will be carrying out this exercise every six months.

I continue to firmly believe in AIM as the destination of choice for ambitious companies. Cenkos can rightly claim a leading adviser position on AIM and we are committed to continuing to source and create high quality investment opportunities for the benefit of our clients, shareholders and employees. 

Finally, as the world hopefully exits the lengthy pandemic period, we enter an equally challenging environment with economic uncertainty created by the war in Ukraine.  However, I am confident that Cenkos will continue to make progress by seizing the opportunities for growth and by working as a team to successfully navigate any potential market headwinds we face in 2022.

I would like to thank all our employees, our corporate and institutional clients, and our shareholders for their support and look forward to being able to report further progress as the year unfolds.

Lisa Gordon

Non-executive Chairman

Chief Executive Officer's statement

I am pleased to report that a continued focus on client service levels, recruiting and retaining quality talent and a disciplined approach to costs have enabled us to thrive during 2021. In what remained unchartered social and economic times, these remained the foundation from which we supported our clients and colleagues to achieve their aims.  We continue towards our objective of being the first-choice partner for growth to ambitious companies seeking equity capital.

I would like to thank all of our colleagues for their continued drive and determination.  These results are a testament to their continued hard work.

Financial resilience

2021 demonstrated the strength of Cenkos' business model with revenues up 18% to £37.2m (from £31.7m) underlying profit up 47% to £5.9m (from £4.0m) and EPS up 92% to 7.1p (from 3.7p).  This performance was driven by an increase in transactions, with our teams completing 34 in the period, raising over £1.2bn for clients.  Particularly pleasing were the two IPOs completed.  We continue to maintain a healthy balance sheet and capital levels prudently above our regulatory minimums.  We see this resilience as a key advantage as we move ahead with our strategic objectives.

A shift to quality

Looking back, 2021 was a strong year for AIM with over £8.7bn raised across IPOs and secondary fundraises; the highest amount since 2007.  Trading on AIM was equally strong with a record total number of trades placed in a 12-month period (20.3m) and more than £394m of value traded on average across the market each day.  The figures paint a healthy picture of AIM as a home for exciting, growing companies.  AIM saw a slight increase in the number of companies in 2021.  This is the first time since 2014 and, paired with general levels of activity, we believe this represents a gradual shift towards quality, with stronger, well-run companies at the heart of it. Particularly amongst our investment company contacts, we also see growing interest in the alternatives sector, with innovative proposals under consideration. With depth of expertise and an integrated approach across Corporate Finance, Research, Sales and Trading, these are trends that Cenkos is well placed to take advantage of.

Partners for growth

During the year, we have added 17 new companies to our client list.  Our investment company and trading company client base is well spread across multiple sectors and the UK and other geographies.  This year we have supported a diverse range of companies, from builders' merchants and music royalty businesses to smart fabrics and oncology diagnostics.  With a broad pool of knowledgeable, committed investors, we partner with our clients to articulate investment cases and reduce risk in the fundraising process.

It is this variety that makes for a dynamic working environment.  As we look to emerge from the disruption of the past couple of years, these ambitious companies will help drive the economic recovery.  Levelling up and entrepreneurial opportunities sit at the heart of Cenkos and its ethos.

Our people

Cenkos is as strong as its people and we are proud to have launched a firm wide TSR based share incentive scheme for all colleagues to become owners of Cenkos and participate in its success.  We believe that ownership amongst our colleagues is essential in incentivising long-term thinking and creating a sense of ownership.

With 18 new hires across the Firm during the year, we continue to strengthen our talent pool and have continued to build on this in 2022.  Central to our strategy going forward is to maintain our high level of staff ratio to clients.  By concentrating on service level, quality of advice and research we act as an effective link between corporates and investors, creating a virtuous circle.

We emerge from the global pandemic a more flexible, agile business.  We continue to offer our colleagues the opportunity to work in the office or from home, always subject to the arrangements working to the best interests of our clients and the markets more generally.  We recognise the importance of retaining the valuable, sometimes intangible, benefits of face-to-face collaboration.

Our focus is to create an entrepreneurial working environment suitable for 2022 and beyond.  Diversity of thought and an inclusive approach will ensure we remain a compelling choice for talent and clients alike.  Naturally, we consider how we operate and our impact as a corporate citizen.  Sustainability and the wider ESG journey, is a very important topic for us as a business and increasingly one we guide our clients on too.

We understand that providing an environment that colleagues find attractive and enjoyable to work in will lead to sustainable growth for our business and clients alike.  We have invested in systems and training to ensure high service levels are maintained in an operationally resilient and risk aware way.

Dividend policy

The Board continues to reinvest into the Firm and looks to return significant shareholder value by establishing a level of consistency to its dividend payments while exploring other potential returns of excess capital as appropriate to its capital and liquidity requirements. The Board is confident in the Company's strong capital position and encouraged by its strategic direction and so is pleased to announce a final dividend of 3.0p per share (2020: 2.5p per share) which results in a total dividend for the year of 4.25p per share (2020: 3.5p per share).

Looking ahead

The broadly positive conditions from 2021 are not taken for granted as we turn our attention to 2022.  The war in Ukraine with its horrendous personal cost to those involved is having a significant effect on global economies and markets.  The lingering effects of COVID-19 on the labour market and supply chains could also impact growth and market recovery.

Despite the macro-environment, we remain confident in our business model and our track record of successful fundraising at every stage of the market cycle.  Indeed, we have started the year well having already completed  three IPOs, four placings and two M&A transactions in the first 10 weeks of 2022.

We strongly believe in supporting growing companies to access the capital markets and believe these markets remain attractive to good quality companies.  The ability to maintain access to quality capital in periods of uncertainty will mark Cenkos out from the pack.

Julian Morse

Chief Executive Officer

17 March 2022

Income statement

For the year ended 31 December 2021

					2021	2020
					£ 000's	£ 000's
Continuing operations
Revenue					37,225	31,654
Other operating (expense) / income					(87)	259
Administrative expenses					(33,034)	(29,514)
Operating profit					4,104	2,399
Investment income - interest income					17	30
Finance costs - interest on lease liability					(171)	(176)
Profit before tax from continuing operations for the year					3,950	2,253
Tax					(552)	(449)
Profit after tax for the year					3,398	1,804
Attributable to:
Equity holders of Cenkos Securities plc					3,398	1,804
Basic earnings per share					7.1p	3.7p
Diluted earnings per share					6.0p	3.3p

Statement of comprehensive income

For the year ended 31 December 2021

					2021	2020
					£ 000's	£ 000's
Profit for the year					3,398	1,804
Amounts that will not be recycled to income statement in future periods
Loss on FVOCI financial asset					-	(35)
Tax on FVOCI financial asset					-	6
Other comprehensive losses					-	(29)
Total comprehensive income for the year					3,398	1,775
Attributable to:
Equity holders of Cenkos Securities plc					3,398	1,775

Statement of financial position

As at 31 December 2021

					2021	2020
					£ 000's	£ 000's
Non-current assets
Property, plant and equipment					398	382
Right-of-use assets					3,577	4,059
Intangible asset					-	33
Deferred tax asset					1,154	727
Investments in subsidiary undertakings					1	1
					5,130	5,202
Current assets
Trade and other receivables					10,547	12,993
Other current financial assets					7,231	5,312
Cash and cash equivalents					33,457	32,735
					51,235	51,040
Total assets					56,365	56,242
Current liabilities
Trade and other payables					(23,027)	(24,520)
Other current financial liabilities					(1,915)	(1,011)
					(24,942)	(25,531)
Net current assets					26,293	25,509
Non-current liabilities
Trade and other payables					(4,436)	(5,086)
Total liabilities					(29,378)	(30,617)
Net assets					26,987	25,625
Equity
Share capital					567	567
Share premium					3,331	3,331
Capital redemption reserve					195	195
Own shares					(8,360)	(6,607)
FVOCI reserve					(170)	(170)
Retained earnings					31,424	28,309
Total equity					26,987	25,625

The financial statements were approved by the Board of Directors and authorised for issue on 17 March 2022.

They were signed on its behalf by:

Julian Morse

Chief Executive Officer

17 March 2022

Registered Number: 05210733

Cash flow statement

For the year ended 31 December 2021

					2021	2020
					£ 000's	£ 000's
Profit for the year					3,398	1,804
Adjustments for:
Investment income - interest income					(17)	(30)
Finance costs - interest on lease liability					171	176
Tax expense					552	449
Depreciation of property, plant and equipment, ROU assets and intangible asset					649	691
Shares and options received in lieu of fees					(1,820)	(11)
Share-based payment expense					2,920	2,395
Operating cash inflow before movements in working capital					5,853	5,474
Decrease in net trading investments and FVOCI financial assets					804	2,867
Decrease in trade and other receivables					2,459	468
(Decrease) / Increase in trade and other payables					(1,742)	8,301
Net cash inflow from operating activities before interest and tax paid					7,374	17,110
Tax paid					(783)	(99)
Net cash inflow from operating activities					6,591	17,011
Investing activities
Interest received					4	24
Purchase of property, plant and equipment					(150)	(41)
Net cash outflow from investing activities					(146)	(17)
Financing activities
Landlord incentive received as part of lease arrangement						500
Rent paid under lease arrangement					(754)	(117)
Dividends paid					(1,922)	(1,027)
Proceeds from sale of shares to employees on dividend reinvestment					20	12
Acquisition of own shares					(3,067)	(1,960)
Net cash used in financing activities					(5,723)	(2,592)
Net increase in cash and cash equivalents					722	14,402
Cash and cash equivalents at beginning of year					32,735	18,333
Cash and cash equivalents at end of year					33,457	32,735

Statement of changes in equity

For the year ended 31 December 2021

	Equity attributable to equity holders
	Share capital	Share premium	Capital redemption reserve	Own shares held in treasury	FVOCI reserve	Retained earnings	Total
	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's
At 1 January 2020	567	3,331	195	(5,436)	(141)	26,142	24,658
Profit for the year	-	-	-	-	-	1,804	1,804
Loss on FVOCI financial assets net of tax	-	-	-	-	(29)	-	(29)
Total comprehensive income for the year	-	-	-	-	(29)	1,804	1,775
Issue of shares to employees on dividend reinvestment	-	-	-	13	-	-	13
Transfer of shares from share plans to employees	-	-	-	776	-	(776)	-
Acquisition of own shares	-	-	-	(1,960)	-	-	(1,960)
Credit to equity for equity-settled share-based payments	-	-	-	-	-	2,166	2,166
Dividends paid	-	-	-	-	-	(1,027)	(1,027)
At 31 December 2020	567	3,331	195	(6,607)	(170)	28,309	25,625
Balance at 1 January 2021	567	3,331	195	(6,607)	(170)	28,309	25,625
Profit for the year	-	-	-	-	-	3,398	3,398
Loss on FVOCI financial assets net of tax	-	-	-	-	-	-	-
Total comprehensive income for the year	-	-	-	-	-	3,398	3,398
Issue of shares to employees on dividend reinvestment	-	-	-	12	-	8	20
Transfer of shares from share plans to employees	-	-	-	1,302	-	(1,302)	-
Acquisition of own shares	-	-	-	(3,067)	-	-	(3,067)
Credit to equity for equity-settled share-based payments	-	-	-	-	-	2,839	2,839
Deferred tax on share-based payments	-	-	-	-	-	94	94
Dividends paid	-	-	-	-	-	(1,922)	(1,922)
At 31 December 2021	567	3,331	195	(8,360)	(170)	31,424	26,987

Notes to the financial statements

1. Accounting policies

General information

Cenkos Securities plc is a public company limited by shares incorporated in England, United Kingdom under the Companies Act 2006 (Company Registration No. 05210733). The financial information contained within this announcement does not constitute statutory accounts for the year ended 31 December 2021 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 2021 will be delivered to the Registrar of Companies in due course. The annual report and audited 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 11 May 2022.

The 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 Company's business activities, together with the factors likely to affect its future development and performance, the financial position of the Company, its cash flows, capital and liquidity position are set out in the Strategic report on pages 1 to 18 of the Annual Report.

The broadly positive market conditions, heightened activity and stability seen in 2021, despite the ongoing COVID-19 pandemic, continued into 2022, with Cenkos being appointed by several new clients and completing a number of transactions including three IPOs. While the removal of remaining restrictions on individuals and businesses related to the pandemic were positive signs, looking ahead, the war in Ukraine and global sanctions which continue to be applied to entities and individuals connected with the Russian Federation, in the short term at least mean it is unlikely we will see these conditions continue. Although Cenkos has no direct links to the Russian Federation, it is reliant on the health of financial markets and investor sentiment. There are signs of a cooling in global markets as the war in Ukraine and lingering effects of COVID-19 continue to affect the labour market and supply chains, which in turn is stoking inflation. Along with the UK's departure from the European Union and the impact of climate change, all have the potential to detrimentally impact investor sentiment and the health of the financial markets. For Cenkos, this could result in a reduction in fees generated from placing and corporate finance and a decline in fair values of listed and unlisted equities, options and warrants. This has been considered when conducting the impact analysis as part of the going concern assessment. Cenkos' Compliance team has also undertaken a review of our client base, including the links between our corporates, their boards, shareholders and operations with to the Russian Federation. Whilst, we are aware of a small number of clients who are or may be impacted by evolving global sanctions regimes, we believe this will have only limited indirect impact on Cenkos and its revenue.

In order to mitigate the risk associated with fluctuations in the financial markets, the Company operates a flexible business model which links risk adjusted variable remuneration to corporate performance. Fixed costs are kept low and controlled, providing a strong foundation. Cenkos is not reliant on external borrowings but is funded entirely by share capital and retained earnings. The business is not capitally intensive. The trading book is tightly controlled by book limits and, apart from shares received in lieu of fees, is held for market making purposes or to facilitate client business. Cenkos has a positive cash cycle and does not run any liquidity mismatches. Cash is the largest asset on the statement of financial position and consequently its exposure to credit risk is largely due to its bank deposits before risk weighting.

Management has also performed an impact analysis as part of its going concern assessment using information available to the date of issue of these financial statements. As part of this analysis, a number of adverse scenarios have been modelled to assess the potential impact on the Company's revenue streams, in particular corporate finance fees, and on asset values, liquidity and capital adequacy. In addition, a reverse stress test has been modelled to assess the stresses the balance sheet has to endure before there is a breach of the relevant regulatory capital requirement or insufficient cash resources and includes an assessment of any relevant mitigations management has within their control to implement. Having performed this analysis, management believes regulatory capital requirements continue to be met and the Company has sufficient liquidity to meet its liabilities for the next 12 months and that the preparation of the financial statements on a going concern basis remains appropriate as the Company expects to be able to meet its obligations as and when they fall due for the foreseeable future.

Basis of accounting

The Company's financial statements are properly prepared in accordance with UK adopted International Accounting Standards. As the Company has no material subsidiaries, the financial statements presented are for the Company only.

2. Dividends

Amounts recognised as distributions to equity holders in the year:

					2021	2020
					£ 000's	£ 000's
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2020 of 2.5p (2019: 1.0p) per share					1,280	515
Interim dividend for the period to 30 June 2021 of 1.25p (June 2020: 1.0p) per share					642	512
					1,922	1,027

A final dividend of 3.0p per share has been proposed for the year ended 31 December 2021 (2020: 2.5p). The proposed final dividend is subject to approval at the Annual General Meeting and is not recognised as a liability as at 31 December 2021.

The final dividend will be paid on 23 June 2022 to the shareholders on the register at 27 May 2022, subject to approval at the Annual General Meeting to be held on 11 May 2022.

3. Events after the reporting period

There were no material events to report on that occurred between 31 December 2021 and the date at which the Directors signed the Annual Report.

 

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